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

As the nation continues to navigate the economic turmoil caused by the coronavirus pandemic, PPP loan fraud investigations have been on the rise. Federal prosecutors and criminal investigators from various agencies are actively searching for potential PPP loan fraud and other CARES Act violations, with the goal of recovering any funds that may have been obtained through fraudulent means.

But what exactly is PPP loan fraud? Simply put, it occurs when an individual or business submits false information in their application or certification for a loan under the federal Paycheck Protection Program. The PPP was created to provide forgivable loans to companies to help them stay afloat during the pandemic, and businesses can apply for these loans through commercial banks. However, there are strict eligibility criteria and requirements for spending the funds.

During a PPP loan fraud investigation, federal prosecutors focus on determining whether charges should be brought against someone for violating the program’s requirements. They may target businesses and individuals who have allegedly violated the PPP loan program by, for example, falsifying information in their loan application or using the funds for unauthorized purposes.

If you are concerned about possible PPP fraud charges, it’s crucial to take steps to protect yourself and your business. This includes gathering all financial records, not destroying any business records, and making sure your employees know they can report suspicions of PPP fraud without fear of retaliation.

At our firm, we understand the gravity of PPP and EIDL loan fraud investigations and have a proven track record of helping business owners navigate them. Our attorneys, paralegals, and independent consultants work quickly to make sure there is no further contact with our clients and to gather and preserve relevant business documents. We also consult with forensic accountants and present any available arguments for mitigation to the government, all with the goal of minimizing any potential penalties or charges.

The Paycheck Protection Program (PPP) was a federal loan program designed to help businesses keep their workforce employed 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. But as the program came to an end, individuals in different states faced criminal charges for fraud involving the Paycheck Protection Program.

Fraudulent activities in connection with PPP loans include lying on loan applications, falsifying business or tax records, using PPP loans for unauthorized purposes, loan stacking, and concealing or misrepresenting information during a PPP audit or investigation. These activities can result in federal prosecution for identity theft, tax evasion, mail fraud, wire fraud, and bank 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, under which the program was funded, was intended to provide relief to companies and individuals affected by the COVID-19 pandemic. The Paycheck Protection Program was funded 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.

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.

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