Colorado PPP Loan Fraud Lawyers: Federal Defense in Denver

Colorado PPP Loan Fraud Lawyers: Federal Defense in Denver

If your facing PPP loan fraud charges in Colorado, you need to understand that this is a serious federal matter that could result in decades in prison. The U.S. Attorney’s Office for the District of Colorado has made PPP and EIDL fraud prosecutions a top priority, and their the ones who decide whether to charge you with crimes that carry penalties of up to 30 years in federal prison. Your not dealing with a state prosecutor or a local investigation—this is a federal case, and the stakes couldn’t be higher.

Since 2020, the federal goverment has aggressively pursued individuals and buisness owners who allegedly made false statements on PPP loan applications, EIDL applications, or loan forgiveness requests. Based off recent prosecutions in Colorado, the Department of Justice ain’t backing down. In fact, the Attorney General selected Colorado’s U.S. Attorney’s Office to head one of only five national COVID-19 Fraud Strike Force Teams in July 2023, which means increased scrutiny and more resources dedicated to investigating and prosecuting these cases throughout the state.

This article will explain what constitutes PPP fraud under federal law, the specific charges your likely to face, how federal investigations work in Colorado, the penalties and sentencing guidelines, and why hiring an experienced federal defense attorney in Denver is absolutely neccessary to protect you’re freedom and your future.

What is PPP Loan Fraud? Understanding Federal Charges in Colorado

PPP loan fraud occurs when someone makes false statements, submits fraudulent documentation, or misrepresents material facts on a Paycheck Protection Program loan application, an Economic Injury Disaster Loan (EIDL) application, or a loan forgiveness application. The federal statutes most commonly used to prosecute these cases is 18 U.S.C. § 1343 (wire fraud), 18 U.S.C. § 1344 (bank fraud), and 18 U.S.C. § 1014 (false statements to financial institutions).

Common Forms of PPP Fraud Prosecuted in Colorado

Federal prosecutors in the District of Colorado have charged defendants with various types of PPP fraud, irregardless of whether the fraud was sophisticated or relatively simple. Here’s what they typically look for:

Inflated Payroll Costs: This is probly the most common form of PPP fraud. The PPP program calculated loan amounts based off the applicant’s average monthly payroll costs. Many defendants have been charged with creating fake employee records, inflating the number of employees, or exagerating wages to qualify for larger loans then they were entitled to recieve.

For instance, in the recent case of Richard Nieto from Morrison, Colorado, prosecutors alleged he submitted fraudulent PPP applications seeking over $1.1 million and successfully obtained two loans totaling $913,551.88. In support of his forgiveness applications, the defendant created a total of 87 fake payroll checks and paystubs. He was sentenced to 46 months in federal prison and ordered to pay $962,438.85 in restitution.

Fabricated Tax Documents: Applicants was required to submit tax forms like IRS Form 941 (Quarterly Federal Tax Return) or Schedule C to verify payroll expenses and buisness income. Prosecutors have charged numerous defendants with submitting fake tax documents that overstated their payroll obligations or grossly inflated they’re revenues.

Charles Lacona, Jr., formerly of Colorado Springs, was convicted by a jury on two counts of wire fraud and one count of money laundering after evidence showed he inflated payroll costs and gross receipts, made false statements and certifications, and submitted fabricated tax documents and payroll reports to recieve $513,732.50 in PPP loans. He was sentenced to 24 months in federal prison and ordered to pay $549,274.14 in restitution.

Misrepresenting Business Operations: Some defendants claimed their businesses were operating during the pandemic when they wasn’t, or they certified that they’re businesses experienced economic losses due to COVID-19 when that simply wasn’t true. The Lybolt case out of Castle Rock illustrates this perfectly.

Joshua and Magdalena Lybolt were indicted in July 2024 after Joshua allegedly applied for and recieved $4,950,000 in EIDL loans and $41,667 in PPP funds. According to prosecutors, he falsely certified that the business entities suffered losses as a result of the COVID-19 pandemic, despite knowing that the business entities wasn’t in operation on the dates required to recieve relief funds. The indictment alleged they used the proceeds for personal expenses including a 2022 Porsche Taycan, a Range Rover, country club memberships, and real estate properties.

Multiple Applications Using Different Entities: Federal investigators have prosecuted individuals who submitted multiple PPP or EIDL applications using different business names, shell companies, or entities that didn’t really exist. In some cases, defendants created fake EINs (Employer Identification Numbers) or used stolen identities to apply for loans.

