Hawaii PPP Loan Fraud Lawyers: Federal Defense in Honolulu

Hawaii PPP Loan Fraud Lawyers: Federal Defense in Honolulu

The morning you recieve that letter from the Small Business Administration or get an unexpected call from a federal investigator, your world changes. Your probably wondering if this is serious, if you really need a lawyer, and what’s happening to you’re business. In Hawaii, PPP loan fraud investigations are handled by federal prosecutors in the District of Hawaii, and the consequences can be devastating for island businesses still recovering from the pandemic’s effect on tourism.

If your facing questions about your Paycheck Protection Program loan, understand that these aren’t routine audits. Federal agencies—including the FBI’s Economic Crimes Unit and SBA Office of Inspector General—have made PPP fraud prosecutions a priority. The stakes are high: a recent Hawaii CEO was sentenced to 87 months in federal prison for PPP fraud and bank fraud—more then seven years behind bars, far from family.

This guide explains PPP loan fraud charges in Hawaii, the investigation process, unique defense considerations for island businesses, and how to choose qualified federal defense counsel. Whether you’ve received a target letter, been contacted by investigators, or are concerned about your application, understanding you’re rights is critical.

Understanding PPP Fraud Charges in Hawaii

The Paycheck Protection Program was created by the CARES Act in March 2020 to help businesses maintain payroll during COVID-19 shutdowns. However the program’s rapid deployment and relaxed documentation created oppurtunities for fraud. Federal prosecutors have charged thousands nationwide with PPP-related crimes, and Hawaii businesses haven’t been exempt.

Federal Statutes Used in PPP Fraud Cases

18 U.S.C. § 1344 – Bank Fraud
Bank fraud is the most common charge in PPP cases. Since PPP loans was administered through banks and credit unions, prosecutors argue that false statements constitute fraud against federally-insured institutions. The statute carries up to 30 years imprisonment and fines up to $1 million. The goverment must prove you knowingly executed or attempted to execute a scheme to defraud a financial institution.

18 U.S.C. § 1343 – Wire Fraud
Because applications was submitted electronically, prosecutors often charge wire fraud. Each electronic transmission—emails, online applications, fund transfers—can constitute a seperate count. Wire fraud carries up to 20 years imprisonment. The government must prove you used interstate wire communications with intent to defraud.

18 U.S.C. § 1014 – False Statements to Financial Institutions
This statute criminalizes knowingly making false statements or willfully overvaluing property to influence a financial institution’s actions. In PPP cases, this typically involves inflated payroll figures, fabricated employee counts, or misrepresented business operations. The penalty is up to 30 years imprisonment and $1 million in fines.

Additionally, Hawaii has it’s own fraud statute. Hawaii Revised Statutes § 708-835.65 provides that fraud occurs when someone executes “any scheme or artifice to defraud or for obtaining money by means of false pretenses.” While most PPP cases are prosecuted federally, state prosecutors could potentionally bring parrallel charges.

Common Patterns in Hawaii PPP Fraud Cases

Inflated Payroll Numbers – Businesses reporting higher quarterly payroll then they actually paid. Hawaii’s high cost of living means legitimate payroll is higher then mainland businesses, but investigators scrutinize large figures carefully. The issue is whether the numbers was accurate based on IRS filings (Form 941, Schedule C) or was artificially inflated.

Falsified Employee Counts – Claiming more employees then existed. This is common with family businesses where the distinction between owners, contractors, and employees can be unclear. In Hawaii’s ohana-based business culture, family members might of worked informally without traditional W-2 documentation, but prosecutors may view this as evidence of fabrication.

Multiple Applications – The February 2025 Hawaii case involved a CEO who obtained multiple PPP loans to conceal earlier fraud. Investigators examine whether someone controlled multiple businesses and applied seperately for each, potentially exceeding loan limits or double-counting payroll. (This is crucial.)

Misuse of Loan Proceeds – PPP loans had to be used for payroll, rent, utilities, and qualified expenses. Prosecutors have charged individuals who used funds for personal expenses: luxury purchases, vacations, vehicles. Even if the application was truthful, misuse can support fraud charges based off the theory that you never intended to use funds properly.

