What California Businesses Need to Know About PPP Fraud Defense

Thanks for visiting Federal Lawyers, a second-generation criminal defense firm managed by our lead attorney, with over 50 years of combined experience defending federal fraud prosecutions nationwide. California businesses face uniquely aggressive PPP fraud enforcement because the Central District of California in Los Angeles and the Eastern District in Sacramento were selected by the Attorney General to jointly head one of three national COVID-19 Fraud Strike Force Teams – specialized prosecution units with enhanced resources, federal agent support, and mandates to pursue pandemic fraud aggressively. Since 2025, these strike force teams have charged dozens of cases across California: 14 defendants arrested in May 2025 for allegedly obtaining over $25 million in fraudulent loans, a Mid-City Los Angeles woman sentenced to 60 months in prison in February 2025 for $2.3 million COVID loan fraud, a California man pleading guilty in August 2025 to his role in a $15.9 million PPP and EIDL fraud scheme. These prosecutions demonstrate that California U.S. Attorneys’ Offices are prioritizing pandemic fraud cases, targeting both large organized schemes and individual business owners who allegedly made false statements on applications. If you’re a California business owner facing PPP fraud investigation or charges, you need defense counsel who understands the specific prosecution strategies used by California strike force teams and the federal courts where these cases are tried.

California Strike Force Prosecution Strategies

The California COVID-19 Fraud Strike Force brings resources and tactics that differ from standard federal prosecutions. FBI agents are embedded with prosecutors from the beginning of investigations rather than handing off cases after evidence gathering, creating coordinated investigations that build stronger cases. Strike force prosecutors specialize in pandemic fraud rather than handling diverse caseloads, making them extremely familiar with PPP and EIDL program rules, common fraud schemes, and effective prosecution theories. They coordinate across districts – a fraud scheme spanning Los Angeles, Orange County, and San Diego gets investigated jointly rather than separately, making it harder to exploit jurisdictional gaps. Strike force teams have enhanced data analytics capabilities, using sophisticated tools to cross-reference loan applications against IRS records, state unemployment databases, and business registration information looking for red flags that trigger investigation. This aggressive, coordinated approach means California businesses face higher audit rates and more frequent criminal referrals than businesses in districts without strike force teams.

High-Profile Cases Setting Precedents

Recent California prosecutions show the types of conduct triggering charges and the sentences defendants receive. A woman from Mid-City Los Angeles received 60 months – five years in federal prison – for fraudulently obtaining $2.3 million in COVID loans, with restitution exceeding $2.3 million. That sentence reflects the aggressive stance California judges take on pandemic fraud, showing little sympathy for economic desperation and viewing fraud amounts over $1 million as warranting substantial incarceration. The $15.9 million fraud scheme guilty plea demonstrates strike force focus on organized conspiracies involving multiple loan applications and sophisticated fraud techniques. The 14-defendant case with $25 million in alleged fraud shows prosecutors’ willingness to bring massive conspiracy cases charging numerous defendants jointly, which creates pressure for cooperators and makes trials extremely expensive and risky. These cases signal to California businesses that any PPP fraud exposure – even relatively modest amounts – carries serious risk given aggressive local enforcement.

DEFENSE TEAM SPOTLIGHT

Todd Spodek

Lead Attorney & Founder

Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.

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Legal Scenario: What Would You Do?

Scenario

You submitted a PPP loan application during COVID and now realize some employee count numbers may have been inaccurate.

Could this be considered fraud?

Attorney's Answer

Inaccuracies in PPP applications can trigger federal fraud charges carrying up to 20 years in prison. However, honest mistakes differ from intentional misrepresentation. Documentation of your good-faith efforts is critical to your defense.

This is general information only. Contact us for advice specific to your situation.