The Paycheck Protection Program (PPP) was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which aimed to help individuals and companies facing financial difficulties due to the COVID-19 pandemic. Since its implementation, the PPP has faced numerous challenges, including fraud concerns that arose due to the program’s rapid distribution of federal funds. The U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC) has been seeking input from lenders about how they can improve future programs and address issues that have arisen out of the PPP system. In this article, we will discuss various forms of fraud related to the PPP, as well as what companies must do to prove they are in compliance with the program’s requirements.

Possible Allegations of Fraud in Relation to the PPP

There are several possible allegations of fraud associated with the PPP. One specific type of potential fraud identified by the OCC is “loan stacking” or receiving PPP loans from multiple lenders. The federal government can monitor the distribution of funds from the PPP. Therefore, the risk for companies that received funds from more than one lender facing lawsuits is high. Moreover, companies must comply with multiple criteria to be eligible for PPP funds. Misrepresenting information on loan applications could lead to accusations of fraud. This includes misrepresenting the company’s number of employees, misclassifying employees as independent contractors, and misrepresenting the company’s payroll costs. PPP loan applicants were also required to make various certifications, and bad-faith certifications can lead to fraud allegations. Companies are restricted to using PPP funds for four specific purposes to cover payroll costs, pay interest on mortgage obligations, pay rent, and pay for utilities. Using PPP funds for any other purpose could result in fraud allegations. Companies must keep records of eligible and non-eligible expenses to demonstrate compliance during a federal audit or investigation. Personal involvement in fraudulent activity can also result in criminal charges under the False Claims Act.

What Should Companies Do if They are Targeted for SBA PPP Loan Fraud?

Companies must engage experienced federal defense attorneys immediately if they are targeted for SBA PPP loan fraud audit or investigation. The charges associated with PPP loan fraud cases can be severe, resulting in tens of thousands of dollars in fines and up to five years of federal imprisonment. The involvement of experienced attorneys can protect a company’s rights, build a robust defense, and mitigate the risk of prosecution. At Oberheiden PC, we have experienced federal defense attorneys who actively represent clients in various issues related to the COVID-19 pandemic. If your company is facing accusations of PPP loan fraud, we can help you protect your rights and build a robust defense.

Table 1: Possible Allegations of Fraud in Relation to the PPP

| Type of Fraud | Explanation |
| — | — |
| Loan “Stacking” | Applicants receiving PPP loans from multiple lenders. |
| PPP Loan Application Fraud | Companies misrepresenting information on their loan applications in order to fraudulently claim eligibility for PPP funds. |
| Fraudulent Loan Certification | Providing false information in connection with certification to obtain PPP funds. |
| Using PPP Funds for Ineligible Business Purposes | Companies using PPP funds for purposes other than paying specific expenses. |
| Using PPP Funds for Fraudulent Purposes | Companies using PPP funds in fraudulent activities. |
| Fraudulent Loan Forgiveness Certification | Falsely claiming eligibility for loan forgiveness under the PPP. |
| Misrepresenting or Concealing Information During a PPP Audit or Investigation | Companies withholding information or making false statements during a PPP audit or investigation. |

Conclusion

The PPP loan fraud allegations leveled against companies that applied for and received funds are severe, and the federal government is expected to prosecute companies that unlawfully accessed PPP funds. A company accused of PPP loan fraud can risk substantial penalties, including fines and jail time. Therefore, it’s essential to engage experienced federal defense attorneys immediately, as they can help companies mitigate their risk of facing significant consequences. At Oberheiden PC, our federal defense attorneys are seasoned in matters related to COVID-19 pandemic concerns, including PPP loan fraud charges. We can assist companies in protecting their rights, building robust defense, and mitigating the risk of criminal prosecution.