On July 21, 2025, Farooq Khan was sentenced to 42 months in prison for participating in a scheme to fraudulently obtain over $3.6 million in minor business loans under the Coronavirus Aid, Relief, and Economic Security Act Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loan (EIDL) program implemented by the Small Business Administration (SBA).
Khan owned and managed Hannan Tax Services, a tax preparation company based in Chicago. Between May 2020 and October 2021, Hannan Tax submitted at least 30 fraudulent applications for loans through the PPP and EIDL program. Kahn was fully aware of the application process, and he knew that the companies for which he sought the loans were non-operational and were not qualified. Yet he purposefully falsified the information contained in the applications, including the number of employees and tax records attributed to the companies.
Beyond the $3.6 million distributed by the SBA and PPP lenders, he also attempted to access at least $588,900 in loans through other EIDL applications that were for nonexistent companies. Personally, he attained approximately $1.2 million of the fraudulent loan proceeds. Khan pleaded guilty to one count of wire fraud on February 19, 2025, and was also ordered to pay $3,645,104 in restitution.
How can trusted professionals like tax preparers create risk under the False Claims Act?
There are many ways in which professionals, including tax preparers, can engage in actions that result in False Claims Act claims. The Office of Professional Responsibilities (OPR) investigates violations of Circular 230 under the Internal Revenue Service (IRS), which sets forth industry standards of competency, diligence, and other ethical behavior for tax professionals. It also provides procedures for disciplinary actions for noncompliance, which includes:
- Inaccurate records/record keeping
- Miscalculations of reported tax liability or refund amount
- Missed deadlines for tax filing and payment
- Lack of supportive evidence for income, deductions, or credits claimed on tax returns
- Lack of knowledge on laws in specialized areas of tax
- Non-comprehensive client interviews
- Inadequate due diligence regarding supporting documentation verification
- Unfamiliarly with IRS guidelines
Why is the government still pursuing pandemic-related fraud years later and how can whistleblowers expose this kind of fraud and be protected in the process?
As of 2024, the COVID-19 Fraud Enforcement Task Force (CFETF) had stated that they would continue their efforts to tackle widespread pandemic relief abuse. Since the CFETF was created four years ago, they have charged more than 3,500 defendants, seized or forfeited over $1.4 billion in stolen COVID-19 relief funds, and filed more than 400 civil lawsuits resulting in court judgements and settlements. Since this time, the CFETF has also established five strike forces to focus on more complex and large-scale pandemic fraud. Their efforts remain due to the high volume of such crimes even post-pandemic.
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