Shambrica Washington, who owned an online luxury baby boutique called Tiny Toes and Tiaras, was found guilty on 31 counts in September 2024. Evidence showed she obtained loans under two seperate business names by misrepresenting how many people were employed by her businesses and the businesses’ wages, revenues, and costs of operation. She defrauded the EIDL and PPP programs of nearly half a million dollars.

Fraudulent Forgiveness Applications: Even if your initial PPP loan application was legitimate, submitting a fraudulent forgiveness application can result in federal charges. Many defendants have been prosecuted for creating fake documentation—payroll records, cancelled checks, bank statements, utility bills—to support forgiveness when they new the funds wasn’t used for eligible expenses.

The Legal Elements: What Prosecutors Must Prove

To secure a conviction under the primary statutes used in PPP fraud cases, federal prosecutors must prove specific elements beyond a reasonable doubt. Let’s break down each statute:

18 U.S.C. § 1343 – Wire Fraud: This statute applies when electronic communications—emails, online applications, electronic bank transfers—was used to execute a fraud scheme. That covers submitting your PPP application online, recieving loan funds via electronic transfer, and any emails or electronic communications related to the fraud.

To convict you of wire fraud, prosecutors must prove: (1) you knowingly devised or participated in a scheme to defraud, (2) you did so with the intent to defraud, (3) the scheme involved material misrepresentations or omissions, and (4) you used interstate wire communications to further the scheme.

18 U.S.C. § 1344 – Bank Fraud: This statute applies when you knowingly executed a scheme to defraud a financial institution or obtained money from a financial institution by false pretenses. Your PPP lender is a financial institution, irregardless of whether they’re a traditional bank or an online lender.

Bank fraud requires prosecutors to prove: (1) you knowingly executed or attempted to execute a scheme to defraud a financial institution, (2) the scheme involved material misrepresentations, and (3) you had the intent to obtain money or property owned by or under the custody or control of the financial institution.

18 U.S.C. § 1014 – False Statements to Financial Institutions: Section 1014 is one of the most commonly charged offenses in PPP fraud cases because every PPP loan was made by a bank or financial institution even though the loans was backed by the SBA.

To convict you under Section 1014, prosecutors must prove three elements beyond a reasonable doubt: (1) that you made a false statement or report to a financial institution or to the SBA, (2) that you did so knowingly, and (3) that the false statement was made for the purpose of influencing the institution’s action on a loan application.

Here’s the thing—and this is crucial—prosecutors don’t have to prove that you actually recieved the loan or that the bank relied on your false statement. The crime is complete the moment you submit the fraudulent application with the intent to influence the bank’s decision.

How Federal PPP Fraud Investigations Work in Colorado

Federal investigations into PPP fraud in Colorado is typically conducted by multiple agencies working together. The primary agencies involved include the FBI’s Denver Division, the Small Business Administration Office of Inspector General (SBA-OIG), the Internal Revenue Service Criminal Investigation Division (IRS-CI), the Secret Service, and the Department of Justice.

Understanding how these investigations unfold can help you recognize when your in the crosshairs and when you need to immediantly contact a federal defense attorney.

Initial Red Flags and Triggers

Most PPP fraud investigations don’t start with a random audit. They’re triggered by specific red flags that alert federal investigators to potential fraud. Here’s what catches their attention:

SBA Data Analytics: The SBA and Treasury Department use sophisticated data analytics to identify suspicious patterns in loan applications and forgiveness requests. They look for things like multiple applications from the same IP address, identical banking information across different applicants, unusually high loan amounts for the type of buisness, and applications that don’t match IRS tax records.

Bank Reports: Financial institutions are required to file Suspicious Activity Reports (SARs) when they detect potential fraud. If your bank noticed that you recieved a large PPP loan and then immediantly transferred the funds to crypto exchanges, made large cash withdrawals, or purchased luxury items, they may of filed a SAR that triggered an investigation.

Whistleblower Complaints: Employees, buisness partners, ex-spouses, and competitors sometimes report suspected PPP fraud to federal authorities. The government takes these complaints serious, especially when they’re accompanied by documentation.

Cross-Reference with IRS Records: Federal investigators routinely compare PPP loan applications with IRS tax filings. If you claimed $500,000 in annual payroll on you’re PPP application but your tax returns show only $100,000 in payroll expenses, that discrepency will trigger an investigation.

