Tennessee PPP Loan Fraud Lawyers

Tennessee PPP Loan Fraud Lawyers: Federal Defense When Nashville, Memphis, or Knoxville Prosecutors Target Your COVID Loan

The Middle District of Tennessee collected $137 million in Fiscal Year 2024, making it one of the most aggressive PPP fraud enforcement districts in the entire country. This is not a state where federal prosecutors are letting pandemic relief fraud slide. If you received a PPP loan in Tennessee and something was wrong with your application, the U.S. Attorney’s offices in Nashville, Memphis, or Knoxville may already be building a case against you.

Tennessee has three federal judicial districts covering different parts of the state. The Eastern District operates out of Knoxville and Greeneville. The Middle District is headquartered in Nashville. The Western District covers Memphis and the surrounding region. Each district has its own U.S. Attorney and prosecution priorities. Understanding which district handles your case can significantly affect your outcome because prosecution approaches vary substantially.

What separates Tennessee prosecutions from many other states is the sheer aggressiveness of enforcement. In one case, a woman received 78 months in federal prison for applying for PPP loans while she was literally incarcerated in a federal prison. She claimed business income for a year when she was behind bars. If federal prosecutors will pursue someone sitting in prison, they will certainly pursue anyone who submitted a questionable application while running an actual business.

The cases coming out of Tennessee show clear patterns in what triggers prosecution. Herman Shaw used over $700,000 in PPP funds for gambling debts and gave his accomplice a $262,000 kickback. The Western District indicted 10 people at once for a $950,000 scheme that included a church pastor. Koide Tennessee, a corporation, paid $2 million to settle False Claims Act allegations for obtaining a second-draw PPP loan when they were not eligible. If you are worried about your PPP application, this article explains what you are actually facing and what options exist.

Federal PPP fraud investigations require immediate attention from experienced defense counsel. The wire fraud statute carries up to 20 years in prison per count, and Tennessee prosecutors are actively filing new charges in 2025 for loans obtained in 2020. The decisions you make now, before charges are filed, can dramatically affect whether you face prosecution at all.

Tennessee’s Three Federal Districts and How They Prosecute

Understanding which federal district handles your case is criticial becuase each district in Tennessee takes a somewhat different aproach to PPP fraud prosecutions. The state is divided into Eastern, Middle, and Western districts, and the U.S. Attorneys office in each has developed it’s own enforcement patterns over the past several years.

The Middle District of Tennessee, headquartered in Nashville, has made pandemic fraud an institutional priority. There collection of $137 million in fiscal year 2024 demonstrates this commitment. Under U.S. Attorney Henry Leventis, the Middle District pursues both criminal charges and civil False Claims Act recovery simultaniously. If your business was based in Nashville, Murfreesboro, Columbia, or Cookeville, your case would be prosecuted here.

The Western District of Tennessee, covering Memphis and surrounding areas, has focused on ring prosecutions and multi-defendant takedowns. U.S. Attorney Kevin Ritz’s office indicted 10 people at once in a $950,000 scheme that spanned Memphis, Mississippi, and Arkansas. Herman Shaw’s 30-month sentence for the $782,000 gambling scheme came from this district. Lisa Evans, who ran a $5.1 million facilitator operation taking 20-30% kickbacks, pled guilty here and faces up to 20 years.

The Eastern District of Tennessee has demonstrated that nowhere is safe from prosecution. Leslie Bethea recieved 78 months for filing a PPP application while sitting in federal prison. She claimed $99,835 in income for a year when she was incarcerated. The Eastern District also secured a $2 million settlement from Koide Tennessee for False Claims Act violations. This district covers Knoxville, Chattanooga, Greeneville, and Johnson City.

Real Sentences Tennessee Defendants Have Recieved

The sentences handed down in Tennessee PPP fraud cases vary significently based on the fraud amount, wheather the defendant cooperated, and there role in any larger scheme. Understanding these real outcomes is more usefull then focusing on the theoretical maximum penalties that rarely apply to first-time offenders.

Leslie Bethea’s 78-month sentence is among the harshest in Tennessee for the amount involved. She obtained $223,800 through two fradulent applications. What made her case particularly egregous was that she applied while incarcerated and also commited employment tax fraud by claiming payroll expenses while failing to actually pay payroll taxes. Her sentence reflects multiple aggravating factors beyond just the PPP fraud itself.

Herman Shaw recieved 30 months for defrauding the PPP of $782,212. His case shows how personal spending patterns affect sentencing. He used the money for gambling debts rather then legitimate business expenses, and he paid his accomplice a $262,000 kickback. The judge orderd him to pay full restitution of $782,212 to the Small Business Administration.

Nakita Cannady was sentenced to 14 months for submitting six fradulent PPP and EIDL applications for four buisnesses she controlled. Her case was complicated by simultanious healthcare fraud charges. She was orderd to pay $346,882.13 in restitution. Shorter sentences like this often reflect smaller fraud amounts and defendants who accepted responsability through guilty pleas.

