The Paycheck Protection Program (PPP) was one of the central provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which aimed to provide relief to people and businesses adversely affected by the COVID-19 pandemic. With nearly $350 billion allocated to the PPP, it was intended to offer much-needed financial assistance to small and medium-sized businesses impacted by the pandemic’s economic effects.

Unfortunately, even with such a large amount of funding, the PPP quickly ran out of money, with lenders inundated with applications in a mere matter of minutes. This has led to concerns about fraud, which is not uncommon in all government programs that provide financial relief to businesses or consumers.

What Are the Fraud Concerns Related to PPP, and What is Being Done to Address Them?

As with any federal program, there are various types of acts and omissions that have the potential to lead to fraudulent allegations involving the PPP loan program. This includes not only intentional misrepresentations, but also inadvertent errors that result in the improper receipt of federal funds.

Moreover, the U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC) is currently soliciting input from lenders on how to improve future programs and address the issues that have arisen from the PPP’s severe deficiencies. The OCC’s goal was to prevent fraud and identify other lessons learned while seeking lender feedback about the potential for fraud, given the chaotic nature of the PPP loan rollout. Federal agencies are also looking back to determine which companies illegally received funds from the PPP.

There are various other fraud concerns related to the PPP program as well, and companies that received loans from the program might face heavy scrutiny from federal authorities. As the multi-hundred-billion-dollar allocation from the PPP was quickly depleted, the agencies are likely to focus on fraud identification.

What is PPP Loan Fraud, and What Are the Allegations?

The PPP loan fraud involves the frauds committed in relation to the PPP program. The following are some of the possible allegations of fraud related to the PPP loan program:

1. Loan “Stacking”
“Loan stacking” refers to an applicant receiving PPP loans from multiple lenders. The federal government has the ability to track the distribution of all funds from the Paycheck Protection Program, and companies that received funds from more than one lender may become early targets in the government’s efforts to prosecute PPP fraud.

2. PPP Loan Application Fraud
Companies that misrepresented information on their loan applications in order to fraudulently claim eligibility may face prosecution as well. This includes misrepresenting the company’s number of employees, misclassifying employees as independent contractors, misrepresenting small business size standards, and misrepresenting the company’s payroll costs.

3. Fraudulent Loan Certification
PPP loan applicants were required to certify to various facts, including the loan necessity to support ongoing operations, use of the funds to retain workers and maintain payroll or make eligible payments, non-receipt of other PPP loans, and the provision of true and accurate information.

4. Use of PPP Funds for Ineligible Business Purposes
PPP funds can only be used for four specific purposes: payroll costs, mortgage obligations interest payments, rent, and utilities. Using the funds for any other purpose may lead to allegations of fraud.

5. Use of PPP Funds for Fraudulent Purposes
Individuals who are involved in fraudulent activities may face tens of thousands of dollars in fines and up to five years of imprisonment. Even companies may face hundreds or millions of dollars in criminal fines and decades behind bars.

6. Fraudulent Loan Forgiveness Certification
Companies must provide documentation that they have continually met eligibility criteria and used the PPP funds for authorized expenses. Failure to comply with instructions would lead to allegations of fraud.

7. Misrepresenting or Concealing Information During a PPP Audit or Investigation
Deliberately withholding information required for federal authorities to report is an offense in itself, punishable by law.

What Should You Do if You or Your Company is Accused of SBA PPP Loan Fraud?

If you or your company is under audit or investigation for PPP loan fraud, it is crucial to engage experienced federal defense counsel immediately. The consequences of these accusations can be severe and need to protect yourself from the potentially substantial penalties associated with this crime. Contact the law office of Spodek Law Group to fight allegations of PPP loan fraud. Our federal defense attorneys with many years of experience represent clients in a broad range of issues related to the novel coronavirus (COVID-19) pandemic.