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Chicago PPP Loan Fraud Lawyers
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Last Updated on: 14th December 2025, 07:57 pm
The thing that destroys most PPP fraud defendants isn’t the original crime. It’s what they do after. They panic. They repay the money thinking it will make the problem go away. And in doing so, they hand federal prosecutors exactly what they need to convict: consciousness of guilt. What worked in 2021 – quickly returning the funds to avoid scrutiny – now guarantees prosecution in 2025. The Department of Justice figured out that voluntary repayers are the easiest cases to win. You essentially confessed before they even charged you.
Welcome to Spodek Law Group. Our goal is to give you real information about PPP loan fraud defense in Chicago – not the sanitized version you find on other websites. We believe you deserve to understand exactly what you’re facing before you make decisions that could determine whether you go to federal prison. Todd Spodek founded this firm on one principle: clients deserve the truth, even when it’s uncomfortable. And the truth about PPP fraud prosecution in 2025 is deeply uncomfortable.
The federal government has a 98.5% conviction rate in prosecuted COVID fraud cases. Read that number again. Ninety-eight point five percent. That means out of every 200 people the government decides to prosecute, 197 of them get convicted. The feds don’t bring cases they might lose. By the time someone knocks on your door, they’ve already built the case. They’ve already analyzed your bank records. They’ve already talked to your co-defendants. The investigation you didn’t know about has been running for months or years. This is the reality facing Chicago business owners right now.
The Repayment Trap Nobody Warned You About
Heres the part that makes defense attorneys lose sleep. Back in 2021, the conventional wisdom was simple: if you got a PPP loan you shouldn’t have, pay it back quickly and move on. The SBA was overwhelmed. Prosecutors were focused on the biggest cases. Quiet repayment seemed like the smart play. Alot of attorneys even recommended it.
That advice is now catastrophically wrong. The DOJs COVID-19 Fraud Enforcement Task Force specifically targets voluntary repayers. Why? Becuase repayment creates what prosecutors call “consciousness of guilt” evidence. Think about it from there perspective. If you didn’t know you did anything wrong, why would you rush to return the money? Your repayment becomes Exhibit A at your trial. Its not evidence of remorse – its evidence you knew the loan was fraudulent all along.
Ive seen this pattern destroy cases. A Chicago business owner gets nervous after hearing about PPP prosecutions on the news. They wire the money back to the SBA thinking theyre being proactive. Six months later, federal agents show up with a grand jury subpoena. The prosecutor opens with: “Ladies and gentlemen of the jury, the defendant knew this loan was fraudulent. How do we know? Because he paid it back before anyone even asked him to.” Thats the trap. Theres no way to unring that bell.
How the Federal Machine Actually Works
Most people dont understand how PPP fraud investigations actually operate. They think the SBA audits your loan, maybe asks for some documents, and thats it. The reality is far more coordinated and far more dangerous.
Four federal agencies are activly hunting PPP fraud:
- The SBA Office of Inspector General
- The FBI
- The Department of Justice
- The IRS Criminal Investigation unit
But heres the hidden connection nobody talks about. When the SBA-OIG audits your loan and finds problems, they dont just revoke forgiveness and move on. They share that information directly with federal prosecutors who decide whether criminal charges are warranted. The audit isnt seperate from the criminal investigation. The audit IS the criminal investigation. Your just the last one to find out.
The COVID-19 Fraud Enforcement Task Force uses data analytics to identify targets. There not randomly selecting loans to review. Algorithms flag specific patterns – businesses that didnt exist before the pandemic, payroll numbers that dont match tax records, multiple applications from the same address. By the time an agent contacts you, theyve probably already identified three or four red flags in your application. The “interview” isnt fact-finding. Its confirmation of what they already believe.
Todd Spodek has handled hundreds of federal cases, and the pattern is always the same. The government builds the case quietly. They interview your former employees. They subpoena your bank records. They talk to co-defendants who are desperately trying to cooperate there way to a lighter sentence. Then – and only then – they reach out to you. By that point, your already playing defense from behind.
The Proffer Agreement Trap
If your under investigation for PPP fraud, a prosecutor might offer you something called a proffer agreement. It sounds helpful. Come in, tell us your side of the story, and well consider it when making charging decisions. This is one of the most dangerous moments in any federal case.
Heres the thing about proffer sessions that defense attorneys know but clients dont. Prosecutors dont ask questions there curious about. They ask questions they already know the answer to. They have your documents. They have your co-defendants statements. They have your bank records showing exactly were the money went. Every question is designed to either confirm what they know – or catch you in a contradiction so they can add false statement charges.
The false statement trap destroys defendants who think there being cooperative. Everything you say in a proffer must be 100% truthful. If you lie – even accidentally, even through genuinly misremembering – you can be charged with making false statements under 18 USC 1001. Thats a separate crime with up to five years in prison. Ive watched clients walk into proffer sessions trying to be helpful and walk out having committed a new federal offense.
