When the PPP launched in April 2020, there were many applications. Millions of businesses applied for loans. The initial PPP $349 billion allocation of funds was exhausted almost instantly. While many of the applications were legitimate, it was clear that many banks issued millions of dollars of loans due to false applications.

If you recently realized that information in your company’s PPP loan application was false, or if you are being investigated for filing a fake PPP application, then what should you do? At this point, the main thing you can do is speak to an experienced federal criminal defense attorney. The Paycheck Protection Program Flexibility Act of 2020, which was enacted on June 5, 2020, relaxed some of the standards for PPP loan forgiveness.

Employees are turning in employers for PPP loan fraud

For company owners and executes who are concerned about the accuracy of their PPP loan applications, one thing they can’t do is ignore this issue. The SBA is encouraging employees to whistleblow and come forward with information about PPP application fraud. By filing whistleblower claims, employees can get 30% of the amount the government recovers. This has created a significant incentive for individuals to report instances of PPP fraud.

What constitutes PPP loan application fraud?

Employees can file whistleblower claims based on a wide array of allegations. Some examples of fraud, and false, statements which can lead to prosecution include:

• misrepresenting the # of employees
• misrepresenting the qualification
• misrepresenting the needed loan amount
• misrepresenting corporate affiliation and identity
• falsely stating that no other ppp loans were received
• falsely certifying that the need for a loan resulted from covid 19 crisis economic conditions

How is the federal government uncovering false PPP loan applications

In addition to whistleblower claims, one of the main ways the government is uncovering PPP application fraud is the SBA audit program. The SBA is looking at the applications of all companies which got PPP loans of $2 million or more, and is auditing the applications of recipients of smaller PPP loans as well. The SBA is conducting these audits when the company submits their request for loan forgiveness. If the SBA determines that a loan recipient’s application was false, not only can it deny the forgiveness of the application – it can also refer the borrower of the PPP loan for a civil or criminal fraud investigation.

What agencies are investigating PPP application fraud?

There are many federal agencies which are investigating PPP loan application fraud. The investigations are being triggered either by whistleblower claims, SBA audits, or information obtained from PPP lenders. Investigations conducted by each of these agencies can lead to federal charges, and the penalties can be severe. Below is a list of the agencies that are investigating PPP loan application fraud:

• DOJ – the DOJ has launched many criminal investigations target individuals and companies that fraudulently obtained PPP loans by submitting fake/false information. The DOJ is heavily involved in all aspects of PPP compliance. Agents, and prosecutors, across the country are targeting PPP borrowers for loan application fraud.
• SBA – The SBA-OIG is investigating PPP borrowers as a result of the SBA’s auditing initiative. Allegations of PPP application fraud from the SBA-OIG can lead to criminal or civil prosecution.
• FBI – The FBI is working closely with the DOJ to investigate cases of suspected PPP application fraud. Agents in FBI field offices nationwide are working to uncover fraud, and prosecute it. They have a number of tools to do this.
• FDIC/OIG – The FDIC/OIG is involved in investigating PPP application fraud and is working on preventing fraud, abuse, and misconduct. Banks that are lending PPP funds which are FDIC-insured, that were obtained by borrowers due to fraud applications – are being investigated by the FDIC.
• IRS/CI – The fraudulent use of PPP loan funds can result in tax related offenses as well. Criminal tax fraud is investigated by the Internal Revenue Service Criminal Investigation. Companies accused of fraud under PPP may find themselves facing federal tax fraud, and tax evasion charges.

There are many possible charges and penalties

Companies, and individuals, including company owners/executives – accused of submitting fake PPP applications can face a number of federal charges. Federal prosecutors are using a variety of statutes to prosecute companies and individuals that obtained/tried to obtain, funds under the PPP by submitting fake applications. Below is a list of statutes that could be used against applicants:

• False Claims Act (31 U.S.C. §§ 3729 – 3733)
• Making False Statements to the SBA or an FDIC-Insured Bank (18 U.S.C. § 1014)
• Bank Fraud (18 U.S.C. § 1344)
• Wire Fraud (18 U.S.C. § 1343)
• Aggravated Identity Theft (18 U.S.C. § 1028A)
• Tax Evasion (26 U.S.C. § 7201)
• Attempt (18 U.S.C. § 1349)
• Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349)

What will happen if you’re charged with criminal fraud

Anyone who is charged with criminal fraud as a result of submitting false PPP loan applications will be subject to scrutiny, and potential prosecution. Facing criminal charges can be very different from a state level proceeding. At Spodek Law Group, our team of lawyers has experience handling some of the toughest federal cases nationwide.

Are you at risk for federal criminal prosecution

There are many mistakes you have to avoid because they can result in potential criminal charges being filed against you.

• Ignoring the potential PPP loan fraud you did, and waiting to get caught by federal authorities
• Returning PPP loan funds without speaking to lawyers first
• Using PPP loan funds which were fraudulent obtained
• Submitting a request for loan forgiveness with false information

What Should I Do if I Realize My PPP Application was False?

If your PPP application potentially contained fake information, or false information – it’s critical you speak to our PPP loan fraud lawyers immediately. We are here to help you.