In a cautionary tale for small business owners navigating financial assistance, Shawn Ray Murnan, a 57-year-old businessman from Windemere, Florida, was sentenced to 33 months in prison for committing bank fraud in relation to the CARES Act. The ruling comes as a stark reminder of the legal and financial pitfalls that can arise when individuals attempt to exploit government funding programs.

During the COVID-19 pandemic, the CARES Act aimed to provide much-needed emergency financial assistance to businesses suffering from economic disruptions. Unfortunately, Murnan took advantage of this relief by falsifying information on multiple loan applications, leading to a substantial financial windfall that he ultimately could not justify.

U.S. Attorney Clint Johnson underscored the severity of Murnan’s actions, stating, “In 2020, the CARES Act funding was established to provide emergency financial assistance to help businesses that were disrupted. Investigators and prosecutors are committed to finding those like Murnan who steal government funding and prosecuting them to the fullest extent of the law.”

From April 2020 to October 2021, Murnan submitted 14 applications, claiming numerous employees and inflating payroll expenses on behalf of his businesses, including Blujett, LLC, based in Broken Arrow, Oklahoma. He requested over $2 million and received $1,641,796.47 through seven Paycheck Protection Program (PPP) loans and two Economic Injury Disaster Loans (EIDL). He subsequently sought to have these loans forgiven, further complicating the situation.

Murnan’s case highlights critical concerns for small business owners who may be considering or have already utilized government funding programs. The ramifications of fraudulent behavior can lead to not only financial penalties but also criminal charges, with the potential for imprisonment.

The U.S. Department of Justice (DOJ) continues to actively pursue fraud cases involving the COVID-19 relief funds. Murnan’s sentencing is part of a broader effort; since the CARES Act’s inception, the DOJ’s Fraud Section has prosecuted over 150 defendants, recovering more than $75 million in fraudulently obtained funds. Small business owners should recognize that these investigations are continuing and that the consequences of attempting to manipulate funding can be severe.

The Office of Inspector General for various federal agencies, including the Federal Reserve System and the Small Business Administration (SBA), played a pivotal role in uncovering Murnan’s fraudulent activities. This level of scrutiny serves as a warning to small business owners: transparency and accuracy in financial reporting are paramount when applying for government assistance.

Navigating the application process for programs such as PPP and EIDL can be complex, and while the programs offer essential support, they require strict adherence to guidelines and honest disclosure of financial information. Small business owners should take the time to understand all requirements associated with these programs, as errors can have long-lasting effects.

Murnan was taken into custody immediately following his sentencing, slated for transfer to the U.S. Bureau of Prisons, where he will serve his sentence. He is also liable for full restitution, adding financial burdens to his existing liabilities.

In the current landscape where economic recovery is crucial, small business owners must remain vigilant in adhering to ethical standards when seeking financial assistance. Government funding can be a lifeline, but it comes with responsibilities that shouldn’t be taken lightly.

For a deeper look into fraud-related prosecutions tied to COVID relief funds, visit the DOJ’s official updates here. Understanding the implications of this case and the ongoing oversight of such programs can help entrepreneurs avoid similar pitfalls while successfully leveraging available resources for growth and recovery.

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This article, “Business Owner Jailed for Fraudulently Claiming $1.6M in CARES Act Funds” was first published on Small Business Trends