In 2020 a research study was done, where it was estimated that between 10-15% of loans approved went to borrowers who may have been double dipping(taking too much money from relief programs). In some cases it was unintentional, but in other situations it was fraudulent. Congress included PPP as one of several relief packages in the COVID Act. This was to help businesses retain employees, and prevent people from falling into poverty.
Researchers in 2020 lay the blame on “FinTech” lenders, who didn’t spend enough time stringently analyzing all the loan requests. There was a lot of fraud, or misuse of funds under the PPP program.
So the question is – what happens when a ppp loan is flagged?
Many people are receiving requests for information from the government. The question borrowers and banks are wondering about – is what to do, if a subpoena or request for information about the PPP loan is received.
First thing – after a PPP loan is flagged – you should contact our PPP loan fraud lawyers immediately. Responding to the subpoena or investigative request is a task which must be taken seriously. You should involve an advisor to guide you through this process.
You should not do anything before you talk to counsel – because doing so might introduce new evidence that can be used against you. You should develop a strategy to respond to the government with counsel.
All loans over $2 million are by default – being audited. If you took a loan under $2 million, and it is flagged – this can be concerning. It could be that one of your employees is a whistleblower, and as a result is bringing an action against you – by helping the government identify theft and fraud. These cases are known as qui tam cases. There are strict employment and federal laws on how you can deal with such scenarios. You cannot obstruct the government, or retaliate against the employee.
Why are PPP loans getting flagged
There are multiple reasons why a PPP loan could be flagged by the SBA. Here are some circumstances behind why a red flag could be applied on a loan application.
Federal prosecutors and criminal investigators are looking for PPP loan fraud, and other violations of the CARES Act.
What happens when a PPP loan is flagged
If your PPP loan is flagged, you will get a subpoena, or some other civil investigative demand. Depending on which agency is investigating you – the pathway could take a number of different turns. Bottom line, you will need to hire a PPP loan fraud defense lawyer who can help you – and guide you.
The different federal agencies could potentially charge you with a number of crimes, such as: bank fraud, wire fraud, conspiracy to commit fraud, false statements to a financial institution, and more.
If your PPP loan is flagged – you should assume you are under investigation for PPP loan fraud. This is essentially the beginning of the PPP loan fraud investigation – and you should hire a PPP loan fraud attorney who can help you.
When you get the notification that the PPP loan is flagged
-You should keep a record of all business and personal records, and not destroy anything
-You should communicate with our attorneys as soon as possible to get help and guidance
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