SBA PPP Loan Fraud Defense
SBA PPP Loan Fraud Defense
Launched in April, 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) was intended to help businesses stay afloat during the Covid-19 pandemic. The PPP loans provided funding for payroll costs and employee benefits, rent, utilities, mortgage interest, and worker protection costs related to COVID-19 and were forgiven if the business used the money to pay for payroll and other specific expenses within a designated period of time.
Despite its size, the Paycheck Protection Program effectively ran out of funds in a matter of minutes. Any time a federal program offers financial relief to businesses or consumers, there are going to be questions raised about fraud. But, with the nature of the PPP and the extraordinary rate at which its multi-hundred-billion-dollar allocation was depleted, many companies that received PPP loans can expect to face heavy scrutiny from federal authorities.
For these companies, it will be important to engage experienced federal counsel who can help mitigate the risk of facing substantial penalties. Many companies will face audits and investigations related to their receipt of PPP loan funds. This includes audits and investigations conducted by the Federal Bureau of Investigation (FBI), the U.S. Department of Justice (DOJ), various other federal agencies, and task forces that are formed specifically to target PPP loan fraud.
Could Your Company Be Prosecuted for Paycheck Protection Program (PPP) Loan Fraud?
Our experienced lawyers have identified potential fraud accusations that might be made in connection to the PPP, including:
- Eligibility criteria – Claims that a company is ineligible on various factors, including misrepresenting numbers and classifications of employees and payroll costs
- Loan “stacking” – Receiving loans from multiple lenders
- Ineligible use of funds – PPP funds are only permitted to cover benefits and payroll, rent, utilities, and mortgage interest, and only those that had been in place before February 15, 2020
There is much room for error and misunderstanding since the PPP is filled with gaps that may inadvertently trap businesses and companies who do not have clarification on key requirement clauses, or information is missing entirely. Nevertheless, federal authorities may still accuse you of ineligibility or misrepresentation for no intentional fault of your own.
According to the DOJ, PPP loan fraud encompasses a wide variety of activities, including:
- Inflating payroll expenses in order to obtain larger loans than the business was really qualified for.
- Reviving dormant corporations and purchasing shell companies to obtain multiple loans.
- Submitting identical loan applications and supporting documents under the names of different companies.
- Laundering the funds obtained by fraudulent means through numerous bank accounts.
- Using loan proceeds for prohibited purposes, such as the purchase of houses, cars, jewelry, and other luxury items.
If you are found to have engaged in any of these activities or it is discovered that you sought PPP loan forgiveness when you were not eligible for it or provided false information during a PPP fraud investigation, you could face very serious federal charges, including bank fraud, wire fraud, making false statements to a federal agent/entity, making false statements to a financial institution, money laundering, or identity theft. These are very serious federal offenses that can carry harsh sentences. If convicted, you could face severe penalties. The maximum penalty for a bank fraud conviction, for example, is 30 years in prison and a $1 million fine, while the maximum penalty for money laundering is five years in prison and a $250,000 fine.
What should you do if your company is targeted in a PPP loan fraud investigation?
The single most important thing you can do is to engage experienced federal defense counsel right away. This is a serious matter that requires your immediate attention, and you will need to rely on the advice and representation of experienced attorneys who know how to fend off federal charges. Your attorney’s ability to communicate effectively with federal agents and prosecutors could be crucial in avoiding additional serious charges and achieving the best possible outcome for you.