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New Jersey PPP – SBA – EIDL Loan Fraud Lawyers

March 21, 2024 Uncategorized

New Jersey PPP and EIDL Loan Fraud

What are the PPP and EIDL loan programs?

The COVID-19 pandemic hit small businesses hard. To help them survive, the government created two emergency loan programs – the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.

The PPP gave out low-interest loans that small businesses could use for payroll, rent, utilities, etc. These loans could be forgiven if the business used most of the money for payroll.

The EIDL program also offered low-interest loans to cover losses caused by the pandemic. These came with an emergency grant up to $10,000.

To get these loans, businesses had to certify that all their application information was accurate.

PPP and EIDL fraud in New Jersey

While the programs helped many legitimate businesses, some people took advantage. New Jersey has seen lots of PPP and EIDL scams, with owners and employees charged with defrauding the Small Business Administration (SBA).

Some common fraud schemes include:
Fake payroll numbers – Making up employees to get bigger PPP loans
Loan stacking – Getting multiple PPP loans for the same expenses
Fake businesses – Creating pretend companies to get loans
False statements – Lying on applications about your business and finances
Fake documents – Creating phony tax and payroll records
Misusing funds – Spending loan money on personal purchases instead of business expenses
Identity theft – Applying for loans using someone else’s information

Recent New Jersey cases

Here are a few recent PPP and EIDL fraud cases prosecuted in New Jersey:
In July 2022, Sheridan Wahl pleaded guilty to getting over $1 million in fraudulent loans. She lied about her payroll and employees and used the money for personal investments.

In July 2022, five people were charged with getting $2.7 million in fake PPP and EIDL loans. They allegedly faked documents and bought luxury items.

In June 2022, Reddy Annappareddy pleaded guilty to fraudulently getting $900,000 in PPP loans. He lied about his employees and used the money for stocks and crypto.

The penalties can be severe – years in prison and massive fines. But experienced attorneys may be able to fight the charges.

New Jersey PPP and EIDL Loan Fraud: Common Schemes and Recent Cases

Overview of the PPP and EIDL Programs

The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program were created to provide emergency loans and grants to small businesses impacted by COVID-19. While these programs offered a lifeline to many legitimate businesses, they also became targets for significant fraud.

Common Fraud Schemes

Some of the most common PPP and EIDL fraud schemes include:

  • Falsifying payroll expenses and number of employees to obtain larger PPP loans
  • Receiving multiple PPP loans for the same business expenses through different lenders (“loan stacking”)
  • Making false statements on applications about business operations and finances
  • Creating fake businesses to apply for loans under pretend company names
  • Using stolen personal information and identities to file fraudulent applications
  • Forging documents like tax returns and bank statements to support fraudulent information
  • Spending loan funds on unauthorized personal purchases instead of approved business expenses

Recent New Jersey Cases

Federal prosecutors in New Jersey have charged numerous individuals for PPP and EIDL fraud, including:

  • In July 2022, Sheridan Wahl pleaded guilty to obtaining over $1 million in fraudulent loans, which she used for personal investments[1].
  • In July 2022, five people were charged with getting $2.7 million in fake PPP and EIDL loans to buy luxury items[2].
  • In June 2022, Reddy Annappareddy pleaded guilty to fraudulently obtaining $900,000 in PPP loans to invest in stocks and crypto[3].
  • In April 2022, Andrew McQuade was charged with creating shell companies to get $2.6 million in fake loans[4].

Those convicted face potentially lengthy prison sentences and massive fines. However, experienced criminal defense lawyers may be able to fight the charges or negotiate reduced penalties[5].

New Jersey PPP Loan Fraud Lawyers

Paycheck Protection Program (PPP) loan fraud has become a major issue in New Jersey and across the country. As a lawyer practicing in New Jersey, I’ve seen many cases come across my desk involving clients accused of PPP loan fraud. The government is cracking down hard on this type of fraud, so anyone charged needs experienced legal representation. I’d like to provide an overview of PPP loan fraud issues and defenses specific to New Jersey.

