The Paycheck Protection Program (PPP) was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020, to help small and medium-sized businesses that were facing financial constraints due to the economic impacts of the COVID-19 pandemic. This program was created to provide financial relief to businesses and individuals affected by the novel coronavirus. The Paycheck Protection Program was endowed with nearly $350 billion in federal funds, but it was quickly depleted, leaving many eligible companies unable to receive loans. Due to the extraordinary rate at which the PPP ran out of funds, the U.S. Treasury Department and other agencies handling the program are investigating potential fraud and have expressed concern about the lack of organization in the application process. Therefore, companies that received PPP loans should anticipate increased scrutiny and the possibility of heavy penalties.

Fraud Concerns Related to PPP
The disorganized rollout of the PPP system and past instances of fraud related to similar federal relief programs raised concerns about the program’s integrity. The U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC) is seeking input from lenders on how to address the issues that have arisen with the program, including identifying fraud. The OCC will focus specifically on “loan stacking,” where one company receives PPP loans from multiple lenders. As part of the PPP application process, there were eligibility criteria and certifications that companies had to meet. Misrepresentation of any information could lead to allegations of federal fraud. In addition, the improper use of PPP funds could also result in allegations of fraud.

How to Prove Compliance with PPP Requirements
Companies that received funds from the PPP should take measures to prove that they are in compliance with program requirements. The U.S. Treasury Department’s Paycheck Protection Program Information Sheet states that companies can face criminal charges if they use the proceeds for fraudulent purposes. This warning highlights the risks that companies face when they fraudulently obtain loans through the PPP. Individuals who are personally involved in fraudulent activities, such as company owners and executives, could face criminal fines and decades behind bars.

Allegations of Fraud in Relation to PPP
There are several types of alleged fraud in relation to the PPP, including fraudulent loan certification, fraudulent loan forgiveness certification, misrepresenting or concealing information during a PPP audit or investigation, and using PPP funds for ineligible business purposes. To request loan forgiveness, companies must provide documentation that they have met eligibility criteria and used their PPP funds for eligible expenses. If audited or investigated, companies must avoid making misrepresentations or concealing pertinent information.

Importance of Engaging Experienced Federal Defense Counsel
In the event that a company is audited or investigated for PPP loan fraud, it is essential to engage experienced federal defense counsel immediately. 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. The defense counsel can help protect your rights if your company is targeted for PPP loan fraud. At Spodek Law Group, our federal defense attorneys provide legal services to clients facing a broad range of issues related to the COVID-19 pandemic. We have extensive experience in defending clients against allegations of PPP loan fraud and can use our experience to protect you.

Table: Allegations of PPP Loan Fraud

| Type of PPP Loan Fraud | Description |
| — | — |
| Loan “Stacking” | Companies that receive PPP loans from multiple lenders |
| PPP Loan Application Fraud | Misrepresentation of eligibility criteria on loan applications |
| Fraudulent Loan Certification | Certifying to various facts in bad faith |
| Using PPP Funds for Ineligible Business Purposes | Using PPP funds for any purpose other than payroll costs, interest on mortgage obligations, rent, and utilities |
| Using PPP Funds for Fraudulent Purposes | Using the funds for fraudulent activities among personnel or clients |
| Fraudulent Loan Forgiveness Certification | Providing fraudulent documentation to request loan forgiveness |
| Misrepresenting Information During a PPP Audit or Investigation | Failing to comply with the audit or investigation by disclosing false information |