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Ohio PPP and EIDL Loan Fraud Lawyers

By Spodek Law Group | March 18, 2023
(Last Updated On: March 18, 2023)

The CARES Act, a law that aims to provide relief to individuals and businesses severely affected by the COVID-19 pandemic, includes the Paycheck Protection Program (PPP), which aims to help small and medium-sized businesses facing financial difficulties. However, despite having nearly $350 billion in federal funding, the PPP was depleted in just a few minutes. As expected, due to the nature of the program and the staggering amount of funding, authorities will likely scrutinize the PPP loans that companies received. The United States Treasury Department’s Office of the Comptroller of the Currency (OCC) is seeking input from lenders to improve future programs and address concerns about the PPP’s vulnerability to fraud.

Various types of Paycheck Protection Program (PPP) Loan Fraud have been identified, including loan “stacking,” loan application fraud, fraudulent loan certification, using PPP funds for ineligible business purposes, using funds for fraudulent purposes, fraudulent loan forgiveness certification, and misrepresenting or concealing information during a PPP audit or investigation.

“Loan stacking” involves a company receiving PPP loans from multiple lenders. The OCC is focusing specifically on this type of loan fraud. Companies that engage in such fraudulent activities may become early targets of the government’s efforts to investigate PPP fraud as the government can track the distribution of funds.

PPP loan applicants must meet specific eligibility criteria, such as the number of employees, meeting Small Business Administration (SBA) employee-based size standards, and meeting payroll costs. Misrepresenting information on applications can lead to allegations of fraud and result in severe criminal charges.

PPP loan applicants must adhere to mandatory certifications, such as demonstrating that the loan is necessary to support ongoing operations, using funds to retain workers, and making mortgage, lease, and utility payments will be used for authorized expenses only, and all information provided is true and accurate. Any bad-faith certifications could result in charges of federal fraud.

Using funds received through the PPP for anything other than payroll costs, rent, interest on mortgage obligations, or utilities is unauthorized, and may result in allegations of fraud. Companies receiving PPP loans should maintain thorough documentation of the source of payment for all eligible and non-eligible expenses to demonstrate compliance in the event of a federal audit.

Although a personal guarantee requirement is not necessary under the PPP, if a company or individual uses proceeds for fraudulent purposes, the federal government will pursue criminal charges. The False Claims Act permits fines and imprisonment for up to five years, and individuals can face tens of thousands of dollars in fines for fraudulently obtaining funds from the PPP.

Companies eligible for loan forgiveness must provide documentation showing they continually met eligibility criteria and used funds for authorized expenses, along with a certification stating that the documents are accurate.

Companies facing audits or investigations must rely on experienced federal defense counsel to advise them on how to avoid disclosing pertinent information or withholding information required by law to disclose. False statements or the withholding of information during such investigations is considered fraud and may attract individual prosecution.

Companies and individuals facing allegations of PPP loan fraud must engage experienced federal defense counsel immediately. Experienced attorneys can use their knowledge to protect you and ensure that you get the best legal representation amidst the allegations of PPP loan fraud.

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