Shelby Lynn Hill recieved 12 months and one day for obtaining a $220,645 PPP loan for a ficticious business called “Plateau Angus Farms” while living in Crossville, Tennessee. Her sentence was at the lower end becuase she cooperated and the fraud involved a single fradulent application rather then a pattern of applications.

The 10-Person Memphis Indictment

One of the largest PPP fraud prosecutions in Tennessee involved ten defendants charged simultaniously in the Western District. This case illustrates how federal prosecutors investigate networks and charge everyone involved, from the ringleaders to the minor participants who obtained smaller amounts.

Rodrick Flowers faced 12 wire fraud counts for allegedly obtaining approximately $111,450 in PPP and EIDL funds. According to the indictment, he submitted fradulent applications not just for himself but also on behalf of co-defendants. This role as a facilitator dramatically increased his exposure compared to defendants who only filed for themselvs.

Stephen Brown, the pastor of Light of Glory International Church in Memphis, was charged with obtaining approximately $149,900 in EIDL proceeds. His case shows that no one is immune from prosecution based on there profession or community standing. Churches that misused pandemic relief funds face the same charges as any other business.

The other defendants in the indictment ranged from Frederick Smith ($150,275 PPP) and Cleveland Wells ($149,900 EIDL) at the high end to Mary Payne ($4,000 EIDL advance) at the low end. Each defendant faces up to 20 years in prison per wire fraud count. The indictment alleges they all submitted applications containing false statements about employee counts, gross revenues, costs of goods sold, and average monthly payroll.

When federal prosecutors conduct mass indictments like this, everyone charged faces conspiracy liability regardless of how small there individual role might have been. Conspiracy charges dont require that each defendant knew every other defendant or participated in every fraudlent application. Being part of the network is enough.

What Federal Charges Apply to PPP Fraud

Tennessee federal prosecutors typically bring multiple charges against PPP fraud defendants to maximize there sentencing leverage. Understanding these charges helps you evaluate your potential exposure and the importance of early legal intervention.

Wire fraud under 18 U.S.C. § 1343 is almost always included becuase PPP applications were submitted electronically. Each false application can be charged as a seperate count carrying up to 20 years in prison. Herman Shaw pled guilty to one count of wire fraud. Rodrick Flowers was charged with 12 counts. The number of counts directly affects potential sentencing exposure.

Bank fraud under 18 U.S.C. § 1344 applys when defendants made false statements to financial institutions that processed PPP loans. This charge carrys up to 30 years in prison and a $1 million fine. More importantly, bank fraud has a 10-year statute of limitations compared to wire frauds 5-year limit, meaning 2020 loans remain chargeable through 2030.

Making false statements under 18 U.S.C. § 1014 covers lies in loan applications and can add another 30 years of potential exposure. Money laundering charges under 18 U.S.C. § 1956 come into play when defendants moved PPP funds to conceal there origin or purpose. Conspiracy charges under 18 U.S.C. § 371 apply whenever multiple people worked together on fradulent applications.

The $5.1 Million Facilitator Case

Lisa Evans’ case in the Western District demonstrates how seriously Tennessee prosecutors treat facilitators who helped others commit PPP fraud. Evans, 42, of Olive Branch, Mississippi, pled guilty to conspiracy to commit wire fraud for her role in a $5,126,258 scheme.

According to prosecutors, Evans prepared fradulent loan applications for borrowers who then paid her kickbacks of 20 to 30 percent of the disbursed funds. She didnt just help friends or family. She ran what amounted to a PPP fraud buisness, taking a substantial cut from every fradulent loan she facilitated. Her sentencing is scheduled for May 2025, and she faces up to 20 years in federal prison.

This case matters becuase many people who helped others with PPP applications dont realize there exposure. If you prepared applications for friends, family members, or paying clients and those applications contained false information, you may face greater liability then the actual borrowers. Federal prosecutors view facilitators as more culpable becuase they enabled fraud at scale.

Signs Your Under Federal Investigation

Federal PPP fraud investigations often proceed quietly for months before any arrest or indictment. However there are warning signs that you may be under scrutiny. Recognizing these signs early can help you take apropriate action before the situation escalates beyond your control.

Direct contact from federal agents is the most obvious sign. If FBI agents, IRS Criminal Investigation agents, or SBA Office of Inspector General investigators contact you with questions about your PPP loan, you are being investigated. In Tennessee, the Secret Service, FDIC OIG, and Treasury Inspector General for Tax Administration have also been involved in PPP investigations. Do not answer there questions without a lawyer present.

Less direct signs include banks notifying you about subpoenas for your account records, former employees or business partners mentioning they were questioned about you, or accountants or lawyers receiving grand jury subpoenas for documents related to your business. Any of these events suggests prosecutors are building a case and gathering evidence.

Grand jury subpoenas are a clear indication that indictment may be forthcomming. If you recieve a subpoena to testify before a federal grand jury or produce documents, having experienced federal defense counsel is absolutly essential. Your testimony could be used against you or result in additional charges like obstruction or making false statements if you dont handle the situation correctly.

What to Do If Federal Agents Contact You

Your response when federal agents first contact you can significently affect your case. Many PPP fraud defendants have made there situations worse by trying to explain or lie to investigators. Heres what you should and shouldnt do.

