Last Updated on: 28th July 2023, 07:22 pm

As the COVID-19 pandemic continues to ravage the economy, small business owners have been faced with a host of challenges, one of which is the threat of prosecution for PPP loan fraud. Unfortunately, several businesses have already found themselves in hot water for misusing federal funds intended to keep their doors open.

On May 13, 2020, a Texas business owner was investigated for fraudulently receiving $10 million in PPP funds to pay 250 employees, only to be found to have no employees at all. The owner faced a litany of charges, including wire fraud, bank fraud, false statements to a financial institution, and false statements to the Small Business Administration.

This is a stark reminder that the Department of Justice is taking a hardline stance against obvious instances of fraud, but businesses should also be aware that criminal and civil enforcement authorities are likely to verify certifications made by companies regarding their need for PPP funds. In other words, even if your fraud isn’t glaringly obvious, you could still face prosecution.

PPP loan fraud is a serious federal crime, and it’s one that small business owners should be aware of. Around 15% of PPP loans have been flagged for suspected fraud, which means that some businesses in need of assistance have been denied it due to others misusing the funds. The feds are taking this issue very seriously and have set up an anonymous tip line for reporting suspected fraud.

If you’ve been accused of PPP loan fraud or suspect that you may be under investigation, it’s crucial to contact a PPP loan lawyer immediately.  Spodek Law Group, is a top defense attorney who can explain the charges against you and mount a defense if necessary.

It’s also worth noting that PPP loan fraud carries heavy fines and penalties. Applying to the Paycheck Protection Program with false statements can result in up to 30 years in prison and a fine of $1 million. Additionally, stealing the identity of others to obtain PPP loans is a felony offense with a two-year prison term.

Misusing PPP loans is viewed by the feds as hurting small businesses, which is why they’re taking such a hardline stance against fraud. According to researchers, around $76 billion in PPP loans were taken out illegitimately, which is nearly 10% of the program’s budget.

It’s important to note that the Small Business Administration is still auditing PPP loans, so even if you received your funds more than a year ago, you could still be subject to investigation. All companies that received $2 million or more in PPP loans are subject to audit by the SBA, and other federal agencies are also investigating recipients suspected of fraud. With the SBA stepping up audits and investigations in 2022 and expected to increase in 2023, it’s crucial to have a PPP defense lawyer like Todd Spodek on your side.

Raleigh PPP and EIDL Loan Fraud Lawyers

The Paycheck Protection Program (PPP) was established as a lifesaving measure in the midst of the COVID-19 pandemic through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020. The PPP promised businesses up to $2 million in zero-interest loans, guaranteed by the U.S. Small Business Administration (SBA), to cover essential expenses such as payroll, rent, and utilities. However, the program was met with overwhelming demand, and with an initial endowment of only $350 billion, the funds were depleted in minutes. The additional $310 billion authorized by Congress was exhausted just as quickly. The high volume of applications, coupled with limited regulation, led to accusations of fraud and abuse. To date, the SBA’s Office of Inspector General (OIG) has uncovered widespread fraud and abuse in the PPP loan program through 11 reports. The OIG found that the program lacked proper controls and that many loans may have had eligibility issues, with lenders not always properly verifying payroll costs. The OIG has referred numerous cases of suspected fraud to the Department of Justice for criminal prosecution.

What constitutes PPP loan fraud? Fraud occurs when a party misrepresents facts to the government, leading to improper funding. Common examples of PPP loan fraud include application fraud, using loan proceeds for unauthorized purposes, loan stacking, and misrepresenting eligibility to receive both PPP funding and unemployment benefits. Banks serve as lenders for PPP loans, but they are not responsible for verifying eligibility. However, they may be required to report any suspicious activity to the SBA, including loan stacking. Federal fraud charges require intent to defraud, material misrepresentation, and financial loss. If accused of PPP loan fraud, it is crucial to seek legal counsel immediately.