Proving Intent: The Government’s Burden

Intent is the most critical element. The government must prove beyond reasonable doubt that you knowingly and willfully made false statements or engaged in fraud. This is were defense strategies focus. Honest mistakes, negligence, or misunderstanding complex PPP rules don’t constitute criminal fraud.

Prosecutors establish intent through financial records (comparing applications to IRS filings, bank statements, and payroll records to show inconsistancies), communications (emails, texts, or recorded conversations showing knowledge of falsity), witness testimony (employees, accountants describing your knowledge), and patterns of conduct (multiple false applications, evidence concealment, unusual activities after recieving funds).

However, intent isn’t always easy to prove. Many Hawaii businesses operated with informal record-keeping, especially small family operations or Native Hawaiian businesses following traditional ohana structures. The absence of documentation doesn’t automatically prove fraud—it may reflect cultural business practices or the chaotic circumstances of early 2020 when Hawaii’s tourism industry collapsed overnight.

The Investigation Process in Hawaii

PPP fraud investigations in Hawaii typically begin in several ways. Understanding the process helps protect you’re rights from the earliest stages.

How Investigations Begin

SBA Data Analytics – The Small Business Administration uses sophisticated software to identify suspicious patterns: duplicate applications, Social Security numbers associated with multiple loans, inconsistancies between loan amounts and IRS data, or loans to businesses with no tax history. Hawaii businesses are included in these nationwide sweeps.

Bank Reports – Financial institutions must report suspicious activities. If you’re bank noticed unusual transactions after funds was deposited—large cash withdrawals, wire transfers to foreign accounts, luxury purchases—they may have filed a Suspicious Activity Report (SAR) with FinCEN, triggering investigation.

Whistleblowers – Disgruntled employees, former partners, or competitors may report suspected fraud to the SBA Inspector General or FBI. Whistleblowers can recieve financial rewards under the False Claims Act for information leading to recovery of fraudulently obtained funds.

The Federal Agencies Involved

Multiple federal agencies collaborate on PPP fraud investigations in Hawaii:

SBA Office of Inspector General (OIG) – The SBA’s internal watchdog conducts audits and investigations. They’re often the first agency to identify potential fraud and refer cases to criminal investigators.

FBI Economic Crimes Unit – The Federal Bureau of Investigation handles white-collar crime investigations through their Honolulu field office. FBI agents interview witnesses, execute search warrants, and build criminal cases.

IRS Criminal Investigation – Because PPP applications rely on tax data, IRS special agents often assist, comparing applications to filed returns and identifying discrepencies that suggest false statements.

U.S. Attorney’s Office for the District of Hawaii (USAO-HI) – Federal prosecutors in Honolulu make charging decisions, present cases to grand juries, and prosecute in the U.S. District Court for the District of Hawaii. They’re located in the Prince Jonah Kuhio Kalanianaole Federal Building downtown.

Based off the February 2025 sentencing, USAO-HI prosecutors Jennifer Bilinkas and Tom Tynan have handled PPP fraud cases, indicating the office’s commitment to these prosecutions.

Investigation Timeline

The investigative timeline varies. Some cases move within months, others take years. Geography is a factor—Hawaii’s location creates challenges. Federal investigators based on the mainland may need multiple trips to Hawaii to interview witnesses or execute search warrants. The time and expense of traveling to the islands can slow investigations.

A typical investigation might include: initial inquiry (months 1-3) where investigators identify potential fraud through data analysis; active investigation (months 3-12) where agents interview witnesses, subpoena records, and may conduct surveillance; prosecution decision (months 12-18) where prosecutors decide whether to charge; and indictment (month 18+) if prosecutors present the case to a federal grand jury.

During this period, being proactive with experiance federal counsel can make a significant diffrence. Early intervention creates opportunities to present exculpatory evidence, negotiate civil resolutions instead of criminal charges, or prepare for the best outcome if charges are inevitable.

Your Rights During Investigation

If federal investigators contact you regarding you’re PPP loan, you have important rights:

Right to Counsel – You have the right to an attorney during any interview. Never speak to FBI agents, SBA investigators, or prosecutors without your lawyer present. Even truthful statements can be misinterpreted.