The Investigation Process

Once an investigation is opened, here’s what typically happens:

Document Subpoenas: Federal agents will issue grand jury subpoenas to your bank, your PPP lender, the SBA, and sometimes your accountant or payroll company. They’re looking for every document related to you’re loan application, business operations, and how you used the funds.

You might not even know this is happening. Federal investigations is conducted in secret, and the institutions that recieve subpoenas are prohibited from telling you about them.

Interviews of Witnesses: Investigators will interview your employees, buisness partners, accountants, and anyone else who might have knowledge of you’re PPP loan. These witnesses ain’t required to tell you that federal agents came to talk to them.

Surveillance and Monitoring: In some cases, particularly when investigators suspect you’re continuing to commit fraud or might flee, they may conduct physical surveillance or monitor you’re electronic communications. This is more common in large-scale fraud investigations.

Search Warrants: If investigators believe they have probable cause that evidence of fraud is located at you’re home or buisness, they’ll execute a search warrant. This is often the first time defendants realize their under investigation. (And this is crucial) – when federal agents show up with a search warrant, DO NOT speak to them without an attorney present. You have the right to remain silent, and you should excerise that right immediantly.

Target Letters: Sometimes prosecutors will send you a target letter informing you that your the subject of a federal grand jury investigation. This letter typically invites you to come in for an interview or to provide documents. Do not respond to a target letter without consulting a federal defense attorney first. Anything you say can and will be used against you.

The Grand Jury Process

Federal prosecutors present evidence to a grand jury, which is comprised of 16 to 23 citizens who determine whether there’s probable cause to believe you committed a crime. The grand jury process is one-sided—you don’t get to present evidence or cross-examine witnesses. Your attorney can’t even be present in the grand jury room.

If the grand jury finds probable cause, they’ll return an indictment charging you with federal crimes. At that point, you’ll be arrested or summoned to court for your initial appearance.

Federal Penalties for PPP Fraud in Colorado: What You’re Facing

The penalties for PPP fraud are severe. Let me be clear about this—your not looking at probation or a fine if you’re convicted of federal PPP fraud in Colorado. Your looking at significant prison time, substantial restitution, and a permanent felony record that will affect every aspect of you’re life.

Statutory Maximum Penalties

Wire Fraud (18 U.S.C. § 1343): Up to 20 years in federal prison. However, if the wire fraud affects a financial institution or is connected to a federal disaster relief program (which PPP fraud is), the penalty increases to up to 30 years imprisonment and a $1,000,000 fine.

Bank Fraud (18 U.S.C. § 1344): Up to 30 years in federal prison and a $1,000,000 fine. Bank fraud carries more time then wire fraud, mail fraud, or most other fraud offenses, which is why prosecutors love to charge it in PPP cases.

False Statements to Financial Institutions (18 U.S.C. § 1014): Up to 30 years in federal prison and a $1,000,000 fine. This statute is powerful for prosecutors because it applies to a wide range of false statements made in connection with loan applications.

Money Laundering (18 U.S.C. § 1956 or 1957): If you used PPP loan proceeds for personal expenses like buying cars, real estate, or luxury items, prosecutors may charge you with money laundering, which carries up to 20 years in federal prison per count.

Conspiracy (18 U.S.C. § 371 or 1349): If you worked with others to commit PPP fraud, you can be charged with conspiracy. Under 18 U.S.C. § 1349, conspiracy to commit fraud carries the same penalties as the underlying fraud offense.

Multiple Counts = Cumulative Exposure

Here’s what alot of people don’t understand: prosecutors can charge you with multiple counts based off a single fraudulent PPP loan application. For example, if you submitted a fraudulent PPP application (bank fraud), and you used email to submit it (wire fraud), and you made false statements on the application (Section 1014 violation), and you later submitted a fraudulent forgiveness application (additional counts), you could be charged with 6, 8, or even 10 federal felonies arising from one loan.

If convicted on all counts and the judge sentences you to consecutive sentences (meaning one after another), your theoretical maximum exposure could exceed 100 years in federal prison. While judges rarely impose consecutive maximum sentences, the threat of cumulative exposure gives prosecutors tremendous leverage in plea negotiations.

Federal Sentencing Guidelines

Federal sentences is determined by the U.S. Sentencing Guidelines, which calculate a recommended sentencing range based off the offense level and the defendant’s criminal history category. While the guidelines ain’t mandatory after the Supreme Court’s decision in United States v. Booker, judges still use them as the starting point for determining an appropriate sentence.

