Constitutional Rights When Accused of PPP Fraud.

“PPP fraud” is an umbrella term; it is not, in itself, a crime under federal law. To target alleged PPP fraud, federal prosecutors must use federal fraud statutes and specific PPP-related crimes. In particular, most federal PPP fraud cases are based on one of two statutes: the wire fraud statute (18 U.S.C. § 1343) or the bank fraud statute (18 U.S.C. § 1344). The following summaries are provided for illustrative purposes, and they may not fully encompass the specifics of the federal government’s statutory authority to pursue alleged PPP fraud cases.

Wire Fraud, 18 U.S.C. § 1343

The wire fraud statute is among the government’s most-used criminal statutes. It is exceptionally broad. The statutory language of 18 U.S.C. § 1343 states:

“Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both.smits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds, for the purpose of executing, or attempting to execute, such scheme or artifice to defraud, or for obtaining any money or property by means of false or fraudulent pretenses, representations, or promises, shall be fined under this title or imprisoned not more than 20 years, or both.”

Bank Fraud, 18 U.S.C. § 1344

The bank fraud statute is, similarly, quite broad. § 1344 states:

“Whoever knowingly executes, or attempts to execute, a scheme or artifice to: (1) defraud a financial institution; or (2) 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, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.”

When do Target Letters, Subpoenas, Interviews, and Grand Jury Proceedings Trigger Constitutional Protections in PPP Cases?

During a federal PPP fraud investigation, federal agents (such as those with the FBI and the IRS’s Criminal Investigation Division) can use a wide array of investigative tools. These tools often involve the collection of documentary evidence, such as loan applications, payroll records, tax filings, bank account information, and expenditure statements. In many cases, the DOJ Fraud Section (part of the Criminal Division) takes the lead in conducting these investigations, often in tandem with the U.S. Attorney’s Office in the district where the targeted individual or business is located.

As the investigation progresses, targeted individuals may receive a variety of notices and demands. These can include federal target letters, grand jury subpoenas, and subpoenas or civil investigative demands (CIDs). When do these, or other investigative events, trigger constitutional protections and/or opportunities to challenge the government’s case?

What is a Federal Target Letter?

A federal target letter is a formal notice that you are the target of a federal criminal investigation. While it may often be followed by a federal indictment, it is not an indictment in itself. Similarly, it does not prove guilt, nor does it mean that prosecutors have decided to pursue charges. Instead, it signals the government’s interest in you and the fact that you are being targeted in connection with a federal grand jury investigation.

What is a Grand Jury Target?

If you are considered a grand jury target, you are at risk of being called to testify during a federal grand jury investigation. Depending on your level of involvement in the government’s case, and depending on whether you or your legal representation is prepared to engage with the government, you may (or may not) choose to testify under subpoena.

What is a Federal Subpoena or CID?

A federal subpoena or a civil investigative demand (CID) is a request to produce certain records or to testify at a later date. This can apply to companies and individuals alike. The recipient of a subpoena or CID can often challenge it based on various legal grounds, or negotiate the scope of the records demanded.

When do Constitutional Protections Apply to Federal PPP Fraud Investigations?

There are a variety of constitutional protections that can come into play during a federal PPP fraud investigation. However, these protections trigger different consequences. For instance, in a federal criminal case, the Fifth Amendment protections that apply to a Miranda-related suppression argument focus on statements obtained by government agents during a custodial interrogation. If the government obtains a statement without advising the suspect of their Fifth Amendment rights, then the statement may be subject to suppression.

Pretrial suppression motions may raise a variety of other constitutional arguments. These arguments focus on challenges to the validity of evidence that the government has obtained illegally. For example, the Fourth Amendment protection against unreasonable searches and seizures may apply to the manner in which the government obtained records that it is using as the basis of its case.

Suppression motions can raise other constitutional issues as well, such as those arising during interrogations that fall outside of the Miranda-warning requirements. While, as discussed above, Miranda warnings are not required during every interview with federal investigators, including interviews conducted at a suspect’s home or office, the Fifth Amendment still requires that statements be voluntarily given.

