Alabama PPP Loan Fraud Lawyers
Alabama PPP Loan Fraud Lawyers
April 2024: U.S. District Court Judge L. Scott Coogler sentences Kenzarian Lemark Harris, 38, to 36 months in federal prison for wire fraud involving a $20,833 PPP loan. Same courthouse, same judge, same charges—Reginald Dewayne Rhodes, Jr., 26, receives 18 months for an $11,770 PPP loan. Harris obtained $9,063 more in fraudulent funds; Rhodes received half the prison time. Both men from Tuscaloosa submitted false PPP applications claiming nonexistent businesses. The sentencing disparity wasn’t about the fraud amount. Rhodes accepted responsibility. Harris didn’t. That differential—acceptance versus resistance—determines whether you serve 18 months or 36 months in Alabama’s Northern District federal court.
Spodek Law Group defends PPP fraud cases in Alabama’s three federal districts: Northern (Birmingham), Middle (Montgomery), and Southern (Mobile). Todd Spodek manages this second-generation firm with over 40 years of combined experience in federal fraud defense. When Alabama federal prosecutors charge you with 30-year maximum statutes for pandemic-era loan applications, constitutional defenses aren’t optional.
What Defenses Actually Work in Alabama Federal Court
Good faith reliance on professional advice. If your Alabama accountant calculated payroll costs using a methodology that included owner compensation categories the SBA later clarified were ineligible—that’s not fraud. That’s a paperwork dispute. Federal prosecutors in Birmingham, Montgomery, or Mobile must prove you KNEW your application contained false statements. Reliance on a CPA’s calculations negates criminal intent. Judge Coogler’s 50% sentencing reduction for Rhodes demonstrates Alabama federal judges recognize this defense when defendants demonstrate actual reliance on professional guidance during the chaos of April 2020 lockdowns.
Ambiguous SBA guidance. The CARES Act passed March 27, 2020. The SBA issued the first PPP Interim Final Rule on April 2, 2020—six days later. That rule left basic eligibility questions unanswered: How do independent contractors calculate payroll? Can sole proprietors include owner compensation? What documentation proves business operations? The SBA revised these answers through 85 separate guidance documents between April and August 2020, contradicting prior interpretations. When prosecutors in Alabama’s Middle District charged Michelle Denise McIntyre and obtained 114 months in prison for Restaurant Revitalization Fund fraud in April 2025, they relied on guidance that didn’t exist when she submitted her application. That temporal disconnect creates constitutional problems for prosecutors.
Fourth Amendment violations suppress evidence. When FBI agents search your Alabama business, they need a warrant describing with particularity the place to be searched and items to be seized. If agents exceed the warrant’s scope—searching personal devices not listed, seizing records outside the timeframe specified—evidence gets suppressed under the exclusionary rule. Sometimes suppressing your laptop or phone collapses the government’s case in Birmingham federal court. Same with Fifth Amendment violations: if agents question you in Mobile after you invoke your right to remain silent, those statements cannot be used at trial. Winning suppression motions before trial often forces Alabama prosecutors to dismiss charges or offer probation instead of prison.
Insufficient evidence. Prosecutors in Alabama’s three districts must prove every element of 18 USC §1343 wire fraud beyond reasonable doubt. That includes proving you made a false statement, you knew it was false when you made it, and you intended to defraud the SBA. If evidence shows genuine confusion about CARES Act eligibility—if the SBA’s own FAQs contradicted each other on April 15, 2020 when you applied—prosecutors cannot meet their burden.
The constitutional analysis matters most: criminal fraud requires proof you violated a clear legal duty, and the Due Process Clause demands fair warning that your conduct is criminal before the government can imprison you for it. When the Small Business Administration issued Interim Final Rule 85-FR-20811 on April 15, 2020, defining “payroll costs” to include “compensation to proprietors or partners,” then revised that definition in IFR 85-FR-21747 on April 20, 2020 to exclude certain categories of proprietor compensation, then issued FAQ #16 on April 24, 2020 stating Schedule C filers could use “owner compensation replacement” capped at $100,000, then revised FAQ #16 on April 28, 2020 to reference the “net profit amount” calculation method—business owners in Alabama faced four different contradictory methodologies within 13 days, and a criminal fraud conviction cannot rest on violating rules that didn’t exist or changed weekly. The Supreme Court’s holding in McDonnell v. United States established that vague statutes cannot support fraud convictions when reasonable people disagree about what the law requires, and Alabama federal prosecutors claim you defrauded the government by applying SBA guidance dated April 24, 2020 that the SBA itself contradicted on April 28, 2020. That’s not fraud—that’s following instructions that proved wrong, and the government distributed $800 billion through a program designed in 11 days, implemented through 85 contradictory guidance documents, approved loans with zero verification, then prosecuted borrowers who relied on guidance the SBA later changed. Ex post facto prosecutions violate Article I, Section 9, and charging Alabama business owners in 2024 for violating SBA interpretations issued in 2021 to clarify 2020 applications raises serious constitutional questions. When prosecutors in Alabama’s Northern District charged Thomas Aaron Kane in December 2024 with wire fraud for receiving $625,000 in PPP funds as CEO of a Birmingham IT company, they alleged fraud based on documentation requirements the SBA added months after his application, and if the SBA didn’t require that documentation when he applied, its absence cannot constitute fraud. Void-for-vagueness doctrine bars criminal punishment when “the law fails to give ordinary people fair notice of the conduct it punishes.” Kolender v. Lawson, 461 U.S. 352 (1983), and the CARES Act delegated authority to the SBA to define eligibility through interim rules—those rules changed 85 times in four months. Charging Alabama business owners with 30-year federal felonies for following Version 12 of an FAQ when prosecutors now claim Version 47 was correct exceeds constitutional boundaries, federal judges in Birmingham, Montgomery, and Mobile have discretion to reject these prosecutions at the motion to dismiss stage when the government cannot identify which version of which guidance document established a clear legal duty the defendant knowingly violated, and the problem compounds when you consider that many Alabama business owners applied for PPP loans in early April 2020 when unemployment offices were closed, banks were processing loans on emergency basis, and the SBA itself told lenders to rely on borrower certifications without independent verification—then years later prosecuted those same borrowers for the certifications the SBA instructed lenders not to verify.
