PPP LOAN FRAUD LAWYERS

Savannah PPP and EIDL Loan Fraud Lawyers

What You Need to Know if You’re Facing a DOJ PPP Loan Fraud Investigation

The Paycheck Protection Program (PPP) was enacted as a means to provide financial support to businesses struggling with economic devastation brought on by the COVID-19 pandemic. Though PPP loans were offered as federally-backed, forgivable loans, these funds were susceptible to fraud, and reports surfaced of many ineligible beneficiaries and inappropriate use of loan funds. Resultantly, the U.S. Department of Justice (DOJ) launched extensive investigations to uncover any such fraud.

Facing an investigation in association with PPP loan fraud is a severe issue and carries significant legal consequences. If you or your business is a subject of a DOJ investigation looking into PPP loan fraud, it’s crucial to gain an understanding of what you can expect during the process.

The DOJ is Aggressively Investigating and Prosecuting PPP Loan Fraud

The DOJ is committed to probing and identifying companies suspected of submitting fraudulent and unauthorized PPP loan applications or other certification. The DOJ intends to penalize these companies and individuals with criminal charges under federal statutes. A recent press release stated: “The Paycheck Protection Program was designed to help Americans struggling with financial hardship during the pandemic. Our office will be aggressive in targeting anyone who defrauds this critical program.”

The DOJ has Already Pursued Charges in Multiple PPP Loan Fraud Cases

Since PPP loan fraud investigations were initiated, the DOJ has filed charges against several individuals and organizations, highlighting the program’s fraudulent activity. The charged individuals created fake companies and submitted false payroll information to gain PPP loans, utilized PPP loan funds to finance personal expenses, and attempted to acquire more than one PPP loan.

The DOJ is Collaborating with Other Federal Law Enforcement Agencies

The DOJ is not working alone in investigating PPP loan fraud. The DOJ is joined by several other federal agencies, which share a common goal to locate and prosecute fraudulent appropriation of federally backed, forgivable loans offered under PPP. The agencies that assist the DOJ in the investigations include Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Federal Bureau of Investigation (FBI), Internal Revenue Service Criminal Investigations (IRS-CI), and U.S. Small Business Administration Office of Inspector General (SBA-OIG).

Several Potential Defenses for Individuals and Organizations Accused of PPP Loan Fraud in DOJ Investigations

Though allegations of PPP fraud could pose significant threats to the accused individuals and businesses, there are multiple defenses that may potentially prove helpful in such cases. In particular, these defenses are relevant when specific charges are brought under statutes listed above. Some of these defenses include:

Paycheck Protection Program Compliance – When implemented correctly, the PPP could serve as the primary defense against allegations of wrongdoing. Companies that adhere to PPP regulations when using the funds, establish a separate PPP loan account, and maintain detailed records may see a prompt resolution to the issue. While providing details to the DOJ, companies must be extra vigilant to avoid incrimination.

Lack of Fraudulent Intent – Conviction of a federal criminal offense would require intent on the accused’s part. «Inadvertent» PPP loan fraud, such as obtaining a PPP loan mistakenly or using PPP funds wrongly, could potentially provide a gateway to absolution from the charges. However, civil offenses under specific statutes still apply to unintentional fraud and could carry penalties, including treble damages, heavy fines, loss of eligibility to federal programs, and other such consequences.

Potential Charges in Federal PPP Loan Fraud Investigations

There are multiple charges that may arise from investigations involving PPP loan fraud, which include but are not restricted to:

Making False Statements to the Small Business Administration – Under 18 U.S.C. § 1014, making false statements and submitting fake reports to the Small Business Administration (SBA) for influencing its decisions is a federal criminal offense. This includes false statements on companies’ PPP loan applications as well as certifications for loan forgiveness.

Making False Statements to an FDIC-Insured Bank – Prohibitions set forth in 18 U.S.C. § 1014 also apply to false statements and reports presented to financial institutions operating under the purview of the Federal Deposit Insurance Corporation (FDIC) and other banking institutions.

Bank Fraud – Under 18 U.S.C. § 1344, prosecution can occur for the presentation of false statements or reports to PPP lenders, and individuals or organizations having used false or fraudulent pretenses or representations to obtain funds from the said financial institutions.

Wire Fraud – Allegations of PPP-related wire fraud include Internet use in connection with any scheme causing fraud or obtaining money or property through fraudulent pretenses, representations, or promises. The DOJ has previously filed multiple PPP-related cases under the federal wire fraud statute, 18 U.S.C § 1343.

Aggravated Identity Theft – The aggravated identity theft charges, as per 18 U.S.C. § 1028A, is for individuals who knowingly use a means of identification of another person illegally. The DOJ has filed aggravated identity theft charges in many PPP loan fraud cases where individuals fraudulently attempt to obtain loans for companies they don’t own.

Tax Evasion – Under 26 U.S.C. § 7201, individuals can be prosecuted for evading payroll tax by unlawfully obtaining payroll expenses using PPP loan funds or evading income tax by failing to report their profit or earnings from business operations financed by PPP loans.

Making False Statements to Federal Agents – Organization heads, executives, and stockholders may face prosecution under 18 U.S.C. § 1001 for making materially false, fictitious, or fraudulent claims during a PPP loan fraud audit or investigation by federal agencies.

Conspiracy – Federal conspiracy statutes 18 U.S.C. § 371 and 18 U.S.C. § 1349 can prosecute individuals and organizations collectively involved in the notion of fraudulently obtaining federal funds under the PPP. Such charges can initiate irrespective of whether the PPP loan was awarded or not.

Attempt – The federal statute for an attempt otherwise allows federal prosecutors to impose criminal penalties for unsuccessful attempts to carry out PPP loan fraud. 18 U.S.C. § 1349 reads in part, “Any person who attempts … to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt … .”

False Claims Act Violations – The Federal False Claims Act, 31 U.S.C. §§ 3729 – 3733, imposes civil and criminal penalties for fraud targeting federal government programs. Civil charges regarding PPP loan application or forgiveness certification fraud may result from unintentional fraud, while intentional fraud could lead to criminal charges.