Do not answer questions about your PPP loan or buisness finances. You have the right to remain silent under the Fifth Amendment and you should exercise that right. Agents are trained to get information from you and anything you say becomes evidence. Even truthfull statements can be misremembered or twisted in ways that hurt your defense. Simply say “I’d prefer to speak with an attorney before answering any questions.”

Do not lie to federal agents. Making false statements to a federal officer is a seperate crime under 18 U.S.C. § 1001 carrying up to 5 years in prison. Many defendants who might have avoided conviction on the underlying fraud have been convicted for lying during the investigation. If your going to talk at all, you risk either incriminating yourself or commiting a new crime by lying.

Do not destroy documents. Obstruction of justice charges can be added to PPP fraud cases if prosecutors believe you destroyed evidence after learning you were under investigation. Keep all records related to your PPP application including bank statements, payroll records, tax documents, and any communications about the loan. Your attorney will need these records to prepare your defense.

Contact an experienced federal criminal defense lawyer immediatley. Time is critical in federal investigations. An attorney can sometimes negotiate with prosecutors before charges are filed to prevent prosecution entirely or to reduce the charges you face. Early intervention is much more effective then waiting until your already indicted.

Potential Defenses to PPP Fraud Charges

Several defenses may be available depending on the specifics of your situation. An experienced federal defense attorney can evaluate which defenses apply to your case and how to present them most effectivley to prosecutors or a jury.

Lack of intent is the most common defense in PPP fraud cases. The government must prove you knowingly and intentionaly made false statements to obtain funds. If you genuinley believed your application was accurate based on your understanding of the rapidly changing program requirements, you may not have the criminal intent required for conviction. The PPP was rolled out with confusing and evolving guidance that left many legitimate buisness owners unsure about eligability requirements.

Mistakes in the application do not automaticaly equal fraud. If you miscalculated your payroll expenses or misunderstood how to count employees, that error might not constitute criminal fraud. The distinction between honest mistakes and intentional deception is critical. This defense works better when you can show you made reasonable efforts to comply with program requirements and didnt spend the money on obviousely prohibited items.

Reliance on professional advice can be a defense if you reasonably relied on an accountant, attorney, or loan officer who told you the application was proper. This defense requires showing you disclosed accurate information to the professional and followed there advice in good faith. It becomes weaker if you provided false information to the professional or should of known there advice was wrong.

Cooperation and restitution can significently reduce sentences even if conviction is unavoidable. Tennessee defendants who cooperated early with investigators and made efforts to repay fradulent funds have recieved substantially lower sentences then those who fought charges unsuccesfully. The difference between 12 months and 30 months often comes down to cooperation.

The Statute of Limitations Question

Many people who obtained PPP loans in 2020 or 2021 wonder wheather they can still be charged years later. The short answer is yes, and in Tennessee the statute of limitations extends even longer then many people realize.

Wire fraud has a 5-year statute of limitations. PPP loans obtained in 2020 can be charged through 2025. Loans from 2021 remain chargeable through 2026. However Congress passed the PPP and Bank Fraud Enforcement Harmonization Act of 2022, which extended the limitations period for certain PPP fraud charges to 10 years. This means 2020 loans remain chargeable through 2030.

The government is still actively filing new charges in 2025 for loans obtained in 2020. Herman Shaw was sentenced in November 2024 for fraud commited in 2020. The 10-person Memphis indictment charges conduct from the same period. Federal prosecutors have made clear they intend to continue pursuing PPP fraud cases for years to come, and Tennessee’s $137 million FY2024 collection proves there committment.

Do not assume your safe becuase several years have passed without contact from investigators. Many PPP fraud investigations take years to develop. The Middle Districts aggressive collection numbers suggest they are building cases methodically and pursuing everyone, regardless of how much time has passed.

Taking Action to Protect Yourself

If you have concerns about your PPP loan application, taking proactive steps now is far better then waiting for federal agents to contact you. Tennessee’s three federal districts are all actively prosecuting pandemic relief fraud, and the Middle Districts $137 million collection in FY2024 demonstrates the scale of enforcement.

An experienced federal defense attorney can help you evaluate your situation and determine the best path forward. Some defendants have benifited from approaching prosecutors before being charged. Voluntarily disclosing problems and offering to repay funds can sometimes result in civil resolution through False Claims Act settlement rather then criminal charges. Koide Tennessee paid $2 million civily rather then facing criminal prosecution. However this aproach requires careful legal guidance and isnt right for everyone.

Whether your currently under investigation or simply worried about potential exposure, preserving documents and avoiding actions that could be seen as consciousness of guilt is important. Continue operating your buisness normally. Do not make unusual transfers or purchases that could be interpretted as hiding assets.

Tennessee PPP fraud prosecutions are continuing across all three federal districts. Sentences ranging from 12 months to 78 months demonstrate the wide range of outcomes depending on fraud amount, role, and cooperation. The federal sentencing guidelines provide structure, but individual circumstances matter enormously. Understanding your specific situation requires consulting with federal defense counsel who can evaluate the facts of your case and advise you on the best aproach for your circumstances.