Last Updated on: 17th October 2023, 10:57 pm

Who Investigates PPP Fraud?

The Paycheck Protection Program (PPP) was created last year to help small businesses stay afloat during the pandemic. But unfortunately, some dishonest people took advantage of the program and committed fraud. So who’s in charge of investigating PPP fraud cases and bringing scammers to justice?

Well, there’s a few different agencies involed. Here’s a quick rundown of who does what when it comes to looking into PPP fraud:

The Small Business Administration

Since the PPP is run by the Small Business Administration (SBA), they’re kind of like the main overseer. The SBA’s Office of Inspector General (OIG) is responsible for auditing lenders and borrowers to make sure everyone followed the rules. They also investigate any suspicious activity or allegations of fraud.

The OIG works with the Department of Justice to prosecute PPP scammers. They’ve already charged hundreds of people for stealing aid money or using it improperly. Most cases involve people who shouldn’t have qualified for PPP loans in the first place, but lied on their applications anyway.

Department of Justice

The DOJ plays a big role in punishing PPP fraud too. They have attorneys that specialize in financial crimes and work closely with agencies like the SBA OIG. The DOJ files charges against scammers and takes them to court.

So far, they’ve charged defendants with wire fraud, bank fraud, making false statements and other crimes. Penalties can include fines, having to repay the loans and even prison time. In one case, two businessmen got 5 years in prison for a $24 million PPP scam!

Federal Bureau of Investigation

The FBI also investigates major PPP fraud networks. They look into criminal enterprises that try to steal millions in relief funds through sophisticated schemes.

FBI agents have uncovered scams involving fake companies, forged documents, stolen identities and more. In one plot, over 80 people tried to get $16 million in PPP loans for made-up businesses. Special FBI task forces work with local police agencies to catch these fraud rings.

Internal Revenue Service

Since PPP loans are taxable income, the IRS watches out for people who don’t report it properly. They can audit businesses that got loans, checking for false deductions or unreported income. Not reporting PPP loan forgiveness is one of the top things the IRS looks for.

The IRS Criminal Investigation division also assists the DOJ with criminal PPP fraud cases. They help provide financial records, trace money and identify potential scams. Tax cheats who rip off COVID relief programs are prime targets.

Treasury Inspector General for Tax Administration

TIGTA is another Treasury agency that monitors PPP fraud. They oversee IRS activities to make sure PPP tax rules are followed. TIGTA investigates claims of IRS employees helping facilitate fraud too.

They also audit lenders that issue PPP loans on behalf of the SBA. Reviews make sure lenders comply with program guidelines and identify risks.

State and Local Authorities

In addition to federal agencies, state and city authorities also crack down on PPP scams. The New York State Attorney General has prosecuted several cases, including one where a man used relief funds to buy a $60,000 Tesla.

Local police departments work with the FBI on fraud investigations. They help track down suspects, gather evidence and make arrests. State regulators also target shady lenders issuing improper PPP loans.

Whistleblowers

Private citizens who report PPP fraud, a.k.a. whistleblowers, are also key. Many scams are first uncovered when employees, competitors or lenders flag suspicious activity. Whistleblowers can get a cut of the money recovered in some cases.

The SBA has a hotline to submit tips. You can report fraud anonymously online too. But in some cases, whistleblowers file formal lawsuits under the False Claims Act alleging fraud.

What Kinds of Scams Do They Investigate?

Investigators have seen lots of shady behavior, including:

• Faking payroll/employee numbers to get larger loans
• Using relief funds for personal purchases – cars, homes, vacations, etc.
• Creating shell companies to apply for multiple loans
• Stealing identities to apply for loans under other names
• Lying about eligibility by claiming fake businesses or falsifying documents
• Colluding with lenders for higher loan amounts in exchange for kickbacks

Pretty much any lie, misuse of funds or sketchy activity related to PPP loans could lead to criminal charges or penalties. Billions have already been stolen due to fraud.

What are the Penalties for PPP Fraud?

Punishments depend on the specific crimes but can include:

• Repaying loan amounts
• Fines equal to the money obtained by fraud
• Up to 30 years in prison for theft/bribery
• Up to 5 years for wire/bank fraud
• Up to 5 years for false statements
• Up to 10 years for identity theft
• Loss of federal benefits
• Restitution to victims

Businesses can face huge fines, asset seizure and loss of licenses too. And individuals often have to repay loans, fees and interest.

What Defenses Can You Claim?

There are a few arguments defendants try to make, like:

• No intent – Claiming it was an accident or mistake, not an intentional attempt to defraud.
• Repaid funds – Arguing charges should be dismissed because the money was paid back.
• Blame others – Saying they relied on advice from attorneys, accountants, etc. who assured them it was okay.
• Misunderstanding – Asserting the PPP rules were unclear so they didn’t realize they were committing fraud.

But these defenses don’t usually work. Prosecutors argue the applications clearly stated the terms and warnings about fraud. It’s also hard to claim false statements were accidental.

How Can You Report Suspected PPP Fraud?

If you think a business or person committed fraud, here’s how to report it:

• SBA OIG Hotline: Online form or 800-767-0385
• DOJ National Center for Disaster Fraud: Online form or 866-720-5721
• IRS: Form 3949-A or 800-829-0433
• FBI: Online tips or call local FBI office
• Whistleblower lawsuits: Consult an attorney

You can submit a complaint anonymously or openly as a whistleblower. But providing as much evidence and documentation as possible helps investigators.

The Bottom Line

Stealing COVID relief funds meant for struggling businesses is despicable. Thankfully, agencies at all levels work hard to uncover PPP scams and bring fraudsters to justice. Billions have already been seized back and returned to government relief programs.

So if you know of anyone faking eligibility or misusing loans, make sure to report it! Stopping PPP fraud ensures the money goes to small businesses who truly need help surviving the pandemic.

Sources

• SBA OIG Management Challenges Report
• DOJ Combats COVID-19 Fraud
• IRS Investigates PPP Fraud
• FBI Highlights PPP Fraud
• Paycheck Protection Program Fraud Claims

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.