06 Aug 23

PPP Loan Fraud and the DOJ

| by

Last Updated on: 6th August 2023, 07:25 pm

What You Need to Know About PPP Loan Fraud

In response to the COVID-19 outbreak, the Paycheck Protection Program was created to provide much-needed economic relief to businesses that were struggling to survive. Altogether, hundreds of millions of dollars were doled out, and some of these funds landed in bank accounts of ineligible recipients. More than that, many eligible recipients have used the PPP loan proceeds for ineligible purposes, such as to pay for personal expenses.

The Department of Justice, or DOJ, is now actively investigating many people and businesses that are suspected of committing PPP loan fraud. Those who are identified may be charged with a variety of crimes depending on the circumstances.

Aggressive Investigations and Prosecution Are Underway

Loan fraud has cost taxpayers a tremendous amount of money, and the matter has been widely publicized. For these reasons, the DOJ is actively investigating both individuals and businesses that may have committed fraud through loan applications, the use of funds and loan forgiveness certifications.

Many Charges Have Already Been Filed

The DOJ has already reached a critical point in many investigations, and it has filed charges against individuals and businesses in Texas, Rhode Island, Georgia and California so far. Additional investigations are in progress or will begin soon. To date, those who have been charged with crimes related to PPP loan fraud have allegedly falsified payroll data, created shell companies, applied for multiple PPP loans, used funds to pay for personal expenses and more.

PPP Loan Fraud Investigations May Lead to Other Charges

In many cases, a PPP loan fraud investigation has revealed evidence of other criminal activity. With this in mind, those who are charged with PPP loan fraud may also face other criminal charges. The PPP loan fraud cases that have resulted in charges to date have also been tied to charges for the following crimes:

  • Wire Fraud
  • Tax Evasion
  • Aggravated Identity Theft
  • Making False Statements to the Small Business Administration
  • Making False Statements to Federal Agents
  • Making False Statements to an FDIC-Insured Bank
  • Attempt and Conspiracy
  • False Claims Act Violations
  • Bank Fraud

Each of these charges can result in a penalty of imprisonment and a monetary fine. A single conviction of some of these crimes may result in up to 30 years in prison and up to a $1 million fine. Obtaining representation from a legal team that has experience with white-collar fraud cases is crucial if you are being investigated for PPP loan fraud or if charges have already been filed against you.

The DOJ is Collaborating with Other Law Enforcement Agencies

In order to build a complete and strong case against accused parties, the DOJ is actively collaborating with numerous other law enforcement agencies. To date, the entities that it has collaborated with include the Internal Revenue Service Criminal Investigations unit, the Federal Bureau of Investigations, the FDIC Office of Inspector General and the SBA Office of Inspector General. Collaboration has facilitated the identification of PPP fraud as well as investigations and pursuit of charges.

Numerous Defense Strategies May Be Used

While PPP loan fraud charges and other related criminal charges may seem insurmountable, rest assured that your criminal defense attorney may utilize any number of effective defense strategies. Depending on the circumstances, defenses may be used to reduce or nullify charges. Possible defense strategies that could be used in a PPP loan fraud case include:

PPP Compliance

Proof of compliance with PPP loan terms may be easy to document if the application was lawful and if the use of funds was documented through a segregated loan account. Keep in mind, however, that some documentation may actually be used to further incriminate the defendant. With this in mind, it is important to work with an experienced attorney even if you believe that you have not done anything wrong.

Lack of Intent

At the federal level, the prosecution must prove that there was a criminal intent to defraud the government. Even if a lack of intent can be proven at a federal level, the accused could face civil violations. Such charges may result in large fines and carry other ramifications.

Constitutional Rights Violation

The DOJ and all collaborating law enforcement agencies must not work in a manner that violates your constitutional rights. For example, it must have probable cause and cannot violate the unreasonable search and seizure clause. An experienced lawyer is skilled at identifying and leveraging such violations in a defendant’s best interests.

Lack of Evidence

When some evidence that the DOJ has collected has been thrown out as being inadmissible or when some evidence is missing altogether, lack of evidence could be a sound defense strategy. It can be used in the trial as well as during grand jury and pre-trial proceedings.

Request a Legal Consultation

Are you facing PPP loan fraud charges, or are you the focus of an active investigation? Contact our law firm today to obtain the legal representation that the matter calls for.