Last Updated on: 3rd June 2023, 12:25 am

As the extent of the fraud perpetuated under the federal Paycheck Protection Program (PPP) comes into sharper focus, it is imperative for all companies that received low-interest, forgivable loans under the program to promptly conduct an internal assessment focused on assessing PPP compliance. With multiple federal agencies, including the U.S. Small Business Administration’s (SBA) audits, investigating PPP loan fraud, it is essential to know what federal agents will find and identify the agency (or agencies) involved. Each agency follows its own investigative procedures, and the steps involved in executing an effective and successful defense can vary.

Below are the primary federal agencies actively conducting PPP loan fraud investigations:

1. 1. SBA Office of Inspector General (SBA-OIG)

The SBA-OIG is the integrity and accountability arm of the SBA, conducting financial and performance audits of participants in SBA programs. The SBA-OIG’s Auditing Division is involved in the audits of all recipients of PPP loans of $2 million or greater, while the Investigations Division is handling allegations of PPP loan fraud on a case-by-case basis. Companies targeted in SBA-OIG investigations need to prepare to defend themselves effectively in order to reduce the risk of facing federal criminal charges.

1. 2. Federal Bureau of Investigation (FBI)

The FBI’s White Collar Crime division is responsible for investigating corporate entities, including those suspected of committing government benefit program fraud. Specifically, in regards to PPP loan fraud, the FBI is targeting individuals and companies that have submitted false information or fraudulent certifications in support of their PPP loan applications, used PPP loan funds for unlawful purposes, or submitted fraudulent certifications for loan forgiveness. Companies that may have violated the PPP’s requirements will need to prepare to defend themselves if targeted by the FBI.

1. 3. U.S. Department of Justice (DOJ)

The DOJ is aggressively targeting and prosecuting individuals suspected of perpetrating fraud under the PPP. Since its first PPP-related criminal complaint in early May, the DOJ has initiated numerous cases against company owners, executives, and alleged scam artists who are accused of fraudulently applying for and obtaining PPP funds. The DOJ has included charges for bank fraud, wire fraud, aggravated identity theft, making false statements, and conspiracy in the criminal complaints filed to date.

1. 4. Internal Revenue Service (IRS)

The IRS is participating in PPP loan fraud investigations to the extent that they involve the underreporting and/or underpayment of companies’ or individuals’ federal tax liabilities. One issue that has the potential to lead to trouble for many PPP loan recipients is the IRS’s determination that expenses paid with forgiven PPP loans are not eligible for ordinary business deductions.

How Do I Know if My Company is Under Investigation for PPP Loan Fraud?

Companies can find out if they are under investigation by the SBA-OIG, FBI, DOJ, or IRS for PPP loan fraud through the issuance of a target letter or civil investigative demand (CID), a criminal complaint, subpoena, or search warrant. If your company receives one of these forms of notification, it is critical to engage federal defense counsel promptly. An SBA PPP audit can potentially trigger an investigation by the SBA-OIG, FBI, DOJ, and/or IRS, and an audit revealing evidence of fraud may refer the case to the office’s Investigations Division or another agency.

Conclusion

The PPP was intended to help businesses affected by the COVID-19 pandemic, but some have taken advantage of the program, committing fraud and breaking the law. Companies that received PPP loans need to take the initiative to ensure that they are in compliance with the program’s requirements and that they have the necessary documentation to substantiate PPP compliance. In the event of a federal investigation, it is essential to identify the agency (or agencies) involved and to engage defense counsel promptly.

Table of Contents

1. Federal Agencies Investigating PPP Loan Fraud
2. Recognizing the Signs of a PPP Loan Fraud Investigation
3. Preparing Your Company for a Potential PPP Audit and Investigation

Overview: Federal Agencies Investigating PPP Loan Fraud

As malicious activities exploiting the federal Paycheck Protection Program (PPP) come to light, all companies that obtained low-interest, forgivable loans need to urgently_ conduct a comprehensive internal assessment of PPP compliance_. Various federal agencies, such as the U.S. Small Business Administration’s (SBA) audits, are probing possible PPP loan fraud. Identifying the investigating authority—or authorities— is crucial while familiarizing oneself with each agency’s procedures will play a considerable role in establishing successful defense.

Below is a list of principal federal institutions actively examining PPP loan fraud:

1. SBA Office of Inspector General (SBA-OIG)
2. Federal Bureau of Investigation (FBI)
3. U.S. Department of Justice (DOJ)
4. Internal Revenue Service (IRS)

Todd Spodek and the Spodek Law Group specialize in working with companies targeted by these investigations. They help businesses build solid defense strategies minimizing the risk of encountering criminal charges.

Recognizing the Signs of a PPP Loan Fraud Investigation

If your company has received any form of communication such as a target letter, Civil Investigative Demand (CID), criminal complaint, subpoena, or search warrant from the _SBA-OIG, FBI, DOJ, or IRS_, there may be an ongoing inquiry into PPP loan fraud allegations involving your business. Promptly hiring federal defense support is imperative in such situations. An SBA PPP audit may lead to an investigation by one or more of these agencies, and if proof of fraud surfaces during the audit, the case might be referred to the respective investigative division.

Preparing Your Company for a Potential PPP Audit and Investigation

The ultimate goal of the PPP was to assist businesses strained due to the COVID-19 pandemic. Regrettably, some exploited the program, resorting to fraudulence and unlawful conduct. However, in anticipation of potential federal investigations, a proactive approach must be adopted—having all requisite documentation organized to ensure absolute compliance with PPP rules.

Todd Spodek and the Spodek Law Group adeptly provide assistance to businesses to make sure they meet the Paycheck Protection Program’s stringent requirements.Invalid image URL Given the increasing number of fraud cases emerging, learning the facts around this matter will help businesses protect their interests moving forward.