Corporate Investigations & PPP Loan Fraud
Reducing the Risk of PPP Loan Fraud Allegations through Conducting Corporate Audits
In response to the COVID-19 pandemic, the U.S. government established the Paycheck Protection Program (PPP) to assist businesses with forgivable loans to maintain their operations and workforce. Unfortunately, widespread fraud in the program has been identified by the U.S. Treasury Department and the U.S. Department of Justice (DOJ), triggering a wave of audits and investigations. The SBA is auditing many PPP loan recipients at the time they submit their forgiveness applications, and the DOJ has already filed criminal complaints in numerous cases of alleged PPP loan fraud. Todd Spodek suggests that conducting a corporate audit can help businesses ensure that they are not at risk of prosecution for PPP loan fraud.
Benefits of Conducting a Corporate Audit
Conducting a corporate audit can serve multiple important purposes. It can help identify whether company personnel are complying with internal policies and procedures, as well as inefficiencies and systemic failures. Additionally, it can assist companies in preparing for possible allegations of fraud, which is a significant risk for businesses that received forgivable loans under the PPP.
When to Conduct an Internal Compliance Audit
For most PPP loan recipients, it is not a question of whether to conduct an internal compliance audit but rather when. There are several situations when businesses should consider conducting an internal compliance audit. These include when there are concerns about PPP loan compliance, the company has a high volume of PPP loan transactions, it is preparing to submit its PPP loan forgiveness application, or it is being targeted in a federal PPP loan fraud audit or investigation.
Concerns about PPP Loan Compliance
If there are concerns about PPP loan compliance for any reason, an audit should be initiated promptly to determine what issues exist and what actions are necessary to rectify them. Concerns may arise from discovering that multiple departments submitted PPP loan applications, learning about PPP rules and regulations of which company personnel were previously unaware, or having insufficient documentation of expenditures from the company’s PPP loan account.
High Volume of PPP Loan Transactions
Larger companies that received PPP loans face administrative challenges in maintaining compliance with the program’s terms. To demonstrate that the funds are only being used for authorized purposes, personnel with access to the company’s PPP loan accounts should be trained on the program’s requirements, and companies should adopt controls designed to ensure compliance. Compliance audits should be conducted periodically to ensure that all internal policies and procedures are being followed.
Preparing to Submit PPP Loan Forgiveness Application
Before submitting an application for loan forgiveness under the PPP, companies must ensure that they qualify. The SBA is auditing PPP loan recipients at the time they submit their forgiveness applications. If the SBA determines that a company is ineligible for loan forgiveness under the PPP, it can demand repayment of the loan plus interest, and if an audit uncovers possible evidence of fraud, a civil or criminal investigation could follow. Companies can mitigate these risks by conducting internal corporate audits and ensuring that they have the requisite documentation before submitting their applications for loan forgiveness.
Targeted in a Federal PPP Loan Fraud Audit or Investigation
If a company is being targeted in a federal PPP loan fraud audit or investigation, launching an internal corporate audit immediately is crucial. Our firm conducts emergency audits for companies as necessary, and our senior attorneys and former federal agents can get to work immediately if necessary in order to get out in front of the investigation and build a proactive defense strategy.
Steps to Conducting an Internal Corporate Audit for PPP Loan Fraud
Although several steps are involved in conducting an internal corporate audit for PPP loan fraud, it is possible to execute these steps efficiently. Relying on experienced outside counsel can allow company owners and executives to gather the information they need without disrupting their day-to-day business operations. The critical steps involved in conducting an internal corporate audit focused on assessing Paycheck Protection Program compliance include:
Assemble the Audit Team
The first step in conducting an internal corporate audit for PPP loan fraud is to assemble the audit team. The team should include experienced attorneys and investigators who have a thorough understanding of PPP loan compliance and potential fraud issues.
Collect Pertinent Documentation
The next step is to collect all pertinent documentation related to the PPP loan. This may include loan applications, financial statements, payroll records, and any other documents related to PPP loan expenditures.
Evaluate Documentation Collected
Once all documentation has been collected, the audit team should evaluate it to identify any compliance risks or deficiencies. This step involves reviewing the documentation to ensure that it complies with the PPP program’s requirements and identifying any areas of concern.
Assess Compliance Risks or Deficiencies
Based on the evaluation of the documentation, the audit team should assess any compliance risks or deficiencies. This involves identifying potential violations of the PPP program’s requirements and evaluating the likelihood of facing an audit or investigation for PPP loan fraud.
Determine Next Steps for Compliance and/or Defense
Finally, the audit team should determine the next steps for compliance and/or defense. This involves developing a plan to address any compliance risks or deficiencies and preparing a defense strategy to respond to potential audit or investigation findings.
Why Choose Todd Spodek for PPP Loan Fraud Audits, Investigations, and Defense?
Businesses facing federal PPP loan fraud audits and investigations are at risk of substantial repayment liability and potential civil or criminal penalties. It is essential to take the necessary steps to ensure compliance with the PPP program’s terms and conditions and rely on experienced outside counsel to uncover compliance deficiencies that have the potential to trigger invasive federal audits and investigations. Here are five reasons why businesses nationwide trust the attorneys and former federal agents at Todd Spodek:
Our former federal prosecutors and federal agents offer deep insights from prior experience with the DOJ, FBI, IRS, and other federal agencies.
Our firm’s practice is devoted to federal compliance and defense, and all of our attorneys and investigators have extensive experience in complex federal matters.
With local affiliated counsel operating in cities across the country, we are able to efficiently represent businesses nationwide.
As a client of Todd Spodek, your company’s key personnel will have access to our senior attorneys and investigators 24/7.
We have helped businesses in all industries across the country avoid federal charges through effective compliance and defense representation.
Conducting a corporate audit is critical to reduce the risk of facing fraud allegations for businesses that received PPP loans. Companies must be aware of the compliance risks and deficiencies and take proactive measures to rectify them. Todd Spodek can assist companies with conducting corporate audits and defending against federal audits and investigations. Our experienced attorneys and former federal agents offer deep insights and extensive experience in complex federal matters, ensuring that businesses are well-equipped to navigate the challenges of PPP loan compliance and potential fraud issues.