As the nation continues to grapple with the devastating economic impact of the COVID-19 pandemic, the Paycheck Protection Program (PPP) has emerged as a crucial lifeline for small businesses struggling to stay afloat. However, as with any government program of this magnitude, fraud and abuse are unfortunately all too common. Our federal criminal defense attorneys have seen a wide variety of criminal charges brought in relation to PPP loans, and we want to take a closer look at some of the most common types of fraud that we’ve seen.

PPP Application Fraud

The CARES Act, which established the PPP, required businesses to provide accurate and truthful information on their loan applications. However, some businesses have attempted to game the system by providing false information, such as overstating the number of employees or the amounts that employees would make in order to get more money. This type of conduct is particularly concerning to federal prosecutors, and businesses that engage in it risk criminal investigation and charges.

Fraudulent Use of PPP Loan Funds

The PPP provides a wide range of restrictions on how loan funds can be used, including limits on the use of the funds for expenses such as rent, payroll, insurance, and utilities. However, some businesses have attempted to use the funds for personal expenses or luxury items, which is not allowed under the program. This type of conduct also risks criminal investigation and charges.

Fraud in the Loan Forgiveness Certification Process

The PPP also allows for loan forgiveness, but only if certain requirements are met. However, some businesses have attempted to cheat the system by providing false information or fraudulent documentation in order to secure loan forgiveness. This type of conduct is also of great concern to federal prosecutors, and businesses that engage in it risk criminal investigation and charges.

Obtaining Multiple PPP Loans From Different Lenders

Finally, some businesses have attempted to obtain multiple PPP loans from different lenders, which is not allowed under the program. This type of conduct is also of great concern to federal prosecutors, and businesses that engage in it risk criminal investigation and charges.

In conclusion, it is important to remember that the PPP is a vital lifeline for small businesses during these difficult times, but it is also a program that is subject to significant fraud and abuse. Businesses that have received PPP loans should take care to ensure that they are in compliance with the program’s requirements, and those that have engaged in fraudulent conduct should contact a criminal defense attorney immediately.

The Paycheck Protection Program (PPP) 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 small businesses the opportunity to obtain up to $10 million in loans to cover payroll, mortgages, rent, and utilities for eight weeks, with the government forgiving the debt if the money was used for these “qualified expenses.” However, with the immense popularity of the program and a lack of regulation, fraud and abuse have plagued the PPP loan program.

California PPP and EIDL Loan Fraud Lawyers

Obtaining money through false pretenses through the CARES Act is a federal crime under the Small Business Act. The severity of the sentence depends on the specific offense. For example, making false statements or overvaluing securities carries a potential felony sentence of $5,000 and/or 2 years in federal prison. Embezzlement carries a potential sentence of $10,000 and/or 5 years in prison. Plus, the defendant will need to pay restitution.

People facing PPP loan fraud charges can argue that they had no intent to defraud or that the Small Business Administration (SBA) made a mistake. For example, if a business owner accidentally provided false information on their loan application due to stress or confusion, they would not be criminally liable. Similarly, if the SBA made an error in processing the loan, the business owner may be able to prove their innocence with the help of their records, such as email communications, voicemails, bank statements, and receipts.

Unfortunately, in most cases, federal criminal records are unsealable. 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. It is important for non-citizens facing criminal charges to consult with legal counsel as soon as possible to explore their options and potentially have the charges dismissed or reduced to a non-deportable offense.

To date, the SBA’s Office of Inspector General has issued 11 reports detailing widespread fraud and abuse in the PPP loan program, with dozens of cases referred to the Department of Justice for criminal prosecution. The PPP loan fraud is a serious crime, it is important for business owners to be aware of the eligibility criteria and the penalties for fraudulent activity.