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U.S. Department of Justice Cracks Down on PPP Loan Fraud: What You Need to Know

The Paycheck Protection Program (PPP) was launched to assist businesses during the COVID-19 pandemic. However, it has also become a prime target of false claims and fraud, and has therefore triggered a crackdown by the U.S. Department of Justice (DOJ). A large portion of the hundreds of millions of dollars in loans from the PPP have gone to individuals and companies who do not meet the qualifying criteria, or have misused the funds for purposes that do not fall under the loan conditions. Hence, the DOJ has actively begun conducting investigations of individuals and companies and charges are being filed for several federal offenses.

The DOJ’s Agenda Against PPP Loan Fraud

Individuals and companies that are being accused of PPP loan fraud by the DOJ will face severe consequences. The DOJ is determined to crack down on all the applications that contain fraudulent information, and to punish those who misused PPP funds. In a recent DOJ press release, it stated that anyone who defrauds the PPP program will be aggressively targeted. Due to the immense cost that PPP loan fraud poses, and the heightened publicity of the fraud affecting the program, the department has been more assertive in pursuing individuals and companies suspected of committing this type of fraud.

Charging for PPP Loan Fraud

The threat of a PPP loan fraud investigation is not empty rhetoric; the DOJ has already filed charges against companies and individuals. The court has accused individuals of submitting false payroll information, applying for multiple loans, creating shell companies, and using PPP funds for personal expenses that did not fall under loan conditions.

DOJ and Other Government Agencies Combat PPP Loan Fraud

The DOJ has joined forces with several other federal agencies that are equally focused on identifying and prosecuting companies and individuals that have misused PPP funds. These agencies include the Small Business Administration Office of Inspector General (SBA-OIG), Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Federal Bureau of Investigation (FBI), and Internal Revenue Service Criminal Investigations (IRS-CI).

Possible Defenses for Individuals and Companies

While the consequences of PPP loan fraud investigations are severe, individuals and companies can still have access to various defenses against the accused PPP loan fraud. A company can show that it followed the PPP program’s policies and suggest that its compliance is part of its first line of defense. However, companies must be cautious when voluntarily providing information to the DOJ to avoid giving away information they may not need to. Proving a lack of intent to fraud charges can also be a defense for some individuals and companies. Unintentional fraud, however, is not excused and leads to several penalties, including civil violations.

Possible Charges in Federal PPP Loan Fraud Investigations

Although the CARES Act, which authorized the Paycheck Protection Program, does not contain provisions for penalizing PPP loan fraud, false claims under the PPP can trigger civil and criminal charges under various federal statutes. Making false claims or making false statements to the SBA and FDIC-insured banks are federal offenses. In some cases, PPP loan fraud can result in conspiracy, wire fraud, bank fraud, tax evasion, or false statements to federal agents. However, it is essential to recognize that a charge does not always equal a conviction, and therefore, having experienced legal representation from Todd Spodek’s law firm is necessary.

Possible Charges in PPP Loan Fraud Cases

Below are some of the charges that the DOJ can file against individuals and companies who are suspected of PPP Loan fraud:

Table 1: Possible Federal Charges for PPP Loan Fraud

|Statute #|Charges|Penalties|

|18 U.S.C. § 1014|Making False Statements to the SBA or Other Lenders|Imprisonment up to 30 years, fines, or both.|

|18 U.S.C. § 1344|Bank Fraud|Imprisonment up to 30 years, fines, or both.|

|18 U.S.C. § 1343|Wire Fraud|Imprisonment up to 20 years, fines, or both.|

|18 U.S.C. § 1349|Attempt|Penalties as prescribed for the offense.|

|18 U.S.C. § 1028A|Aggravated Identity Theft|Minimum of 2 years without parole, fines, or both.|

|26 U.S.C. § 7201|Tax Evasion|Imprisonment up to 5 years, a fine up to $250,000, or both.|

|18 U.S.C. § 1001|Making False Statements to the Government|Imprisonment up to 5 years, fines, or both.|

|18 U.S.C. § 371, 18 U.S.C. § 1349|Conspiracy to Commit PPP Loan Fraud|Imprisonment up to 30 years, fines, or both.|

|31 U.S.C. §§ 3729 – 3733|False Claims Act Violations|Penalties of $5,000 to $10,000 per false claim, plus three times the amount of the damages the government suffered.|

Conclusion

PPP loan fraud is a serious accusation that can result in severe consequences, including imprisonment and massive financial damage. Todd Spodek Law Group’s attorneys have proven themselves capable of defending their clients against PPP loan fraud allegations. You don’t have to face these serious allegations alone, our attorneys have extensive experience in defending individuals and companies facing DOJ PPP loan fraud investigations. Contact us today for a confidential assessment of your case.