Criminal Defense Lawyers

As the world grapples with the economic devastation wrought by the COVID-19 pandemic, many small businesses have turned to the Paycheck Protection Program (PPP) for financial assistance. However, amidst the rush to secure PPP funds, our federal criminal defense attorneys have witnessed a disturbing trend of fraudulent activity related to these loans. From providing false information on loan applications to misusing funds, the following are some of the most common types of PPP loan fraud that have caught the attention of federal prosecutors.

PPP Application Fraud: The CARES Act, which established the PPP, mandated that businesses provide accurate and truthful information on their loan applications. Failure to do so can result in criminal charges, particularly when it comes to falsifying information about the number of employees, employee payroll, and company revenue. In addition, companies that classify employees as independent contractors to qualify for PPP funds may also be investigated.

Fraudulent Use of PPP Loan Funds: The PPP places strict limits on the use of loan funds, with funds only eligible for forgiveness if used for specific expenses such as payroll, rent, and utilities. Any use of funds for personal or luxury items can attract the attention of federal prosecutors.

Fraud in the Loan Forgiveness Certification Process: To obtain loan forgiveness, borrowers must certify that the loan was necessary due to the pandemic, that funds were used for the intended purposes, and that all documents and information submitted are accurate and truthful. Providing false information or fraudulent documentation during this process can result in criminal charges.

Obtaining Multiple PPP Loans From Different Lenders: The PPP allows for up to two loans for certain businesses, but any company that applies for multiple loans with different lenders may be investigated by the government and face criminal charges.

As the federal government continues to aggressively pursue criminal charges for PPP loan fraud, it is crucial for any business that may have engaged in these activities to seek the advice of a criminal defense attorney immediately. The stakes are high and the consequences severe, but with the right legal representation, it may be possible to mitigate the damage and move forward.

The Paycheck Protection Program (PPP) loan fraud is a serious crime that involves obtaining money through false pretenses under the CARES Act. Small businesses affected by COVID-19 with fewer than 500 full-time employees are eligible for up to $10 million in relief to cover expenses such as payroll, mortgages, rent, and utilities for eight weeks. However, those who cheat the Small Business Administration (SBA) out of this money face severe federal penalties, including potential prison time, fines, and repayment of the loan.

PPP loan fraud is a federal crime under the Small Business Act, and the sentence depends on the specific offense. Making false statements or overvaluing securities are considered felonies, carrying a potential $5,000 fine and/or 2 years in federal prison. Embezzlement is also considered a felony, carrying a potential $10,000 fine and/or 5 years in prison, in addition to the requirement to pay restitution.

However, there are defenses that can be argued in cases of PPP loan fraud. The defendant can argue that they had no intent to defraud, as loan applications can be complicated and mistakes can be made. Additionally, the defendant can argue that the SBA made a mistake, and present evidence such as email communications, voicemails, bank statements, accounting notes, receipts, and bills to prove their innocence.

It is worth noting that, in most cases, federal criminal records are not sealable. Additionally, fraud involving more than $10,000 is considered an aggravated felony and a crime involving moral turpitude, making non-citizens convicted of CARES Act fraud vulnerable to deportation.

The Paycheck Protection Program was created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020. The PPP offered businesses up to $2 million in loans, with no interest or principal due for the first 12 months. The program was immensely popular and flooded with applications, but as a result of lack of regulation and little oversight, accusations of fraud soon followed. The SBA’s Office of Inspector General has issued 11 reports detailing widespread fraud and abuse in the PPP loan program and referred dozens of cases of suspected fraud to the Department of Justice for criminal prosecution.