WASHINGTON — The U.S. Department of Justice charged five current or former IRS employees with allegedly defrauding federal stimulus programs funded by the Coronavirus Aid, Relief, and Economic Security Act.

According the DOJ, four Tennesseans and one Mississippi resident allegedly submitted false applications to the Paycheck Protection Program and Economic Injury Disaster Loan Program to obtain more than $1 million in undeserved payouts.

PPP funds, once granted, are expected to be put toward employee payrolls for business owners, mortgage interest for homeowners, rent payments and leases or utility bills. EIDL funds go to small-business owners to help buffer costs of normal operating expenses and working capital, including payroll, purchasing equipment or reducing debt.

Instead, the defendants, all current or past employees of the IRS, used the money they obtained from the government to spend lavishly on a Mercedes-Benz car, Gucci clothing and trips to Las Vegas, among other purchases, prosecutors said.

“This matter demonstrates the brazenness with which bad actors have taken advantage of federal programs meant to help those who suffered most from the COVID-19 pandemic,” said Director for COVID-19 Fraud Enforcement Kevin Chambers in a statement. “The Justice Department will continue to work hard to root out PPP and EIDL Program fraud, including that committed by government employees.”

Each count of wire fraud carries a maximum penalty of 20 years in prison, and each count of money laundering carries a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Since the CARES Act passed in March 2020, the DOJ has prosecuted more than 150 defendants in over 95 criminal cases and seized over $75 million in cash from fraudulently obtained PPP funds, as well as real estate properties and luxury items purchased with such proceeds.

The investigations were brought by an interagency effort between the DOJ’s fraud section, U.S. attorneys’ offices, the SBA Office of Inspector General and the Treasury Inspector General for Tax Administration.

The COVID-19 Fraud Enforcement Task Force was created in 2021 by DOJ’s attorney general to partner with agencies to enforce penalties and pool resources for catching pandemic-related fraud.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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