Last Updated on: 28th July 2023, 07:21 pm

As the nation struggles to recover from the devastating economic impact of the coronavirus pandemic, PPP loan fraud investigations are on the rise. Federal prosecutors and criminal investigators from various agencies are working tirelessly to uncover possible violations of the CARES Act and recover any funds that may have been obtained through fraudulent means.

But what exactly is PPP loan fraud? It occurs when an individual or business submits false information in their application or certification for a loan under the Paycheck Protection Program (PPP). This program was created to help companies stay afloat during the pandemic by providing forgivable loans to cover payroll and operating expenses. However, businesses must meet specific criteria to be eligible for these loans and are subject to strict requirements and limits on how the funds can be used.

During a PPP loan fraud investigation, the primary goal is to determine whether charges should be brought against those who may have violated the program’s requirements. This can include making false statements on the loan application, applying for loans from multiple lenders (known as “loan stacking”), using the funds for improper or unapproved purposes, submitting false certifications for loan forgiveness, or being dishonest with agents during an audit or investigation.

Individuals charged with PPP loan fraud may face severe criminal and civil penalties, including wire fraud (up to 20 years in prison), bank fraud (up to 30 years in prison), false statements to a financial institution (up to 30 years in prison), and conspiracy to commit fraud (penalties are the same as the fraud crime that is the purpose of the agreement).

If you have been contacted by a federal agent or official regarding a PPP loan, it is crucial to proceed with caution. Many have found themselves charged with obstruction or making false statements to agents in addition to PPP loan fraud after speaking to investigators without legal representation. At Spodek PC, we advise our clients to contact us before discussing their loan application or business with a federal agent and before providing any documents or records to the government. Trust us to guide you through this difficult time and protect your rights.

Connecticut PPP and EIDL Loan Fraud Lawyers

The Paycheck Protection Program (PPP) was a federal loan program created to help businesses keep their employees during the pandemic. Until May 31, 2021, certain businesses that met specific qualifications could apply for a PPP loan backed by the Small Business Administration (SBA) at a low interest rate of 1%. Borrowers that met certain conditions could qualify for full loan forgiveness. However, as the program progressed, individuals in different states began facing criminal charges for fraud involving the Paycheck Protection Program.

Examples of PPP Fraud Federal prosecutors are pursuing criminal charges for identity theft, tax evasion, mail fraud, wire fraud, and bank fraud in connection with PPP loans. Some of the most common allegations include:

• Lying on PPP loan applications
• Falsifying business or tax records
• Using PPP loans for unauthorized purposes
• Loan stacking (receiving PPP funds from more than one lender)
• Concealing or misrepresenting information during a PPP audit or investigation

Federal Government Investigation of PPP Fraud The federal government has made it clear that it intends to investigate and prosecute business owners and individuals who fraudulently obtained or attempted to obtain PPP funds. The U.S. Department of Justice (DOJ) has issued press releases regarding prosecution of people charged with PPP and COVID-Relief fraud. The CARES Act, which funded the program, was intended to provide relief to companies and individuals affected by the COVID-19 pandemic. With nearly $350 billion in federal money, participating lenders were immediately flooded with applicants, the program ran out of funds, and many companies that should have been eligible were unable to receive loans. As a result, companies that were able to receive PPP loans are currently under scrutiny by federal authorities.

Legal Penalties for PPP Fraud Potential penalties for PPP fraud will depend on the specific charges arising from a loan fraud investigation. For example, defendants may face the following penalties upon conviction of the following charges:

• Tax evasion: Fine of up to $100,000 for an individual or $500,000 for a corporation and up to five years in federal prison.
• Bank fraud: Fine of up to $1 million and a federal prison sentence of 30 years.
• Making false statements to the SBA or making false statements to an FDIC-insured bank: Fine of up to $1 million and 30 years in federal prison.
• Making false statements to federal agents: Statutory fines and up to five years in federal prison.
• Wire fraud: Statutory fines and up to 20 years in federal prison.
• Aggravated identity theft: Additional penalty of up to two years imprisonment.
• Conspiracy: Statutory fines and up to five years federal imprisonment, plus the same penalties as prescribed for the underlying offense.
• Attempt: The same penalties as prescribed for the criminal offense that was attempted.

Why You Need a Lawyer If You Are Facing PPP Fraud Charges

Federal agencies are looking back in an effort to identify companies that received PPP funds unlawfully. With widespread negative publicity surrounding the depletion of PPP funds, the risk of prosecution is high. If you or your company is targeted for PPP fraud, it is crucial to retain experienced Los Angeles criminal defense lawyers to help mitigate the risk of substantial penalties.