For fraud offenses, the base offense level is 6 or 7, but it increases substantially based off the amount of loss involved in the offense. Here’s how the loss amount affects you’re sentencing:

• Loss of $6,500 to $15,000: Add 2 levels
• Loss of $15,000 to $40,000: Add 4 levels
• Loss of $40,000 to $95,000: Add 6 levels
• Loss of $95,000 to $150,000: Add 8 levels
• Loss of $150,000 to $250,000: Add 10 levels
• Loss of $250,000 to $550,000: Add 12 levels
• Loss of $550,000 to $1,500,000: Add 14 levels
• Loss of $1,500,000 to $3,500,000: Add 16 levels
• Loss of $3,500,000 to $9,500,000: Add 18 levels
• Loss of $9,500,000 or more: Add 20 levels or more

Additional enhancements can further increase you’re offense level. For example, if the fraud involved 10 or more victims, add 2 levels. If you abused a position of trust, add 2 levels. If the offense involved sophisticated means, add 2 levels. If you were an organizer or leader of the scheme, add 4 levels.

On the flip side, if you accept responsibility for you’re conduct and plead guilty early in the case, you can recieve a 3-level reduction, which can substantially lower your sentencing range.

Real-World Colorado Sentences

Let’s look at actual sentences imposed in recent Colorado PPP fraud cases to give you a sense of what your facing:

Richard Nieto (Morrison): 46 months (nearly 4 years) in federal prison for obtaining $913,551 in fraudulent PPP loans. The court ordered $962,438.85 in restitution.

Charles Lacona, Jr. (Colorado Springs): 24 months (2 years) in federal prison for obtaining $513,732.50 in fraudulent PPP loans. The court ordered $549,274.14 in restitution.

Dr. Joseph (Colorado Springs): 30 months (2.5 years) in federal prison for fraudulently obtaining COVID-19 aid. The court ordered $266,716 in restitution.

These sentences demonstrate several things. First, federal judges in Colorado are imposing substantial prison sentences for PPP fraud—not probation, not house arrest, but actual time in federal prison. Second, restitution is mandatory in these cases, meaning you’ll be required to pay back every dollar you fraudulently obtained, plus interest. Third, even defendants without significant criminal history is recieving multi-year prison sentences when the fraud involves hundreds of thousands of dollars.

Collateral Consequences

Beyond prison and restitution, a PPP fraud conviction carries severe collateral consequences that will affect you for the rest of you’re life:

• Permanent Felony Record: You’ll have a federal felony conviction on your record, which will show up on background checks and make it extremely difficult to get employment, particularly in fields that require bonding or fiduciary responsibility.
• Loss of Professional Licenses: If your a lawyer, doctor, accountant, real estate agent, or licensed in any other profession, a fraud conviction will likely result in the loss of you’re professional license.
• Immigration Consequences: If your not a U.S. citizen, a fraud conviction is considered a crime involving moral turpitude and can result in deportation, even if you’ve lived in the United States for decades and have lawful permanent resident status.
• Firearm Restrictions: Federal law prohibits convicted felons from possessing firearms or ammunition.
• Loss of Voting Rights: While Colorado restores voting rights to felons after they complete their sentence, your voting rights is suspended while your incarcerated or on parole.
• Difficulty Obtaining Credit: A federal fraud conviction will devastate you’re credit and make it nearly impossible to obtain business loans, mortgages, or even credit cards.

Defense Strategies for PPP Fraud Charges in Colorado

If your facing PPP fraud charges in the District of Colorado, you need an experienced federal defense attorney who understands both the substantive law and the practical realities of defending these cases in Denver federal court. Here are the primary defense strategies we employ:

Lack of Intent to Defraud

Intent is a critical element in every PPP fraud prosecution. The government must prove beyond a reasonable doubt that you knowingly made false statements with the intent to defraud. If you made an honest mistake, relied on bad advice from an accountant, or misunderstood the PPP application requirements, you may have a viable defense.

Many PPP applications was completed hastily during the early days of the pandemic when buisnesses was desperate for relief and the SBA’s guidance was evolving. If you made errors on you’re application but didn’t intend to defraud anyone, that’s a defense we can present to the jury.

The recent Supreme Court decision in Thompson v. United States regarding 18 USC 1014 held that the statute don’t criminalize misleading yet literally true statements. If your PPP application statements was factually correct even if incomplete, there might be a defense under Thompson.

Challenging Loss Calculations

The amount of loss is critical to determining you’re sentence under the federal sentencing guidelines. Prosecutors often overstate the loss amount to increase you’re sentencing exposure and pressure you into a plea.