Spodek Law Group states its position plainly on its own front page: we owe loyalty to only you.

Which Additional Charges and Penalties Can Alleged PPP Conduct Trigger?

Many PPP-related allegations can carry the potential for lengthy federal prison terms and millions of dollars in fines and restitution. The following are among the most-common additional charges and penalties that alleged PPP fraud defendants can face:

Federal Wire Fraud (18 U.S.C. § 1343)

18 U.S.C. § 1343

In ordinary cases, Section 1343 authorizes up to twenty years’ imprisonment and substantial monetary penalties.

18 U.S.C. § 1343

18 U.S.C. § 1343 allows for up to thirty years’ imprisonment in cases involving disaster benefits.

18 U.S.C. § 1343 also authorizes up to thirty years’ imprisonment if the violation affects a financial institution.

Federal Bank Fraud (18 U.S.C. § 1344)

18 U.S.C. § 1344

Section 1344 authorizes up to thirty years’ imprisonment and a fine of $1,000,000.

Money Laundering (18 U.S.C. § 1956)

18 U.S.C. § 1956 (a) (1) (i) (B)

Generally, a money laundering allegation under the federal money laundering statute involves allegations that you engaged in financial transactions using proceeds from a crime or other unlawful activity with the intent to promote, conceal, avoid reporting of, or transport the proceeds of that unlawful activity. The penalty under 18 U.S.C. § 1956 (a) (1) (B) is:

“... a fine under this title, or imprisonment for not more than 20 years, or both, but not more than twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater.”

Aggravated Identity Theft (18 U.S.C. § 1028A)

18 U.S.C. § 1028A

The U.S. government often includes charges of aggravated identity theft in PPP fraud cases in which defendants are charged with including false information on loan applications.

The aggravated identity theft statute, 18 U.S.C. § 1028A, provides for an additional sentence of two years of imprisonment except as provided in paragraph (4), no term of imprisonment imposed on a person under this section shall run concurrently with any other term of imprisonment imposed on the person under any other provision of law, including any term of imprisonment imposed for the felony during which the means of identification was transferred, possessed, or used; This constitutes a mandatory minimum sentence.

Aggravated identity theft is not an enumerated crime of violence under the federal sentencing guidelines; § 2B1.6 provides that Chapter Four does not apply to the § 1028A count.

How does Alleged PPP Loss Affect Charging, Guideline Ranges, and Defense Strategy?

The alleged “fraud loss” amount in a federal PPP fraud investigation or case is critical for several reasons. In investigations, PPP loan expenditures that defendants can argue are legitimate business expenses can be deducted from the government’s calculated fraud loss amount. This deduction can be important in both challenging the government’s evidence and arguing against liability.

Relationship Between PPP Loss and Sentencing Guidelines

The U.S. Sentencing Commission publishes federal sentencing guidelines that apply to most federal criminal cases, including PPP-related cases. Under the guidelines, the government must apply a formula to calculate a defendant’s base offense level, taking into account the amount of fraud loss at issue. Once the guidelines’ calculation for the appropriate base offense level is complete, the defendant’s sentencing range is either determined or significantly narrowed. Consequently, every dollar of alleged PPP loan fraud loss has the potential to affect a defendant’s sentencing exposure.

Factors Influencing a PPP-Related Felony Charge

Along with a variety of other factors, the amount of alleged fraud loss is a key factor that federal prosecutors consider when determining whether to pursue a case, whether to file criminal charges or a civil case under the False Claims Act (FCA), and, when pursuing criminal charges, what charges to pursue. Greater fraud losses tend to trigger greater prosecutorial attention, higher risks for enhanced penalties, and higher recommended sentencing exposure.

Reliance on Statutory Maximums

For all the reasons described above, statutory maximums (such as those under 18 U.S.C. § 1343) do not provide a clear picture of a defendant’s potential sentencing exposure. While statutory maximums provide the upper bound of possible penalties, actual sentences are typically influenced by the federal sentencing guidelines, which calculate a recommended range based on the specific circumstances of the case, including the amount of fraud loss at issue.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.