Fifth Amendment Right – You cannot be compelled to provide testimony that might incriminate you. You can decline to answer questions, though this must be asserted carefully through an attorney.

Fourth Amendment Protection – Investigators need a warrant to search your home or business unless you consent. Never consent to a search without consulting counsel first. (Trust me on this.)

If investigators approach you, respond politely but firmly: “I’d like to consult with an attorney. Please provide your contact information.” Then immediantly contact a federal defense lawyer experienced with white-collar cases in Hawaii.

Hawaii-Specific Defense Considerations

Defending a PPP fraud case in Hawaii requires understanding unique economic, cultural, and logistical factors that distinguish island cases from mainland prosecutions.

Cost of Living Defense

Hawaii has the highest cost of living in the United States. This directly effects business payroll—Hawaii businesses must pay higher wages to attract and retain employees in an expensive market. What looks like inflated payroll to a mainland investigator may be completely legitimate for Hawaii.

A small Honolulu restaurant with ten employees reporting $120,000 in quarterly payroll isn’t unusual given Hawaii wage standards. Defense strategies should include expert testimony on Hawaii cost-of-living indices, comparative wage analysis showing how Hawaii salaries compare to mainland equivalents, and industry data from Hawaii sources (Hawaii Restaurant Association, Chamber of Commerce) documenting typical payroll costs.

Tourism Industry Collapse Context

Hawaii’s economy is uniquely dependent on tourism. When COVID-19 hit in March 2020, Hawaii’s tourism didn’t just decline—it virtually ceased. Hotels closed, restaurants shuttered, tour operators had zero revenue, and unemployment spiked to the nation’s highest.

Many Hawaii businesses that recieved PPP loans had substantial, legitimate payrolls before the pandemic. When they applied based off that payroll, the applications was accurate. The fact that businesses later failed doesn’t retroactively make applications fraudulent.

Prosecutors may argue: “You claimed 20 employees, but six months later you only had five. You must have lied.” The defense response: “We did have 20 employees when we applied. The unprecedented collapse of Hawaii tourism made it impossible to maintain that workforce despite PPP assistance. Post-loan failure doesn’t equal pre-loan fraud.”

Multi-Island Business Operations

Hawaii is the only state composed entirely of islands. Many businesses operate across multiple islands—restaurants with locations on Oahu, Maui, and the Big Island; construction companies working on projects statewide; retail businesses with stores on different islands.

Multi-island operations create challenges: How do you properly aggregate payroll when employees work on different islands or different locations have different pay scales? Businesses may have struggled to accurately calculate total payroll across all locations, especially if different locations used different payroll systems or accountants.

Cultural Factors in Hawaii Business Practices

Hawaii’s business culture reflects the islands’ unique history and values. Understanding these factors is essential because what mainland investigators percieve as “red flags” may be standard Hawaii practices.

Ohana (Family) Business Structures – Many Hawaii businesses are family operations where multiple generations work together. Formal employment documentation may be minimal. Cousins, uncles, aunts, and extended family may work part-time or seasonally without formal W-2s, getting paid in cash based on trust rather then contracts.

Prosecutors trained on mainland norms may see this as evidence of fabricated employees. The defense must explain: this is how ohana businesses operate. The work was real, the people existed, but documentation doesn’t match corporate America standards because this isn’t corporate America—it’s a Hawaii family business.

Handshake Agreements – Hawaii business culture emphasizes personal relationships and trust. Agreements might be made with a handshake rather then written contracts. Record-keeping may be less formal, especially for small businesses that operated successfully for decades without extensive documentation.

Expert testimony from Hawaii business consultants or cultural experts can help explain these practices to judges and juries unfamiliar with the islands’ environment.

District of Hawaii Federal Court

If your case proceeds to prosecution, it will be handled in the U.S. District Court for the District of Hawaii, headquartered in the Prince Jonah Kuhio Kalanianaole Federal Building in downtown Honolulu. The District of Hawaii is a relatively small federal district with distinctive practices. Federal judges have individual preferences for case management and briefing. Experienced Hawaii federal practitioners know these judges and how to effectively present your defense.

