Criminal Liability for PPP Loan Fraud Cases

Many small business owners applied for the PPP loan. Most didn’t realize they’d be potentially exposed to criminal charges. The DOJ has filed multiple criminal cases for PPP loan fraud, and more on the way. It’s likely this is something which will go on for many years.

The PPP was established by the CARES Act – but the CARES Act is not a penal statute. The CARES Act was designed to provide financial security to individuals, and business owners who were struggling due to the pandemic. At the time the PPP loan program was enacted, there was limited information and oversight. There was a lot of potential – and even accidental – fraud. In fact, many people filed fraudulent applications, and received fraudulent PPP loans, that the SBA granted.

In fact, there were so many fraudulent loans granted – that the SBA offered a grace period during which individuals and businesses could return fraudulently obtained funds without a penalty. Now this period has expired. The many agencies of the government, such as the SBA, DOJ, and other federal agencies are initiating investigations to discover PPP loan fraud. Many investigations are resulting in criminal charges being filed.

Below are examples of PPP loan fraud:

• Loan stacking multiple PPP loans from multiple SBA lenders
• Misrepresenting your payroll, or misclassifying your employees in order to get PPP eligibility
• Misrepresenting your payroll costs in order to get a larger PPP loan
• Falsely certifying that current economic situations make the loan necessary to support ongoing operations
• Using the PPP loan for ineligible business purposes

What criminal charges might you face for PPP loan fraud?

The CARES Act doesn’t contain any provisions for penalties, or prosecution. Criminal charges are being filed under existing criminal statutes. There are numerous federal laws which are broad enough to encompass any fraudulent actions taken to get PPP funds you aren’t entitled to.

Below are some examples of the laws which could be used to prosecute you:

• false claims act
• making false statements to the SBA
• making false statements to an FDIC insured bank
• bank fraud
• wire fraud
• identity theft
• tax evasion
• making false statements to federal agents
• conspiracy
• attempt

The U.S. Department of Justice has filed criminal complaints in many loans. The number of cases will only continue to rise. Each of the statutes/crimes listed above are just some of the ways in which the government will try to prosecute you.

Potential Criminal Liability in Federal PPP / EIDL Loan Fraud Investigations

Making false statements to the SBA: This statute imposes penalties for anyone who makes knowingly false statements, or reports, to the SBA. This verbiage is broad enough that it includes representations made on the PPP loan application.

Making false statements to an FDIC-Insured Bank: This is a prohibition against making false statements and reports to financial institutions that are insured by the Federal Deposit Insurance Corporation. Companies and individuals who submit false info to the SBA, can be prosecuted for submitting false information.

Bank fraud: Along with prosecution for submitting false info to PPP lenders, companies and individual borrowers can face prosecution for bank fraud. This federal statute makes it a criminal offense to execute, attempt to execute, or scheme, to defraud a financial institution. The DOJ has already filed criminal charges against many individuals and companies guilty of this.

Wire fraud: The federal wire fraud statute is a tool used by federal prosecutors often. The DOJ has filed many cases that involved wire fraud charges in PPP cases.

Making false statements to federal agents: Along with being prosecuted for making false statements in PPP loan applications — company owners, and others, can face prosecution for making false statements to federal agents during a PPP loan fraud audit/investigation.

Conspiracy: There are two main federal conspiracy statutes which allow for the prosecution of individuals and businesses that are involved in an effort to fraudulently get federal funds the PPP program. These efforts do not have to ACTUALLY RESULT in a PPP loan being granted in order to support criminal charges for conspiracy.

Many Small Business Owners Didn’t Realize PPP Loan Fraud Could Lead to Criminal Charges

Many small business owners applied for the PPP loan. Most didn’t realize they’d be potentially exposed to criminal charges. The DOJ has filed multiple criminal cases for PPP loan fraud, and more on the way. It’s likely this is something which will go on for many years.

PPP Loans Established by CARES Act

The PPP was established by the CARES Act – but the CARES Act is not a penal statute. The CARES Act was designed to provide financial security to individuals, and business owners who were struggling due to the pandemic. At the time the PPP loan program was enacted, there was limited information and oversight. There was a lot of potential – and even accidental – fraud. In fact, many people filed fraudulent applications, and received fraudulent PPP loans, that the SBA granted.

SBA Offered Grace Period to Return Fraudulent Funds

In fact, there were so many fraudulent loans granted – that the SBA offered a grace period during which individuals and businesses could return fraudulently obtained funds without a penalty. Now this period has expired. The many agencies of the government, such as the SBA, DOJ, and other federal agencies are initiating investigations to discover PPP loan fraud. Many investigations are resulting in criminal charges being filed.

Examples of PPP Loan Fraud

Below are examples of PPP loan fraud:

• Loan stacking multiple PPP loans from multiple SBA lenders
• Misrepresenting your payroll, or misclassifying your employees in order to get PPP eligibility
• Misrepresenting your payroll costs in order to get a larger PPP loan
• Falsely certifying that current economic situations make the loan necessary to support ongoing operations
• Using the PPP loan for ineligible business purposes

Potential Criminal Charges for PPP Loan Fraud

What criminal charges might you face for PPP loan fraud?

The CARES Act doesn’t contain any provisions for penalties, or prosecution. Criminal charges are being filed under existing criminal statutes. There are numerous federal laws which are broad enough to encompass any fraudulent actions taken to get PPP funds you aren’t entitled to.

Below are some examples of the laws which could be used to prosecute you:

• false claims act
• making false statements to the SBA
• making false statements to an FDIC insured bank
• bank fraud
• wire fraud
• identity theft
• tax evasion
• making false statements to federal agents
• conspiracy
• attempt

The U.S. Department of Justice has filed criminal complaints in many loans. The number of cases will only continue to rise. Each of the statutes/crimes listed above are just some of the ways in which the government will try to prosecute you.

Potential Criminal Liability in Federal PPP / EIDL Loan Fraud Investigations

Making false statements to the SBA

This statute imposes penalties for anyone who makes knowingly false statements, or reports, to the SBA. This verbiage is broad enough that it includes representations made on the PPP loan application.

Making false statements to an FDIC-Insured Bank

This is a prohibition against making false statements and reports to financial institutions that are insured by the Federal Deposit Insurance Corporation. Companies and individuals who submit false info to the SBA, can be prosecuted for submitting false information.

Bank fraud

Along with prosecution for submitting false info to PPP lenders, companies and individual borrowers can face prosecution for bank fraud. This federal statute makes it a criminal offense to execute, attempt to execute, or scheme, to defraud a financial institution. The DOJ has already filed criminal charges against many individuals and companies guilty of this.

Wire fraud

The federal wire fraud statute is a tool used by federal prosecutors often. The DOJ has filed many cases that involved wire fraud charges in PPP cases.

Making false statements to federal agents

Along with being prosecuted for making false statements in PPP loan applications — company owners, and others, can face prosecution for making false statements to federal agents during a PPP loan fraud audit/investigation.

Conspiracy

There are two main federal conspiracy statutes which allow for the prosecution of individuals and businesses that are involved in an effort to fraudulently get federal funds the PPP program. These efforts do not have to ACTUALLY RESULT in a PPP loan being granted in order to support criminal charges for conspiracy.