For example, if prosecutors claim $500,000 in losses but you actually qualified for a $300,000 loan based on legitimate payroll, the loss is only $200,000—which significantly reduces you’re sentencing exposure. We work with forensic accountants to conduct an independent loss analysis and challenge the government’s calculations.

Materiality Challenges

To convict you of fraud, prosecutors must prove that the false statements you made was “material”—meaning they had the potential to influence the lender’s decision. If the misstatements on you’re application was minor and wouldn’t have affected the lender’s decision to approve the loan, we can argue they wasn’t material.

For instance, if you overstated you’re payroll by 10% but would have qualified for the same loan amount even with accurate numbers, the misstatement may not be material.

Reliance on Professionals

Many defendants relied on accountants, bookkeepers, or consultants to prepare they’re PPP applications. If you provided accurate information to your accountant and they made errors in preparing the application, that can be a defense. You can’t be convicted of knowingly making false statements if you didn’t know the statements was false.

This defense requires careful documentation. We’ll need to show that you gave you’re accountant correct information and that any false statements resulted from their errors, not your intent to defraud.

Fourth Amendment Violations

If federal agents obtained evidence against you through an illegal search or seizure, we can file a motion to suppress that evidence. If the court grants the motion, the government may not be able to use critical evidence against you, which could result in dismissal of the charges or a more favorable plea offer.

Fourth Amendment issues arise when agents execute search warrants that wasn’t supported by probable cause, when they exceed the scope of a search warrant, or when they interrogate you after you’ve invoked you’re right to counsel.

Fifth Amendment Violations

If federal agents questioned you without giving you Miranda warnings, or if they continued to question you after you invoked you’re right to remain silent or you’re right to an attorney, any statements you made may be suppressed.

Many PPP fraud defendants made incriminating statements to federal agents during the execution of a search warrant or during a voluntary interview, not realizing they was effectively confessing to federal crimes. We scrutinize every interaction you had with law enforcement to identify potential Fifth Amendment violations.

Negotiating Favorable Plea Agreements

Look, here’s the deal—the vast majority of federal cases result in guilty pleas, not trials. That don’t mean you should accept the government’s first offer. An experienced federal defense attorney can often negotiate a plea agreement that substantially reduces you’re charges and you’re sentencing exposure.

For example, prosecutors may initially charge you with bank fraud (30-year maximum), wire fraud (30-year maximum), money laundering (20-year maximum), and false statements (30-year maximum)—four counts with a theoretical maximum of 110 years. Through plea negotiations, we may be able to get the government to agree to a single count of wire fraud with a sentencing recommendation at the low end of the guidelines range.

We also negotiate over the loss amount, which directly affects you’re sentence. If we can persuade prosecutors to agree to a lower loss figure, that can mean the diffrence between 2 years in prison and 5 years in prison.

Cooperating with the Government

In some cases, particularly when the defendant has information about other individuals involved in PPP fraud, cooperation with the government can result in substantial sentencing reductions. Under U.S.S.G. § 5K1.1, prosecutors can file a motion requesting a downward departure from the guidelines range based on you’re substantial assistance.

Cooperation ain’t right for everyone, and it carries risks. If you cooperate and provide information to prosecutors, you may be required to testify against others, which can put you in a dangerous position. We carefully evaluate whether cooperation is in you’re best interest before pursuing that strategy.

Arguing for Departures and Variances

Even after calculating the guidelines range, federal judges have discretion to depart or vary from that range based off mitigating factors. We present evidence of you’re personal background, you’re lack of criminal history, you’re family circumstances, you’re contributions to the community, and any other factors that might persuade the judge to impose a sentence below the guidelines range.

In PPP fraud cases, we often argue that the defendant acted out of desperation during an unprecedented global pandemic, that the defendant’s buisness was genuinely struggling, and that the defendant used at least some of the loan proceeds for legitimate buisness expenses. These arguments don’t excuse the fraud, but they can persuade a judge to impose a more lenient sentence.

Why You Need a Colorado Federal Defense Lawyer for PPP Fraud Charges

Federal PPP fraud cases is fundamentally different from state criminal cases. The rules is different, the prosecutors is more experienced and better resourced, the penalties is more severe, and the stakes is higher. You need an attorney who practices regularly in federal court and understands the unique challenges of defending federal fraud cases.