Understanding USAO-HI charging practices—what kinds of cases they prioritize, their typical plea offers, their approach to cooperation agreements—is valuable knowledge that comes from experience practicing in this district.

Potential Consequences and Penalties

Understanding what you’re facing if convicted is essential to making informed decisions about you’re defense.

Criminal Penalties

The federal statutes used in PPP fraud carry substantial maximum sentences: Bank Fraud (30 years, $1M fine), Wire Fraud (20 years), False Statements (30 years, $1M fine). However, maximum statutory penalties rarely apply. Federal sentencing is governed by the U.S. Sentencing Guidelines, which calculate recommended ranges based off offense characteristics and criminal history.

Key Sentencing Factors

Loss Amount – The single most important factor is loss amount. Larger losses dramatically increase guidelines ranges: Loss of $40,000-$95,000 adds +6 levels; $150,000-$250,000 adds +10 levels; exceeding $550,000 adds +14 levels or more.

Sophisticated Means – If fraud involved sophisticated concealment, false documents, or complex schemes, guidelines increase by 2 levels.

Acceptance of Responsibility – If you accept responsibility (typically by pleading guilty), guidelines decrease by 2-3 levels. This is one of the most significant mitigating factors available.

Recent Hawaii Sentencing: The 87-Month Case

In February 2025, a former Hawaii CEO was sentenced to 87 months (7.25 years) in federal prison for COVID relief fraud and bank fraud. The DOJ press release indicates the defendant obtained multiple PPP loans and attempted to conceal initial fraud through subsequent applications.

This sentence provides insight into aggravating factors: multiple loans (especially when later loans concealed earlier fraud), high loss amount, sophisticated scheme (concealment efforts suggest planning), and lack of acceptance of responsibility (going to trial or not cooperating results in higher sentences).

Importantly, this sentence isn’t typical for all PPP cases. Many defendants recieve significantly lower sentences—probation, home confinement, or shorter terms—depending on circumstances.

Factors That Reduce Sentences

Several strategies can significantly reduce potential sentences: early cooperation (providing information about co-conspirators or assisting the government’s investigation), acceptance of responsibility (pleading guilty early), lack of criminal history (first-time offenders recieve lower sentences), restitution (repaying fraudulently obtained funds demonstrates remorse), and family/community ties (for Hawaii defendants, strong community ties and hardship of mainland incarceration can be persuasive).

Collateral Consequences

Beyond criminal sentences, fraud convictions carry collateral consequences: Hawaii state licensing boards may suspend or revoke licenses; in Hawaii’s close-knit island communities, criminal convictions can devastate business reputations; fraud convictions disqualify you from federal contracts; and for non-citizens, fraud convictions can result in deportation.

Defense Strategies for Hawaii PPP Cases

Defending against PPP fraud allegations requires a multi-faceted approach tailored to you’re case and Hawaii’s unique considerations.

Challenging Intent: Mistake vs. Fraud

The government must prove criminal intent—that you knowingly and willfully engaged in fraud. Look, here’s the deal: honest mistakes are not crimes.

Defense strategies include demonstrating good faith errors (inaccuracies resulted from honest miscalculations or misunderstanding complex rules), reliance on professionals (if you relied on an accountant or attorney to prepare your application, this supports lack of criminal intent), contemporaneous documentation (business records from the time of application showing genuine attempts to calculate correctly), and lack of sophistication (many Hawaii small business owners operate without formal business training).

Economic Necessity Context

While not a complete legal defense, the context of economic desperation can be powerful at sentencing or negotiations. In Hawaii specifically, the unprecedented tourism collapse created legitimate panic among business owners.

This narrative—”My business of 30 years was about to disappear through no fault of my own, I was desperate to save it and my employees’ jobs, and I made mistakes in that desperation”—is far different then “I saw an opportunity to steal government money.”

Documentation Review and Expert Analysis

Retain a forensic accountant familiar with Hawaii businesses to reconstruct payroll calculations, verify whether application figures was supportable, identify discrepancies and explain reasons for differences, prepare alternative calculations showing how different interpretations of PPP rules could support the figures, and analyze how funds was actually used.

Often, what prosecutors characterize as “obvious fraud” becomes more ambiguous once a skilled forensic accountant reviews the full picture.