PPP Loan Program Overview

First, a quick refresher on what the PPP loan program is. The PPP was part of the CARES Act passed by Congress in March 2020 in response to the COVID-19 pandemic. It was designed to help small businesses keep employees on payroll and cover other expenses during pandemic shutdowns and slowdowns. Eligible small businesses could receive low-interest, potentially forgivable loans to cover payroll, rent, utilities and other costs.

To get a PPP loan, businesses had to submit an application to an approved lender, typically a bank or credit union. The application required detailed information on payroll, number of employees, taxes and other business finances. Loans were approved very quickly, sometimes within days, as the goal was to get money to struggling businesses as fast as possible.

Where Fraud Comes In

With the rush to approve PPP loans, lenders didn’t have much time to verify the information on applications. Unscrupulous borrowers saw this as an opportunity to get “free money” from the government by exaggerating or falsifying information about their business’s finances and operations. Some common PPP loan fraud tactics include:

  • Claiming more employees than the business really has
  • Inflating payroll numbers
  • Lying about taxes paid
  • Creating fake companies to apply for multiple loans
  • Using PPP money for personal purchases instead of approved business expenses

Some estimates say over $100 billion may have been fraudulently obtained through PPP loans. It’s a huge problem that has attracted scrutiny from the Department of Justice, FBI, IRS and other enforcement agencies.

PPP Loan Fraud Charges in New Jersey

Federal prosecutors in New Jersey have been very active in pursuing PPP loan fraud cases. Charges are often brought under the federal bank fraud statute, 18 U.S.C. § 1344, which carries a maximum penalty of 30 years in prison and a $1 million fine. Defendants may also face money laundering and/or wire fraud charges. Here are a few recent notable PPP fraud prosecutions in New Jersey:

  • In September 2020, a New Jersey attorney was charged with bank fraud for allegedly getting $9 million in PPP loans using fake documents and false information.
  • In March 2021, two New Jersey men were charged with conspiring to get over $17 million in fraudulent PPP loans and using the money to buy luxury cars and other personal items.
  • In July 2022, five people from multiple states were charged in New Jersey in a scheme to fraudulently obtain $2.2 million in PPP and Economic Injury Disaster loans.

These cases highlight how seriously PPP loan fraud is taken by federal law enforcement in New Jersey. Penalties can be severe even for first-time offenders.

Defending Against PPP Loan Fraud Charges

Fighting PPP loan fraud charges requires an experienced federal criminal defense lawyer. Here are some potential defenses we may use:

  • No intent to defraud: For bank fraud, prosecutors must prove you knowingly intended to defraud the bank. If errors or omissions were unintentional, that could refute intent.
  • Loan forgiveness rules unclear: PPP loan forgiveness rules were complex and changed frequently. We can argue you made a good faith effort to comply.
  • Documents prepared by others: If accountants, bookkeepers or employees prepared the loan application, you may not have known it contained false information.
  • Business practices justified expenses: We can make the case that questioned expenses were reasonable for your type of business.

An experienced lawyer can analyze the facts of your case to determine the best argument to pursue. We will thoroughly investigate the charges and build the strongest defense possible.

Avoiding Criminal Charges

If you suspect potential issues or errors with a PPP loan application, taking prompt action can help avoid criminal prosecution. Consulting with legal counsel to assess the situation is highly recommended. We may be able to negotiate return of the loan funds or work out an agreement with the lender or SBA before authorities get involved. Don’t wait until charges have been filed to seek advice.

Work with Trusted New Jersey PPP Fraud Lawyers

PPP loan fraud charges can have devastating consequences for your finances, career and reputation. But an experienced lawyer can protect your rights and future. I have successfully defended numerous complex white collar criminal cases in New Jersey. Contact me for a free consultation if you are being investigated for or charged with PPP loan fraud.

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