Covid loan program fraud leads to 205% increase in lawsuits

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Fraud in state guaranteed loan programs has led to a 205% year-over-year increase in the number of business leaders convicted of criminal activity during the coronavirus pandemic and this will increase as that the insolvency department will take a tougher stance, the research says.

The Mazars consulting firm found that the number of business leaders prosecuted during the pandemic rose to September 30, 2020, down from 40 the previous year.

Mazars said the increase is likely related to government-backed Covid support programs, including the Rebound Loan Program (BBLS) and the Coronavirus Business Interruption Loan Program (CBILS).

The company said the trend is expected to continue as the insolvency department takes an increasingly tough stance on fraud during the pandemic.

The Institute of Chartered Accountants in England and Wales and the Insolvency Practitioners’ Association have urged their members to report any suspected cases of misconduct related to Covid support programs directly to the Secretary of State.

Mazars said this focus has helped increase the number of directors being investigated and prosecuted as a result of action taken by the insolvency department.

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“The Insolvency Department sends a clear message that directors will now face heavy penalties, including jail time, for gross misconduct,” said Michael Pallott, restructuring partner at Mazars.

“Covid-related fraud is just one example. The challenges of the pandemic meant that government resources were strained considerably.

“However, the Insolvency Department is committed to tackling Covid-related fraud and is taking a much tougher approach; he is not afraid to initiate criminal proceedings if necessary.

“Normally, such penalties for directors would be limited to disqualification. Given the state of public finances, it is in everyone’s interest to have an effective enforcement mechanism to make dishonest business leaders an example. Directors who have committed Covid-related fraud need to seriously consider these trends. “

Mazars cited figures from the National Audit Office, which estimated that up to 60% of BBLS claims could be fraudulent or in default, representing more than £ 27 billion lost in public funds.

Last month, the first estimates from the Office for Budget Responsibility, shared with City AM., predicted that defaults could reach £ 22 billion, as he predicted that nearly a third of CBILS and BBLS loans could default.


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