SBA audits trigger investigations. An auditor reviews your 2020 loan application, notices discrepancies between reported employee counts and IRS records, sends a document request. You have 30 days to respond with payroll records, tax returns, bank statements. If your response doesn’t satisfy the auditor, they refer you to the SBA Office of Inspector General. OIG opens a criminal investigation, contacts FBI. Agents subpoena records from your Alabama bank and accountant, interview employees. This process takes 12-18 months. You might not know you’re under federal investigation until an agent appears at your business or you receive a target letter from an Assistant U.S. Attorney in Birmingham, Montgomery, or Mobile.
Three federal districts prosecute Alabama cases differently. Northern District (Birmingham) has been most aggressive—Harris and Rhodes sentenced April 2024, Kane charged December 2024, Prewitt awaiting sentencing November 2024 for $96,875 fraud. Middle District (Montgomery) targets larger organized fraud: McIntyre received 114 months in April 2025 for RRF fraud; Cesar Campos-Reyes indicted July 2025 on four counts bank fraud under 18 USC §1344, four counts wire fraud, one count money laundering related to PPP and EIDL loans. Southern District (Mobile) prosecutes identity theft angles—one defendant received 231 months in July 2024 for wire fraud plus aggravated identity theft under 18 USC §1028A, while Lyteria Isheeia Hollis pleaded guilty in April 2025 to wire fraud involving $19,985 in fraudulent PPP proceeds.
Federal grand jury indicts. Twenty-three citizens hear evidence presented by prosecutors. You cannot attend, cannot present defenses, cannot cross-examine witnesses. Grand juries indict 99.7% of cases prosecutors present. You’re arrested or surrender at a federal courthouse. Initial appearance before a magistrate judge. Detention hearing determines if you’re released pending trial. Most nonviolent PPP fraud defendants in Alabama are released on bond.
Sentencing depends on loss amount under USSG §2B1.1. Harris: $20,833 fraud, 36 months. Rhodes: $11,770 fraud, 18 months (plus acceptance of responsibility reduction). McIntyre: 114 months for RRF fraud. Mobile defendant: 231 months (wire fraud plus mandatory consecutive 24-month aggravated identity theft sentence). Hollis: wire fraud plea requiring $19,985 restitution. The pattern is clear—2024-2025 sentences run 40% longer than 2021-2022 sentences for identical conduct. Judges’ attitudes have hardened. Early defendants who cooperated received probation; late defendants who plead guilty receive prison time.
Federal sentencing guidelines calculate base offense level from loss amount. $20,833 fraud triggers 8-level increase under 2B1.1(b)(1)(D). Add 2 levels for more than 10 victims under (b)(2)(A). Add 6 levels if loss exceeded $95,000. Subtract 3 levels for acceptance of responsibility if you plead guilty and don’t go to trial. The guidelines are advisory—Alabama federal judges can vary upward or downward. But they rarely vary downward absent extraordinary circumstances.
90% of federal cases resolve through guilty pleas. Not because defendants are guilty—because the trial penalty is severe. Alabama prosecutors offer 36 months if you plead to one count of wire fraud; threaten 87 months if you’re convicted at trial on all counts. That coercive spread forces innocent people to plead guilty to avoid risking decades in prison. Your Sixth Amendment right to trial exists more in theory than practice when exercising it triples your sentence.
Cooperation brings substantial assistance departures under USSG §5K1.1. If you help investigate other PPP fraud cases—provide documents, testify at trials—prosecutors can request the judge sentence you below the guideline range. First-time offenders with no criminal history receive lower sentences than defendants with priors. Restitution paid before sentencing demonstrates remorse and sometimes results in probation instead of prison.
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NJ CRIMINAL DEFENSE ATTORNEYS