Oriental Bank sues 100+ in RICO lawsuit alleging PPP loan fraud
The institution claims the defendants orchestrated a fraudulent scheme to obtain federal funds by submitting falsified program applications and misusing the proceeds for personal gain.
Oriental Bank has filed a legal complaint in the U.S. District Court for the District of Puerto Rico against more than 100 defendants, including individuals, corporations and organizations, accusing them of conspiring to defraud the institution through the misuse of federal Paycheck Protection Program (PPP) funds.
The bank’s lawsuit invokes the Racketeer Influenced and Corrupt Organizations (RICO) Act, citing financial losses stemming from an alleged scheme involving falsified loan applications and misappropriation of funds.
According to the complaint, the defendants orchestrated a plan to obtain PPP funds by submitting applications that contained “materially false and fraudulent information and supporting documentation” about payroll expenses and the number of employees.
These misrepresentations allegedly were manipulated to maximize the amount of forgivable loans issued by Oriental Bank.
“The defendants combined, conspired and devised a scheme and artifice to defraud Oriental Bank and to obtain PPP funds by means of false and fraudulent pretenses and representations,” the lawsuit states.
The PPP loans, a cornerstone of the Coronavirus Aid, Relief and Economic Security (CARES) Act, were intended to help small businesses retain employees during the economic disruptions caused by the COVID-19 pandemic.
Under the program, loans could be forgiven if used for payroll, mortgage interest, rent or utilities. Oriental Bank, acting as a lender, relied on the accuracy of applications to distribute funds guaranteed by the U.S. Small Business Administration.
The lawsuit accuses the defendants of diverting loan proceeds for unauthorized purposes, such as personal expenses and kickbacks.
“Defendants utilized the fraudulently obtained PPP loan proceeds to benefit themselves and others,” the bank alleges.
Oriental Bank emphasized that the misuse of funds violated PPP guidelines and caused direct harm to the institution. Some defendants have already been indicted for related racketeering activities.
“Oriental is now forced to vindicate its right to be compensated for the full amount of its losses in Court,” the filing states.
The complaint accuses the defendants of violating multiple sections of the RICO Act, a federal law used to target organized criminal enterprises. If Oriental Bank’s claims are proven, the law allows the bank to seek triple damages, significantly raising the stakes for the accused.
The defendants include individuals from Puerto Rico and the mainland United States, as well as corporate entities such as Major Group Inc., CTO Inc., and Cuba Baseball Center Inc.
These organizations are described in the lawsuit as “key players” in facilitating the fraudulent applications and laundering the proceeds.
“Defendants operated as part of a well-organized network aimed at exploiting the vulnerabilities of the PPP system,” Oriental stated.
The case adds to the growing list of legal actions arising from alleged PPP fraud, highlighting the challenges financial institutions and regulators face in monitoring emergency relief funds. With billions of dollars disbursed under the program, investigators nationwide have uncovered numerous cases of PPP fraud, prompting calls for stricter oversight.
Oriental Bank is seeking a jury trial and damages for RICO Act violations, compensation for financial losses and coverage of legal expenses. The case has been assigned to U.S. District Court Judge Maria Antongiorgi-Jordán.
“Oriental Bank is committed to holding those responsible for these fraudulent acts accountable,” the filing concludes.
