How to Fight Allegations of PPP Loan Stacking
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How to Fight Allegations of PPP Loan Stacking
The Paycheck Protection Program (PPP) was launched in 2020 to provide emergency loans to small businesses impacted by the COVID-19 pandemic. To qualify for loan forgiveness, businesses had to use the funds on approved expenses like payroll and rent. While the PPP provided a lifeline for many companies, some business owners are now facing allegations of “loan stacking” – obtaining multiple PPP loans from different lenders.
What is PPP Loan Stacking?
The rules of the PPP allowed each business to obtain only one PPP loan. Loan stacking refers to business owners applying for and receiving multiple PPP loans for the same business from different lenders. This is illegal and can lead to criminal charges for fraud.
Some common schemes include:
- Creating fake businesses and applying for separate PPP loans for each
- Exaggerating the number of employees and payroll expenses to qualify for larger loans from multiple lenders
- Using stolen identities to obtain loans for fictitious businesses
Penalties for PPP Loan Fraud
The penalties for PPP loan stacking can be severe. If convicted, you may face:
- Up to 30 years in federal prison
- Fines up to $1 million
- Restitution (repaying all misused funds plus interest and fees)
- Asset forfeiture (losing property connected to the criminal charges)
Responding to Allegations of Loan Stacking
If you receive notice that you are under investigation for PPP loan stacking or fraud, remain calm. Here are some important steps to take:
- Consult an attorney – An experienced federal defense lawyer can advise you of your rights and build the strongest defense.
- Do not speak to investigators without your attorney present. Anything you say can be used against you.
- Gather documentation related to your PPP loan applications and usage of funds. Your attorney can review for compliance issues.
- Consider an internal investigation – Your attorney can conduct a privileged investigation to identify any problems and build your defense strategy.
Defenses Against PPP Loan Fraud
In building a defense, your attorney will aim to show either (1) you did not actually commit fraud, or (2) the government cannot prove intent or material false statements. Some common defense arguments include:
- You made a mistake but had no intent to defraud
- You used the funds properly for business expenses
- You fully disclosed information to the lender
- The lender is responsible for approving the loan despite issues
- You were the victim of identity theft
- The government obtained evidence against you unlawfully
An experienced federal criminal defense attorney can assess the strength of these and other possible defenses based on the facts of your case.
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Avoiding Allegations from the Start
To avoid facing allegations of PPP loan fraud in the first place, it is critical that business owners are transparent in their applications and meticulous in documenting the use of received funds. Steps to take include:
- Carefully review eligibility criteria before applying
- Disclose all relevant information in your application
- Only apply with one lender
- Maintain detailed records tracking your use of funds
- Be transparent in the loan forgiveness process
Ensuring full regulatory compliance from the start is the best way to avoid allegations. If you do receive notice of an investigation, immediately consult an attorney experienced in PPP fraud defense. An effective legal strategy combined with strong defense arguments can help achieve the most favorable outcome possible.
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