10-Year Statute of Limitations for PPP and EIDL Fraud Explained.

What Ten-Year Rules Apply to PPP and EIDL Fraud?

PPP and EIDL fraud are not subject to one specific statute of limitations period. Instead, federal criminal law generally allows for a 5-year statute of limitations period for fraud offenses, but provides exceptions for various offenses that involving “financial institutions.” In PPP and EIDL fraud cases, these “financial institutions” exceptions are the ones most likely to give rise to a 10-year statute of limitations period.

U.S.C. § 3293 (The Bank Fraud Statute)

One of the most relevant ten-year rules is 18 U.S.C. § 3293, which generally bars prosecution more than ten years after the offense for violations or conspiracies involving specified financial-institution offenses, and for mail or wire fraud under 18 U.S.C. §§ 1341 or 1343 when the offense affects a financial institution. Under Section 1344, the federal definition of “bank fraud” includes fraudulent attempts “to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;”

Wire Fraud

Under Section 3293, this statute of limitations period also applies to wire fraud when the fraudulent action “affects a financial institution.” Because 18 U.S.C. § 3293 applies to wire fraud only when the offense affects a financial institution, whether the ten-year period applies to a particular PPP or EIDL fraud claim depends on the facts and the entities involved.

The “Covered Loans” Provision

The 2022 PPP statute provides that any criminal charge or civil enforcement action alleging that a borrower engaged in fraud with respect to a covered loan guaranteed under the Paycheck Protection Program must be filed no later than ten years after the offense was committed.

• PPP and EIDL fraud defendants in particular should consult with experienced defense counsel in all cases, particularly when the alleged fraud occurred many years ago.

How is the Deadline Calculated When Loans and Representations Occur at Different Times?

This is a nuanced question that requires taking several steps to properly answer. The simplest explanation is that the deadline for filing criminal charges for PPP and EIDL fraud (and related offenses) generally begins to run on the date each offense was committed. From there, the specific limitations period is then determined based on the nature of the offense charged.

• Different offenses arising from a single loan application process may carry different limitations rules.
• Multiple PPP or EIDL loans may involve separate applications and separate alleged offenses.
• The loan issuance date itself does not automatically establish the date of each offense.
• PPP and EIDL loan forgiveness applications can create separate exposure if they contain material intentional falsehoods.
• A later submission of loan documents generally will not extend the statute of limitations for prior offenses.

In addition to these issues, defendants in PPP and EIDL fraud cases often need to understand not only the “clock” that applies to their alleged conduct, but also the clock that applies to the type of prosecution they are facing. This is another layer of complexity that requires clear insight from an experienced federal criminal defense attorney.

Can a PPP or EIDL Loan Forgiveness Application Create New Exposure for Fraud?

Yes, but this occurs in limited circumstances. Typically, if you already submitted a fraudulent application, then obtaining loan forgiveness under that application will not create additional criminal liability for fraud. However, if a forgiveness application, or any later representation that is used to justify loan forgiveness, contains a “material intentional falsehood,” then it may constitute an attempt to commit a new fraudulent offense.

• Importantly, if a defendant is at risk for multiple fraud-related offenses, a later document submission generally will not extend the statute of limitations for the earlier offenses that the government has not already prosecuted.
• If a borrower or business obtained multiple PPP loans, each application is a separate transaction. This can mean that a single business owner may face multiple allegations of criminal fraud involving different loans at different stages of their business’s history.

Which PPP or EIDL Conduct Can Become a Separate Federal Fraud Offense?

Fraudulent conduct leading to PPP or EIDL loan fraud charges can often expose defendants to multiple charges for multiple crimes. In PPP fraud cases specifically, wire fraud charges under 18 U.S.C. § 1343 and bank fraud charges under 18 U.S.C. § 1344 are the two most common charges, in addition to various others. When PPP fraud defendants seek EIDL fraud relief, they will more frequently see accusations of making false statements to federal agencies under 18 U.S.C. § 1001. While the PPP and EIDL statutes have their own rules, they cover conduct that also constitutes these other crimes.

Along with the other crimes, defendants in PPP and EIDL fraud cases should be aware that prosecutors frequently allege money laundering offenses as well. Specifically, transfers or spending of fraudulent loan proceeds can lead to charges under 18 U.S.C. §§ 1956 or 1957. Money laundering charges are a particular concern in PPP and EIDL fraud cases for a few reasons, including that the statute of limitations period for money laundering can differ from the period that applies under the relevant PPP-specific statutes. This can give prosecutors additional time to prosecute if they decide to pursue money laundering charges in addition to fraud charges.