Federal Court Experience Matters

Most criminal defense attorneys practice primarily in state court and have limited experience in federal court. Federal criminal procedure is governed by the Federal Rules of Criminal Procedure and the Federal Rules of Evidence, which differ substantially from Colorado state rules. Federal sentencing is governed by the U.S. Sentencing Guidelines, which don’t exist in state court.

An attorney who don’t regularly practice in federal court may not understand how to effectively challenge a government loss calculation, how to negotiate with Assistant U.S. Attorneys, how to file and argue suppression motions under federal standards, or how to present mitigating evidence at sentencing.

Relationships with Denver Federal Prosecutors

Federal defense attorneys who regularly practice in the District of Colorado have established relationships with the Assistant U.S. Attorneys who prosecute PPP fraud cases. These relationships matter. When your attorney has credibility with prosecutors, when prosecutors know that your attorney is thorough and well-prepared, and when prosecutors respect you’re attorney’s integrity, plea negotiations go more smoothly and the government is more likely to make reasonable offers.

Prosecutors is less likely to make favorable plea offers to attorneys they don’t know or attorneys who have a reputation for being unprepared or unreliable.

Knowledge of Denver Federal Judges

The District of Colorado has multiple federal judges, each with they’re own tendencies, preferences, and sentencing philosophies. An experienced federal defense attorney knows which judges is more receptive to downward variances, which judges is tough on fraud cases, which judges value cooperation, and which judges give significant weight to family circumstances.

This knowledge informs our defense strategy. We know how to present mitigating evidence in a way that resonates with the particular judge assigned to you’re case.

Access to Experts and Resources

Defending a complex PPP fraud case often requires expert witnesses—forensic accountants to challenge the government’s loss calculations, computer forensic experts to analyze electronic evidence, mental health professionals to evaluate whether you was suffering from cognitive impairments or mental health issues at the time of the offense, and economic experts to testify about the impact of the pandemic on you’re buisness.

Federal defense firms have relationships with these experts and the resources to retain them. Public defenders and court-appointed attorneys often have limited budgets for experts, which can hamper the defense.

Time to Devote to Your Case

Federal PPP fraud cases involve voluminous discovery—thousands of pages of bank records, loan applications, tax returns, emails, and other documents. Reviewing and analyzing this discovery takes substantial time.

Court-appointed attorneys and public defenders often handle crushing caseloads and simply don’t have the time to devote to thoroughly investigating and preparing you’re case. Private federal defense attorneys can dedicate the time necessary to identify weaknesses in the government’s case and develop effective defense strategies.

The Investigation Phase is Critical

By the time your indicted, the government has typically spent months or even years investigating you’re case. They’ve interviewed witnesses, reviewed documents, and built what they believe is a strong case against you.

But the investigation phase before charges is filed is when a skilled federal defense attorney can have the most impact. If you recieve a target letter or become aware that your under investigation, immediantly contacting a federal defense attorney can sometimes prevent charges from being filed at all.

We can reach out to prosecutors, present evidence that the government may not have considered, explain legitimate reasons for apparent discrepencies in you’re application, and persuade prosecutors that charging you isn’t warranted. Once your indicted, it’s much harder to get charges dismissed.

Protecting Your Rights from Day One

The moment you become aware of a federal investigation, you’re constitutional rights is at risk. Anything you say to federal agents, you’re employer, you’re accountant, or anyone else can be used against you. People often make incriminating statements before they realize they should of invoked they’re right to remain silent.

A federal defense attorney will advise you on how to respond to investigative inquiries, whether to comply with document requests, whether to sit for an interview, and how to protect privileged communications. These decisions can make the diffrence between being charged and not being charged, or between being convicted and being acquitted.

The District of Colorado Federal Court: What to Expect

PPP fraud cases in Colorado is prosecuted in the U.S. District Court for the District of Colorado, which has courthouses in Denver, Grand Junction, Pueblo, and Durango. Most cases is handled in the Denver courthouse, which is located at the Alfred A. Arraj United States Courthouse, 901 19th Street, Denver, CO 80294.

The U.S. Attorney’s Office for Colorado

The U.S. Attorney’s Office for the District of Colorado is headquartered in Denver and is led by the U.S. Attorney, who is appointed by the President. The office employs dozens of Assistant U.S. Attorneys (AUSAs) who prosecute federal crimes, including PPP fraud.

Since July 2023, the Colorado U.S. Attorney’s Office has been home to one of five national COVID-19 Fraud Strike Force Teams, which means they’ve dedicated substantial resources to investigating and prosecuting PPP and EIDL fraud throughout the state. The Strike Force combines law enforcement and prosecutorial resources and focuses on large-scale, multistate pandemic relief fraud perpetrated by criminal organizations and transnational actors.

