Ppp Loan Fraud Defense

The Federal Government Will Prosecute PPP Fraud Until 2032. The Question Is Whether You Will Be Ready.

Six years after the Paycheck Protection Program disbursed $793 billion in forgivable loans, the Department of Justice has not slowed its pursuit. It has accelerated. As of March 2025, IRS Criminal Investigation has opened 2,039 cases tied to COVID relief fraud, representing $10 billion in alleged losses. Congress, in August 2022, extended the statute of limitations from five years to ten. The arithmetic is plain: a loan application submitted in April 2020 remains prosecutable until April 2030. And the prosecutors assembling these cases have, by their own account, only reached the middle of the enforcement cycle.

What this means for the accused is both specific and general. Specific, because the federal sentencing guidelines under Section 2B1.1 calculate punishment with the precision of an actuarial table, adding offense levels for every increment of loss. General, because the moral climate surrounding pandemic fraud has permitted sentences of extraordinary severity. A Nevada man received over fifteen years for an $11 million scheme. A Mansfield businesswoman received seven years for $8.5 million. Teldrin Foster received 121 months and a $9.6 million restitution order. These are not outliers. They are the emerging median.

The Architecture of a PPP Prosecution

To understand the defense, one must first understand the charge. Federal prosecutors in PPP cases draw from a familiar arsenal: wire fraud under 18 U.S.C. Section 1343, bank fraud under Section 1344, conspiracy under Section 1349, and money laundering under Section 1956. Each carries its own statutory maximum. Bank fraud permits thirty years of imprisonment and a million dollar fine. Wire fraud permits twenty. But the practical sentence is determined not by statutory maximums but by the advisory guidelines, where the intended or actual loss amount functions as the central variable.

A loss between $95,000 and $150,000 adds eight levels to the base offense. A loss exceeding $3.5 million adds eighteen. Each level corresponds, roughly, to additional months of incarceration. A first time offender at offense level 15 faces eighteen to twenty four months. At level 21, the range rises to thirty seven through forty six months. At level 24, fifty one to sixty three. The system operates with a mechanical indifference to narrative, to context, to the particular desperation of March 2020.

And then there are the enhancements. Sophisticated means. Abuse of a position of trust. A former branch manager of a national bank received sixty five months for coordinating thirty eight fraudulent applications totaling $5 million. The enhancement for his position was, in the court’s view, self evident.

Intent Is the Entire Case

The prosecution must prove that the defendant acted with the intent to defraud. This is the element upon which every PPP case turns, and it is the element most susceptible to defense.

Consider the conditions under which these applications were prepared. The CARES Act was signed on March 27, 2020. The SBA began accepting applications on April 3. Seven days. The program’s own guidance changed repeatedly during its first weeks. Lenders issued contradictory instructions. The definition of “payroll costs” was amended. The rules governing sole proprietors were revised. The certifications regarding necessity were, by the admission of the Treasury Department itself, subject to evolving interpretation.

Between the application and the indictment, the government had four years to construct its theory. The applicant had seven days to construct a business.

This asymmetry is not merely rhetorical. It is the foundation of the good faith defense. A defendant who relied on the advice of an accountant, who followed the instructions of a lender, who misunderstood the eligibility criteria in the same manner as thousands of other applicants, has not committed fraud. That person has committed an error. The distinction between the two is the distinction between incarceration and acquittal.

What the Government Concedes Without Admitting

Of the 3,500 defendants charged with federal crimes related to COVID relief fraud, the Department of Justice has obtained convictions or guilty pleas in over 2,000 cases, yielding a conviction rate that IRS Criminal Investigation calculates at 97.4 percent. One should pause over that number. It suggests not prosecutorial infallibility but prosecutorial selectivity. The government charges the cases it can win. It declines the cases that present genuine ambiguity.

But selectivity is not immunity. The five COVID 19 Fraud Enforcement Strike Forces, stationed in California, Colorado, Maryland, New Jersey, and Florida, continue to process referrals. Over 1,200 civil fraud investigations remain open. More than 600 qui tam cases, in which private whistleblowers initiate the action, await resolution. The average sentence for those convicted has reached thirty one months. And defendants sentenced in 2024 and 2025 are receiving terms forty percent longer than defendants sentenced for identical conduct in 2021 and 2022.

The government is not becoming more lenient. It is becoming less.

The Statute of Limitations Is Not What You Believe

Before August 2022, PPP fraud prosecuted as wire fraud carried a five year statute of limitations. PPP fraud prosecuted as bank fraud carried ten. The discrepancy was a product of the program’s architecture. Traditional banks issued most PPP loans, making bank fraud the natural charge. But a significant number of loans were issued by fintech companies, which are not banks. For those cases, only wire fraud applied. Five years from April 2020 would have meant expiration in April 2025.