Along with the limitations period, each of these crimes has elements that the government will have to prove in order to secure a criminal conviction. In addition to the specific elements of money laundering, establishing that any form of criminal fraud occurred requires the government to establish that:

• There was a “material misrepresentation,” or “intentional falsehood,”
• The misrepresentation had a “material” or important effect, and
• There was an intent to “deceive, defraud, mislead,” or gain a perceived advantage by means of this misrepresentation.

Depending on the charges involved, some elements may be easier to prove than others, but establishing all elements is necessary for a criminal conviction. Many PPP and EIDL fraud allegations, even for charges that do not specifically mention “fraud” by name, share these same foundational elements.

Spodek Law Group takes federal matters nationwide, coast to coast, and runs a fully online client portal so a case can be handled from anywhere.

When Can a Pandemic-Fraud Investigation Continue After the Charging Clock Matters?

If you receive a “target letter” in the mail (or electronically), this can signal that you are being viewed as a target of a federal criminal investigation. A grand-jury subpoena in connection with a pandemic-fraud investigation will similarly allow prosecutors to demand records, testimony, or other evidence in support of the government’s decision to pursue an indictment. These are two of the most common ways that individuals and business owners learn about the possibility of criminal charges due to pandemic-era fraud.

Federal criminal investigations can span months, years, and sometimes even decades. In PPP and EIDL fraud cases specifically, investigators may be operating under a 10-year statute of limitations period, making it possible that they have already collected information for years before presenting their case to a grand jury. While an ongoing investigation can certainly be concerning, it is important to remember that an open investigation does not necessarily mean that criminal charges will follow. An investigation is merely an evidence-gathering process that will culminate in the government deciding whether to seek a grand-jury indictment or to cease its efforts.

Notably, pandemic-fraud investigations have multiple components. In many cases, the government will pursue both criminal and civil enforcement measures, such as the False Claims Act (FCA). Prosecutors and agents from federal authorities such as the DOJ, FBI, and IRS may work hand-in-hand to pursue criminal charges while other teams pursue civil penalties. In addition to the potential risk of prison time, this can also lead to substantial financial liability for borrowers and business owners. While prosecutors are more likely to pursue fraud charges under the a 5-year statute of limitations, civil claims can still expose defendants to liability over a much longer period.

Ultimately, targeting a defendant’s liability for PPP and EIDL fraud requires a detailed analysis of multiple factors. Fraud cases are subject to unique complexities and considerations, making it essential for defendants and those at risk to consult with experienced defense counsel.

Can repayment, forgiveness, or civil enforcement still create exposure?

Outline

• Intro (H2: Can Repayment, Forgiveness, or Civil Enforcement Still Create Exposure?)

- Explain the potential civil liability for PPP and EIDL fraud under the False Claims Act (FCA).

• Civil vs. Criminal Fraud Liability

- Discuss the differences between criminal and civil fraud liability.

• Criminal and Civil Enforcement Tracks

- Address how criminal prosecution and civil recovery operate as separate enforcement tracks.

• Loan Repayment and Criminal Exposure

- Explain that loan repayment does not automatically eliminate criminal liability.

• The Relevance of Loan Forgiveness

- Note that loan forgiveness doesn't absolve fraudulent claims.

Article

Can Repayment, Forgiveness, or Civil Enforcement Still Create Exposure?

Repayment of loan funds does not automatically eliminate civil or criminal liability. Along with statutory penalties for PPP and EIDL fraud, the False Claims Act (FCA) also provides for “treble damages,” or three times the government’s loss, potentially leading to substantial liability for borrowers and business owners. Civil fraud liability presents two other key distinctions from criminal fraud liability. First, the burden of proof is lower; the government only needs to prove its case by a “preponderance of the evidence,” not beyond a reasonable doubt. Second, the government may pursue civil recovery without pursuing criminal prosecution.

Criminal Prosecution and Civil Recovery

In practice, this means that criminal prosecution and civil recovery are separate enforcement tracks, and both can be pursued in some cases. For the most part, this means that if you make a fraudulent loan application that leads to civil recovery, there is a strong possibility that a criminal fraud prosecution will also have the justification to proceed.

While PPP and EIDL borrowers may also face prosecution for misusing funds received through loans, this is a different claim from fraudulently applying for a loan. For example, if you legitimately applied for a PPP loan but used it to buy a new Ferrari, you will not be liable for misrepresenting the circumstances under which you obtained the loan, but you could face criminal liability for misusing PPP loan funds.

Can Loan Forgiveness Absolve a Fraudulent Loan Application?

No. Failure to repay a PPP or EIDL loan can create civil liability and collection consequences, and repayment or forgiveness does not automatically eliminate criminal liability for misrepresenting the circumstances of the loan application.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028 to speak with our team.