According to public statements from the U.S. Attorney’s Office, they was investigating dozens of COVID-19 fraud cases worth roughly $75 million as of early 2025.

Initial Appearance and Arraignment

If your indicted, you’ll be arrested or summoned to appear in federal court for you’re initial appearance. At the initial appearance, the judge will inform you of the charges, you’re rights, and the potential penalties. The judge will also determine whether you should be released on bond or detained pending trial.

Federal bond hearings is different from state bond hearings. Under the federal Bail Reform Act, there’s a presumption that you should be released unless the government can prove by clear and convincing evidence that no conditions of release will reasonably assure you’re appearance at trial and the safety of the community. However, for certain offenses involving economic harm, the government can seek detention.

At the arraignment, which may occur at the same hearing or a subsequent hearing, you’ll enter a plea of guilty, not guilty, or no contest. In the vast majority of cases, defendants plead not guilty at arraignment, even if they plan to plead guilty later as part of a plea agreement.

Discovery and Pretrial Motions

After arraignment, the case enters the pretrial phase. The government is required to provide discovery—all evidence it plans to use at trial, as well as exculpatory evidence (evidence that tends to show you’re innocent) under Brady v. Maryland.

In PPP fraud cases, discovery typically includes you’re loan applications, bank records, tax returns, emails, witness statements, and reports from forensic accountants or other experts.

You’re attorney will file pretrial motions challenging the sufficiency of the indictment, seeking to suppress evidence obtained in violation of you’re constitutional rights, or seeking dismissal of charges. The court will hold hearings on these motions, and the judge will issue rulings that can significantly impact the course of the case.

Plea Negotiations

Throughout the pretrial phase, you’re attorney will engage in plea negotiations with the government. As I mentioned earlier, the vast majority of federal cases result in guilty pleas. But that don’t mean you should accept the government’s first offer.

Effective plea negotiations require leverage. The leverage comes from identified weaknesses in the government’s case, strong legal motions, the availability of defenses, and the credibility of you’re attorney. If prosecutors believe they might lose at trial or that the court might suppress critical evidence, they’re more likely to make favorable plea offers.

Trial

If plea negotiations fail and you decide to go to trial, you’re case will be tried before a jury (or before the judge in a bench trial, if you waive you’re right to a jury). Federal trials is conducted under the Federal Rules of Evidence and the Federal Rules of Criminal Procedure.

PPP fraud trials typically involve testimony from bank representatives, SBA officials, forensic accountants, and sometimes cooperating witnesses. The government will present documentary evidence—you’re loan applications, bank records, tax returns—and testimony explaining why the applications was fraudulent.

You’re attorney will cross-examine government witnesses, challenge the admissibility of evidence, and present a defense, which may include you’re own testimony (though you have the right not to testify) and testimony from experts and character witnesses.

The jury must find you guilty beyond a reasonable doubt. If even one juror has a reasonable doubt, the jury can’t convict you. A hung jury results in a mistrial, and the government must decide whether to retry you.

Sentencing

If you plead guilty or is convicted after trial, the case proceeds to sentencing. Before the sentencing hearing, a probation officer will prepare a Presentence Investigation Report (PSR) that includes details about the offense, you’re background, you’re criminal history, and a calculation of the applicable sentencing guidelines range.

Both you’re attorney and the government can object to the PSR. We often challenge the loss amount calculation, the applicability of sentencing enhancements, and the probation officer’s guideline calculations.

At the sentencing hearing, the judge will hear arguments from both sides, consider letters of support from you’re family and friends, hear from victims (in this case, the SBA and taxpayers), and determine an appropriate sentence. The judge must consider the factors set forth in 18 U.S.C. § 3553(a), which include the nature and circumstances of the offense, you’re history and characteristics, the need for the sentence to reflect the seriousness of the offense and promote respect for the law, and the need to provide just punishment.

Federal judges in Colorado have imposed sentences ranging from probation (rare in PPP fraud cases) to 46 months in prison. The sentence depends on the amount of loss, whether you accepted responsibility, you’re criminal history, and mitigating factors.