The intent trap is even more subtle. Wire fraud and bank fraud require proof that you acted “knowingly” and “with intent to defraud.” Many defendants basicly hand prosecutors this element by trying to explain themselves. “I wasnt sure if those employees were real” – congratulations, you just admitted you knew something might be wrong but proceeded anyway. “My accountant told me it was fine” – you just confirmed you sought advice because you had doubts. The prosecutor smiles and writes it all down.
One alternative is an attorney proffer, were your lawyer prepares a written summary without you being present. You dont expose yourself to false statement charges. The prosecutor cant ask follow-up questions that lead you into traps. At Spodek Law Group, we almost always recommend this approach over letting clients speak directly with prosecutors.
Why Forgiveness Wont Save You
Many PPP recipients beleive that once there loan was forgiven, they were safe. The money was officialy converted from a loan to a grant. The SBA signed off. Case closed, right?
Wrong. Loan forgiveness is completly irrelevant to criminal prosecution. The government can investigate and prosecute loans that were officialy forgiven. Forgiveness only means the SBA isnt asking for repayment – it dosent mean you didnt commit fraud when you applied. The criminal exposure existed the moment you submitted false information, regardless of what happend afterward.
But heres the hidden connection that makes it worse. Your forgiveness application potentialy created a second fraudulent act. If you certified that you used funds for eligible expenses when you didnt, thats another false statement. And heres why that matters: the statute of limitations starts from your LAST fraudulent act. Someone who got a PPP loan in May 2020 and submitted forgiveness in August 2021 has there timeline extended by over a year. The forgiveness you thought protected you actualy extended how long prosecutors can come after you.
The statute of limitations for PPP fraud is now ten years. Congress extended it in 2022 specificaly to give prosecutors more time. Loans from 2020 can be prosecuted until 2030. If you submitted forgiveness in 2021, prosecutors have until 2031. The government is in no rush. There working through 70,000+ flagged loans. They might get to yours next month. They might get to yours in five years. Either way, there coming.
The Numbers That Should Terrify You
Lets talk about what conviction actualy looks like in Chicago PPP fraud cases. The numbers are worse then most people realize.
The average federal prison sentence for PPP fraud is 34 months. Thats nearly three years away from your family, your business, your entire life. And sentences are getting longer, not shorter. Defendants sentenced in 2024-2025 recieve sentences that are 40% longer on average then those sentenced in 2021-2022 for identical conduct. The governments message is clear: the later you get caught, the harder they hit you.
OK so lets break down what actualy happens when you get sentenced. Federal prison isnt like county jail. Theres no early release for good behavior in the traditional sense. You serve at least 85% of your sentence no matter what. A 34-month sentence means roughly 29 months behind bars minimum. You dont get to pick your facility. The Bureau of Prisons assigns you based on security level and bed availability. Chicago defendants often end up at facilities in Minnesota, Wisconsin, or even further. Your family has to travel hours for visits.
Federal judges in 2025 include prison time in nearly every PPP fraud sentencing – regardless of the amount involved. The old assumption that small-dollar fraud gets probation is dead. Ive seen defendants sentenced to federal prison for PPP amounts under $100,000. The amount matters for guideline calculations, but judges are sending a message that any PPP fraud is serious enough for incarceration.
If you go to trial and lose – and 85% of PPP fraud defendants who go to trial do lose – your sentence gets substantialy worse. You dont get the three-level reduction for acceptance of responsibility. Judges sometimes impose higher sentences as punishment for wasting court resources. The trial conviction rate combined with the sentencing premium makes going to trial a massive gamble.
Heres the math that keeps defense attorneys up at night. Lets say your guidelines calculate to 24-30 months if you plead guilty and accept responsibility. If you go to trial and lose, those same guidelines jump to 33-41 months becuase you dont get the reduction. Plus the judge might tack on additional time for going to trial. Your looking at potentially 50% more prison time for exercising your constitutional right to a trial. This is the federal system. Its designed to encourage guilty pleas.
Theres an informal prosecution threshold around $150,000. Below that amount, cases often get resolved civily – you pay back the money plus penalties, and no criminal charges are filed. Above $150,000, you enter the zone were federal prosecutors will seriously consider bringing criminal charges. Above $500,000, prosecution is almost certain if fraud can be proven. But these are rough guidelines, not rules. Aggravating factors like identity theft, multiple applications, or lavish spending can trigger prosecution at any amount.
Chicago Cases That Show Whats Coming
The Northern District of Illinois – thats the federal court covering Chicago – has been aggresively prosecuting PPP fraud. These cases show exactly what defendants face.
