From Fairways to Fraud: The Growing Risk of CARES Act Abuse
A New Hampshire man, Michael Kirouac, 38, of Pembroke, recently received a 15-month prison sentence, plus one year of supervised release, for a brazen scheme: using over $1 million in COVID-19 relief funds to purchase Angus Lea Golf Course in Hillsborough, New Hampshire. This case, highlighted by U.S. Attorney Erin Creegan, isn’t an isolated incident, but a stark warning about the vulnerabilities within pandemic-era financial aid programs.
The Anatomy of the Scheme
Kirouac owned or controlled four companies – HK Manchester, HK Loudon, HK Hudson, and HK Pelham – and fraudulently obtained Economic Injury Disaster Loans (EIDLs). He certified the funds would be used as working capital, not for personal expenses or business relocation. Though, approximately $600,000 of EIDL funds intended for HK Manchester and HK Loudon were diverted to purchase the golf course. He also misused funds obtained for HK Pelham and obtained a $260,500 EIDL for HK Hudson while already agreeing to sell the company, failing to disclose this to the SBA.
Beyond the Golf Course: A Pattern of Abuse
The Kirouac case underscores a broader issue. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, designed to provide vital financial relief through programs like the Paycheck Protection Program (PPP) and the SBA’s EIDL program, became a target for fraud. The speed and scale of the program, coupled with limited oversight, created opportunities for individuals to exploit the system.
The Role of Investigative Agencies
The investigation leading to Kirouac’s sentencing was a collaborative effort. The Department of Veterans Affairs’ Office of the Inspector General, IRS Criminal Investigations, and the SBA’s Office of the Inspector General all played key roles. This multi-agency approach is becoming increasingly common in combating financial fraud, demonstrating a commitment to holding perpetrators accountable.
Future Trends: Increased Scrutiny and Enhanced Oversight
The Kirouac case will likely fuel several trends in the coming years. Expect increased scrutiny of loan applications, particularly those involving significant assets like real estate. The SBA and other lending institutions will likely implement more robust verification processes to ensure funds are used for their intended purpose.
data analytics and artificial intelligence will play a larger role in identifying potentially fraudulent activity. Algorithms can analyze loan applications for red flags, such as inconsistencies in financial statements or unusual patterns of spending.
The Impact on Small Businesses
While the focus is often on the perpetrators, it’s crucial to remember the impact of such fraud on legitimate small businesses. Misappropriated funds mean fewer resources available for those genuinely in need, hindering economic recovery and potentially leading to business closures.
FAQ
What is an EIDL? An Economic Injury Disaster Loan is a program offered by the Small Business Administration (SBA) to provide financial assistance to businesses affected by disasters.
What is the CARES Act? The Coronavirus Aid, Relief, and Economic Security (CARES) Act was a stimulus package passed by Congress in response to the COVID-19 pandemic.
What is the penalty for wire fraud? Wire fraud carries a potential sentence of up to 20 years in prison and a fine of $250,000 or twice the gross gain or loss, whichever is greater.
This case serves as a critical reminder of the importance of accountability and transparency in government assistance programs. As we move forward, strengthening oversight mechanisms and leveraging technology will be essential to prevent future abuse and ensure that relief funds reach those who truly need them.
Explore more: Read the official Department of Justice press release.