Negotiation Strategies

Many PPP fraud cases resolve through negotiation rather then trial. Effective strategies include:

Cooperation Agreements – If you have information valuable to the government’s investigation, cooperation can result in substantial sentence reductions. Under 18 U.S.C. § 3553(e), prosecutors can file motions for downward departures for defendants providing “substantial assistance.”

Plea Agreements – Negotiating a plea to reduced charges can significantly lower you’re exposure. Effective plea negotiations require experienced counsel who knows the prosecutors and understands District of Hawaii norms.

Civil Resolution vs. Criminal Prosecution – In some situations, particularly where criminal intent is questionable or loss amount is relatively small, the government may agree to civil resolution: you repay the loan plus penalties, but no criminal charges are filed.

Choosing PPP Fraud Defense Counsel in Hawaii

Selecting the right attorney is one of the most important decisions when facing PPP fraud allegations. Not all criminal defense attorneys have the experience and resources necessary to effectively defend complex federal fraud cases.

Key Qualifications to Look For

Federal Court Admission – To practice in the U.S. District Court for the District of Hawaii, attorneys must be admitted to the court’s bar. Verify that any attorney you consider is admitted to practice in the District of Hawaii.

Experience with White-Collar Federal Cases – Look for attorneys with a track record in federal fraud cases, understanding of federal sentencing and Sentencing Guidelines, comfort reviewing complex financial records and working with forensic accountants, and federal trial experience.

Track Record in District of Hawaii – Ask potential attorneys: How many cases have you handled in the District of Hawaii? Are you familiar with the judges currently on the bench? Do you have established relationships with the U.S. Attorney’s Office here?

Understanding of Hawaii Business Culture – Attorneys who understand ohana businesses, Hawaii’s tourism economy, multi-island operations, and Hawaii-specific economic factors can identify and present defenses that mainland attorneys might overlook.

Resources for Complex Defense – Does the attorney have relationships with qualified forensic accountants, defense investigators, and expert witnesses? Complex federal fraud cases require a team approach.

Questions to Ask During Consultation

Come prepared with questions: What is you’re experience with PPP fraud cases? How many federal cases have you handled in the District of Hawaii? What relationships do you have with USAO-HI prosecutors? What is you’re assessment of my case? What are best-case and worst-case scenarios? What investigation and defense strategy would you recommend? What will this cost?

Evaluate answers for depth of knowledge, honesty (good attorneys won’t make unrealistic promises), and whether they demonstrate genuine understanding of you’re situation and Hawaii-specific factors.

Taking Action: Next Steps

If your facing a PPP fraud investigation or charges in Hawaii, taking prompt action is essential.

Immediate Action Items

Do Not Respond Without Counsel – If federal investigators have contacted you, do not speak with them without an attorney present. Even innocent statements can be misinterpreted.

Do Not Destroy Documents – Never destroy business records, delete emails, or conceal evidence. Obstruction of justice is a seperate crime that can add years to a sentence.

Preserve All Business Records – Gather and organize all documents relevent to you’re PPP loan: the original application and supporting documents, payroll records (Forms 941, W-2s, 1099s), tax returns, bank statements, accounting records, and loan forgiveness documentation.

Why Act Now

Federal investigations don’t go away on their own. The government has substantial resources and motivation to pursue PPP fraud cases. The longer you wait to retain counsel, the more limited you’re options become.

Early intervention can make the difference between criminal charges vs. civil resolution, cooperation agreement vs. standard prosecution, reduced charges vs. maximum charges, and probation vs. years in federal prison.

If your facing a PPP fraud investigation in Hawaii, you need experienced federal defense counsel who understands the District of Hawaii, Hawaii’s unique business environment, and how to effectively defend complex white-collar cases. Don’t wait untill its to late to protect you’re rights and you’re future.

Free Case Evaluation

Most federal defense attorneys handling PPP fraud cases in Hawaii offer free initial consultations. During a consultation, an experienced attorney can assess the seriousness of you’re situation, explain potential charges and consequences, outline defense strategies, answer you’re questions, and provide a fee quote.

Contact an experienced federal defense attorney today. The stakes are too high to face this alone.