Recent Colorado PPP Fraud Cases: Lessons Learned

Looking at recent prosecutions in Colorado provides valuable insights into how these cases is handled and what defendants can expect:

The Importance of Accepting Responsibility: Defendants who plead guilty early and accept responsibility for they’re conduct recieve substantial sentencing reductions. Charles Lacona, Jr. went to trial and was convicted by a jury, which meant he didn’t recieve the 3-level reduction for acceptance of responsibility. Richard Nieto pleaded guilty, which likely resulted in a more lenient sentence then he would of recieved if he’d gone to trial and been convicted.

Restitution is Mandatory: In every Colorado PPP fraud case, the court has ordered full restitution. You will be required to pay back every dollar you fraudulently obtained, plus interest. If you can’t pay immediately, the court will impose a payment schedule that continues even after you’re released from prison.

Personal Use of Funds Aggravates Sentencing: Defendants who used PPP loan proceeds for personal expenses like luxury cars, real estate, country club memberships, and vacations recieve harsher sentences then defendants who at least partially used the funds for buisness expenses. The Lybolt case, where the defendants allegedly purchased a Porsche and a Range Rover with EIDL and PPP funds, is a prime example.

Creating Fake Documents Makes It Worse: Richard Nieto’s creation of 87 fake payroll checks and paystubs was a significant aggravating factor that contributed to his 46-month sentence. Submitting a fraudulent application is one thing; creating an elaborate scheme with dozens of fake documents demonstrates sophistication and planning that judges take very seriously.

The Strike Force Means More Scrutiny: Since Colorado was selected to host one of five national COVID-19 Fraud Strike Force Teams, PPP fraud prosecutions in the state have increased. If you obtained a PPP or EIDL loan in Colorado, you should assume that federal investigators is reviewing loan data and looking for red flags.

What to Do If You’re Under Investigation or Charged

If you recieve a target letter, if federal agents execute a search warrant at you’re home or buisness, or if your contacted by federal investigators regarding a PPP or EIDL loan, take these steps immediantly:

1. Do Not Speak to Federal Agents Without an Attorney. You have the absolute right to remain silent and the right to have an attorney present during any questioning. Exercising these rights can’t be used against you. Federal agents is trained interrogators, and even seemingly innocent statements can be used to build a case against you. Politely tell the agents that you want to speak to an attorney before answering any questions.

2. Do Not Destroy Evidence. It might be tempting to delete emails, shred documents, or destroy other evidence, but doing so is a seperate federal crime—obstruction of justice—that carries up to 20 years in prison. Preserve all documents, even if they’re incriminating.

3. Do Not Discuss the Case with Others. Anything you say to friends, family, employees, or buisness partners can be discovered by federal investigators. Those people can be subpoenaed to testify against you. The only person you can speak to with complete confidentiality is you’re attorney.

4. Contact a Federal Defense Attorney Immediantly. Time is critical. The earlier you involve an attorney, the more options you have. An attorney can communicate with prosecutors on you’re behalf, present evidence that might prevent charges from being filed, and protect you’re rights throughout the investigation.

5. Gather Relevant Documents. Collect all documents related to you’re PPP or EIDL loan, including the applications, supporting documentation, correspondence with the lender, bank statements showing how you used the funds, and any communications with accountants or consultants who helped prepare the application. These documents will be critical to you’re defense.

6. Be Honest with Your Attorney. You’re attorney can’t help you if you don’t tell them the truth. Everything you tell you’re attorney is protected by attorney-client privilege, which means your attorney can’t disclose it to anyone without you’re permission. Be completely honest about what happened, even if it’s embarrassing or incriminating.

Conclusion: Protecting Your Freedom and Your Future

PPP loan fraud charges in Colorado is among the most serious federal cases being prosecuted today. The U.S. Attorney’s Office for the District of Colorado has made these prosecutions a priority, and they’re dedicating substantial resources to investigating and charging defendants throughout the state.

If your facing PPP fraud charges or if your under investigation, you’re freedom, you’re financial future, and you’re reputation is at stake. The penalties is severe—potentially decades in federal prison, hundreds of thousands or even millions of dollars in restitution, and a permanent felony record.

But your not without options. An experienced federal defense attorney can challenge the government’s evidence, negotiate favorable plea agreements, present mitigating evidence at sentencing, and fight to protect you’re rights at every stage of the case.

The most important decision you’ll make is who you choose to represent you. Don’t trust you’re future to an attorney who don’t regularly practice in federal court or who don’t have experience defending complex fraud cases. The stakes is to high for anything less then the best representation available.

Contact a Colorado federal defense attorney today to discuss you’re case and begin building a defense strategy. The earlier you act, the more options you’ll have.