Chicago PPP – SBA – EIDL Loan Fraud Lawyers

Chicago PPP – SBA – EIDL Loan Fraud Lawyers

The COVID-19 pandemic led to unprecedented government assistance for small businesses in order to keep them afloat during widespread shutdowns and reduced economic activity. One of the main programs was the Paycheck Protection Program (PPP), which issued forgivable loans to cover payroll and other expenses. Another was the Economic Injury Disaster Loan (EIDL) program run by the Small Business Administration (SBA), providing low-interest loans and grants.

While these programs threw a lifeline to many legitimate small businesses, the speed at which they were rolled out combined with loose oversight also created opportunities for fraud. There have been many high-profile cases of business owners fabricating information to obtain larger PPP and EIDL loans than they were entitled to, and then using the money for prohibited purposes like personal expenses.

PPP and EIDL Fraud Charges

Both federal and state prosecutors have cracked down hard on COVID relief fraud through criminal charges. The main charges used are wire fraud, bank fraud, money laundering, and making false statements. Defendants face decades in prison if convicted.

For example, in August 2022 three Chicago residents were charged with wire and bank fraud for obtaining $256,500 in fraudulent EIDL loans [2]. Another Illinois man was charged in June 2020 with bank fraud, making false statements, and money laundering for fabricating documents to get $500,000 in PPP loans [3].

The federal wire fraud statute, 18 U.S.C. § 1343, applies when defendants use interstate wires like email or bank transfers to execute their schemes. The maximum sentence is 20 years. Bank fraud under 18 U.S.C. § 1344 carries up to 30 years imprisonment. Money laundering can lead to 10-20 years imprisonment and heavy fines. Making false statements under 18 U.S.C. § 1001 is punishable by up to 5 years.

In addition to federal charges, Illinois has its own state laws prohibiting public aid fraud, forgery, identity theft, theft by deception, and other charges that could apply to PPP or EIDL scams. Defendants can face multiple state felony charges carrying 3-7 years in prison [6].

Defenses Against PPP and EIDL Fraud Charges

Despite the severe potential penalties, experienced criminal defense attorneys can raise several defenses to COVID relief fraud accusations:

• No intent to defraud – The government must prove intent beyond a reasonable doubt. If errors or misunderstandings led to incorrect information, that negates intent.
• Compliance with lender guidance – Vague PPP rules left room for good faith differences in interpretation.
• Lack of materiality – Minor errors that do not substantially impact the loan amount may not rise to the level of criminal fraud.
• Duress – Defendants may have faced economic duress or coercion leading them to bend rules.

In cases charged under federal program fraud statutes, defendants can argue they did not knowingly make false statements. Negligent or inadvertent mistakes generally do not meet the legal standard. For money laundering charges, the defense can claim the funds were not derived from “specified unlawful activity.” With wire and bank fraud, lawyers may assert the interstate nexus wasn’t satisfied for federal jurisdiction.

Chicago PPP Loan Fraud

The Paycheck Protection Program (PPP) offered crucial financial relief to small businesses during COVID-19 shutdowns. But this rapid injection of billions in forgivable loans also created opportunities for fraud. Prosecutors in Chicago and elsewhere have aggressively targeted PPP scams with serious criminal charges.

Business owners face decades in prison if convicted of federal crimes like wire fraud, bank fraud, making false statements, and money laundering. The government only needs to prove intent to defraud, even if the loan funds were actually used to cover payroll and expenses.

Defendants have defenses arguing they lacked criminal intent, reasonably relied on lender guidance, or made only minor errors. But skilled criminal defense lawyers are essential to negotiate with prosecutors and fight these complex fraud accusations.

Federal Charges for PPP Loan Fraud

The main federal charges used against PPP fraudsters in Chicago are wire fraud, bank fraud, making false statements, and money laundering. These carry severe penalties, especially for larger loan amounts.

Wire fraud under 18 U.S.C. § 1343 is one of the most common charges. It applies when defendants use any interstate wires like email, bank transfers, or online applications to carry out the fraud scheme. Each communication can be a separate count. Wire fraud carries up to 20 years imprisonment.

Bank fraud under 18 U.S.C. § 1344 can lead to 30 years imprisonment. This charge relates to schemes to defraud or obtain money from banks and financial institutions. Many PPP lenders were traditional banks and credit unions.

Making false statements under 18 U.S.C. § 1001 comes into play if defendants provide fabricated documents or information. It is punishable by up to 5 years imprisonment. Money laundering charges can also apply if loan funds were used for prohibited purposes.

An Illinois man was indicted in June 2020 on federal bank fraud, false statements, and money laundering charges. He allegedly submitted fake payroll expenses and tax documents to obtain over $500,000 in PPP loans. He faces decades in prison if convicted [3].

Illinois State Charges for PPP Fraud

In addition to federal prosecution, PPP fraudsters in Chicago often face state charges under Illinois criminal statutes. These can include felony theft, forgery, identity theft, public aid fraud, and other financial crimes.

Theft by deception under 720 ILCS 5/16-1 can apply if defendants obtain loans through deception and then use funds for prohibited expenses. This is a Class 3 felony punishable by 2-5 years imprisonment.

Forgery charges under 720 ILCS 5/17-3 relate to fabricating or altering documents to obtain funds. Identity theft under 720 ILCS 5/16-30 comes into play if personal information was misused. These are Class 3 and Class 2 felonies respectively.

Public aid fraud under 305 ILCS 5/8A is a common charge for abusing government program funds. It can be either a Class 4 felony or a Class A misdemeanor depending on the amount.

Prosecutors often stack multiple state charges related to a single PPP loan fraud scheme. These can add up to decades behind bars, huge fines, and restitution.