The Paycheck Protection Program (PPP) was established as a significant part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27, 2020 to offer various benefits to companies and individuals economically affected by the COVID-19 pandemic. The primary objective of PPP was to provide financial assistance to small and medium-sized businesses that experienced financial strain due to the pandemic. The PPP was loaded with almost $350 billion in federal funds to fulfill its purpose but despite its magnitude, the program ran out of finances in just a few minutes. The scheme struggled to meet an influx of applications, leading to the exclusion of eligible companies from the process, which raised questions about fraud. Given the PPP’s nature and the rapid rate at which its billions of government funding were depleted, many companies that received loans under the program are likely to face strict attention from federal agencies.

Multiple Fraud Concerns Related to the PPP

There are several other fraud concerns linked to the PPP, and while the U.S. Treasury is appearing ahead to improve future programs and address issues related to the PPP, other agencies are looking back to find out companies that unlawfully received PPP funds. Companies that received these funds will likely face prosecution as the event of the PPP program’s immediate depletion gained substantial negative media coverage. Therefore, these companies must seek counsel from accomplished federal attorneys that can help minimize the risk of or potential penalties.
As with all federal programs, the Paycheck Protection Program comes with various acts and omissions that have high potential to arise allegations of federal fraud. Intentional misrepresentations may lead to criminal fraud charges, while inadvertent mistakes that resulted in the improper collection of federal funds could result in charges also considering the nature of the PPP program.

PPP Loan Fraud Constituents

PPP loan fraud constitutes various acts, which include loan stacking, PPP loan application fraud, fraudulent loan certification, using PPP funds for ineligible business purposes, using PPP funds for fraudulent purposes, fraudulent loan forgiveness certification, and misrepresenting or concealing information during a PPP audit or investigation. Making misrepresentations and concealing pertinent information during a federal audit or investigation is also considered fraudulent.
Loan Stacking, which is identified as an applicant receiving PPP loans from multiple lenders, is considered a significant type of potential fraud by the OCC. PPP funds distribution can be traced and companies that received funds from more than one lender have chances of being early targets in the government’s efforts to prosecute PPP fraud. Some eligibility criteria, such as the company’s number of employees, were required to have 500 fewer employees to be eligible in most industries. Misclassifying employees as independent contractors to fall below the 500-employee threshold and misrepresenting that the company met the applicable Small Business Administration employee-based size standards for eligibility in their particular industries could lead to prosecution as well. Misrepresenting the company’s payroll costs to obtain a loan larger than the maximum loan amount of $10 million is also fraudulent.

PPP Prosecution

PPP loan forgiveness requires companies to provide documentation that they have continuously met the eligibility criteria and have used their PPP funds for authorized expenses. Additionally, they must certify that the documents are accurate and that they have used the forgiveness amount to keep employees and other eligible payments. Engaging experienced federal defense counsel should be the first step if a company is targeted in a PPP loan fraud audit or investigation because it is a serious matter that requires immediate attention, and experienced lawyers know how to fend off federal charges. There are numerous federal defense attorneys actively representing clients dealing with various issues linked to the COVID-19 pandemic. They can protect companies against allegations of PPP loan fraud with their experience.

Conclusion

The Paycheck Protection Program is an essential program that provides financial relief to businesses and individuals negatively affected by the pandemic. Various acts and omissions can lead to allegations of federal fraud, including fraudulent loan certification, fraudulent loan forgiveness certification, using PPP funds for ineligible business purposes, loan stacking, PPP loan application fraud, using PPP funds for fraudulent purposes, and misrepresenting or concealing information during a PPP audit or investigation. The risks of prosecution are high for companies that unlawfully received PPP funds. Therefore, companies must take necessary precautions to minimize these risks, including engaging experienced counsel right away.