Congress eliminated this asymmetry. The PPP and Bank Fraud Enforcement Harmonization Act of 2022 and its companion statute extended all PPP and EIDL fraud limitations to ten years, retroactively. A borrower who believed the clock had nearly expired received, by legislative act, an additional five years of exposure. The retroactive application has survived constitutional challenge. It will not be overturned.

We say this not to alarm but to correct a specific and dangerous misapprehension. Clients arrive at our offices having been told, sometimes by other attorneys, that the window for prosecution has closed. It has not closed. For loans originated in 2020, it will not close until 2030. For loans originated in 2021, until 2031. The government has time, and it is using that time to build larger, more complex, multi defendant cases that will produce headlines well into the next decade.

Defending the Indefensible and the Defensible Alike

There are PPP fraud cases in which the defendant fabricated employees, forged payroll records, created shell companies, and spent the proceeds on a Lamborghini. Those cases are not defensible on the merits. They are defensible only on sentencing, where the reduction for acceptance of responsibility (three offense levels), cooperation with the government (a potential Section 5K1.1 departure), and the presentation of mitigating circumstances can mean the difference between seven years and three.

And then there are the other cases. The business owner who inflated payroll by twelve percent because the accountant said it was “close enough.” The sole proprietor who included a contractor’s payments in the calculation because the lender’s representative told her to. The restaurant owner who used PPP funds for rent three weeks before the rules were clarified to permit exactly that expenditure. These cases require a different kind of defense. Not negotiation but confrontation. Not mitigation but exoneration.

The difference between these two postures is the difference between a federal criminal defense attorney and a federal criminal defense attorney who has tried PPP cases. The latter knows which forensic accountants the Southern District respects, which IRS agents can be cross examined on their understanding of SBA guidance, which judges have expressed skepticism about the government’s loss calculations. The work is granular. It is slow. It is the opposite of dramatic.

Why Early Intervention Changes the Calculus

In federal white collar cases, the period between investigation and indictment is where the outcome is most often determined. Once a grand jury returns an indictment, the government has committed its resources and its institutional credibility to a prosecution. Before that point, the case remains fluid.

An attorney retained during the investigation phase can contact the assigned agent and the supervising AUSA. This is not a confrontation. It is a presentation. The defense provides the context that the government’s spreadsheet cannot capture: the legitimate business operations, the professional advice relied upon, the confusion inherent in the program’s rollout, the repayment already made. In a meaningful number of cases, this presentation results in a declination. The case is not charged. There is no indictment, no arrest, no mugshot forwarded to a local newspaper.

I will be direct about what that means in practical terms. A declination is not an acquittal. It does not appear on any public record. It is the absence of a prosecution, which is, for the person who would have been prosecuted, the most complete form of victory available.

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.

NY Bar Admitted Multi-State Licensed Federal Courts

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Restitution, Forfeiture, and the Financial Aftermath

Even in cases resolved favorably, the financial consequences of a PPP investigation are substantial. The government has recovered over $1.4 billion in fraudulently obtained funds through criminal proceedings alone. Restitution orders have exceeded $882 million. Asset forfeiture has resulted in the seizure of over $1 billion. Civil settlements and judgments have surpassed $500 million across more than 650 cases.

For the individual defendant, restitution is mandatory upon conviction for a fraud offense. The amount is typically the full loss amount, regardless of what the defendant can pay. It survives bankruptcy. It accrues interest. It can be enforced through wage garnishment, asset seizure, and the interception of tax refunds for the remainder of the defendant’s life. We have seen clients whose criminal sentence was measured in months but whose restitution obligation was measured in decades.

This is why the defense strategy must account for the financial dimension from the first consultation. A negotiated resolution that reduces the loss amount by even a modest percentage can save a client hundreds of thousands of dollars over a lifetime. A successful challenge to the government’s loss calculation at sentencing, demonstrating that the actual loss was lower than the intended loss, or that certain funds were in fact used for legitimate payroll, can alter the restitution figure and the guidelines range simultaneously.

The Firm’s Position

Spodek Law Group has represented clients in PPP fraud matters from the investigation stage through trial and sentencing. We have secured declinations, negotiated non prosecution agreements, obtained acquittals, and argued for below guidelines sentences in cases where conviction was unavoidable. We have worked with forensic accountants, former SBA officials, and sentencing mitigation specialists to construct defenses that address both the legal and human dimensions of these cases.

If you are under investigation for PPP loan fraud, or if you have reason to believe that an investigation is forthcoming, the consultation is free and the conversation is privileged. We do not record it. We do not report it. We listen, we assess, and we tell you what we believe to be true about your exposure and your options.

That assessment begins with a phone call to our office.