Rahul Shah of Evanston ran one of the largest PPP fraud schemes in Illinois history. He fraudulently obtained over $55 million through fake loan applications. A federal jury convicted him on seven counts of bank fraud, five counts of making false statements, two counts of money laundering, and two counts of aggravated identity theft. Hes facing decades in federal prison. Shah thought he was smarter then the system. The system proved otherwise.
Farooq Khan was a Chicago tax preparer who helped clients file fraudulent PPP applications. He prepared and submitted at least 30 fake applications totalling $3.6 million. His sentence: 42 months in federal prison plus $3.6 million in restitution. Khan thought he was just helping clients access pandemic relief. The government thought he was running a fraud factory.
Feroz Jalal of Niles got five years and two months for a $1.5 million PPP fraud scheme. He also has to pay back every dollar. Christopher Scott of Hazel Crest used PPP funds to shop at Tiffany, Saks Fifth Avenue, and Nordstrom. The electronic trail of luxury purchases made the prosecutors case easy. He got nearly six years.
Notice the pattern? Nobody got probation. Nobody got house arrest. Everyone went to federal prison. Everyone had to pay full restitution. And these sentences were handed down by judges in Chicago – the same judges who will handle your case if your charged.
The prosecutors handling these cases in the Northern District are experianced and well-resourced. They have dedicated fraud units. They work closely with the FBI, IRS, and SBA investigators who spent months building the case before charges were filed. By the time you see an indictment, the government has already interviewed witnesses, obtained bank records, analyzed your tax returns, and compared your PPP application to your actualy payroll. The case against you is largely complete before you even know your a target.
What strikes me about the Chicago cases is how ordinary the defendants were. These werent sophisticated financial criminals. Shah was a businessman who got greedy. Khan was a tax preparer who saw an opportunity. Jalal was a regular guy who thought he was smarter then the system. Scott couldnt resist spending the money on luxury goods. There stories serve as warnings. The government isnt just prosecuting criminal masterminds. There prosecuting regular people who made terrible decisions during a confusing time.
What You Need to Do Right Now
If you are reading this article, you are probly in one of three situations. You recieved a PPP loan you are worried about. You have been contacted by federal investigators. Or you have already been charged. Each situation requires a different approach, but all of them require acting immediatly.
If you havent been contacted yet: Do not – under any circumstances – voluntarilly repay the loan without consulting a federal defense attorney first. I cannot stress this enough. Repayment without legal guidance can destroy your defense before prosecutors even know your name. There may be legitimate reasons why your loan was proper, or there may be ways to address problems without creating consciousness of guilt evidence. A skilled attorney can evaluate your situation and determine whether you actualy have exposure or are just panicking unnecessarilly.
If investigators have contacted you: Do not speak to them without an attorney present. Talking to federal agents without counsel is one of the most dangerous things you can do. Anything you say can be used against you. Anything you get wrong – even innocently – can become a seperate false statement charge. Be polite, provide your attorneys contact information, and say nothing else. This isnt about being uncooperative. Its about not incriminating yourself while trying to be helpful.
Heres what happens when you talk to agents without a lawyer. They seem friendly. There just trying to “clear things up.” They tell you this is your chance to explain your side. What they are actually doing is building the case. Every word you say gets written down or recorded. If you contradict your loan application in any way – even minor inconsistencies you dont remember – thats evidence of fraud. If you say something that turns out to be inaccurate, thats a potential false statement charge. The agents arent there to help you. There there to gather evidence.
If you are already charged: The calculus becomes about damage control. Your defense options include challenging the governments evidence of intent, demonstrating good faith reliance on professional advice, highlighting the confusion inherent in the PPP program itself, or negotiating a plea that minimizes prison exposure. The right strategy depends on the specific facts of your case.
Think about what defenses might apply to your situation. Did you genuinely believe your employee count was accurate? Did you rely on what your accountant or bookkeeper told you? Did you misunderstand the eligible expenses rules – which, lets be honest, were confusing and changed multiple times? These aren’t just excuses. There legitimate legal defenses that can affect wheather prosecutors can prove the intent element required for conviction.
The program confusion defense is particularly relevant. The PPP rolled out in chaos. Rules changed weekly. SBA guidance contradicted itself. Banks had different interpretations. Alot of business owners made honest mistakes about wheather they qualified or how to calculate payroll costs. Honest confusion isnt fraud. But you need an attorney who can articulate this defense effectively.
Spodek Law Group has defended clients facing federal fraud charges for years. We understand how the Northern District of Illinois handles these cases. We know which arguments resonate with Chicago federal judges. We know how to negotiate with Assistant US Attorneys who specialize in pandemic fraud. And we know that in PPP cases, early intervention often determines wheather someone goes to prison or resolves there case without criminal charges.
The consultation is free. The cost of waiting isnt. Call us at 212-300-5196. The investigation is already underway. The only question is wheather you get in front of it or let it run you over.