NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 13th September 2023, 12:00 am
Navigating PPP and EIDL Fraud Allegations in Seattle
The COVID-19 pandemic led to an unprecedented level of government assistance for small businesses in the form of Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) funds from the Small Business Administration (SBA). While these programs provided a lifeline for many businesses impacted by the economic fallout of the pandemic, they also opened the door for potential fraud and abuse. Allegations of PPP and EIDL fraud have been on the rise in Seattle and across the country.
Understanding PPP and EIDL Loan Fraud
PPP loans were intended to help businesses retain employees and cover certain expenses during COVID-19 shutdowns and slowdowns. These loans can be forgiven if the funds are used for eligible costs like payroll, rent, utilities, etc. EIDL loans and grants provided working capital funds to businesses impacted by the pandemic.The expedited loan process and lack of oversight around these programs created opportunities for fraud in applications and use of funds. Some common fraudulent activities include:
- Providing false information on loan applications such as number of employees, payroll expenses, cost of goods sold, etc.
- Claiming payroll for fake employees or overstating payroll costs
- Using PPP funds for personal expenses instead of eligible business costs
- Applying for multiple PPP loans through different lenders (“loan stacking”)
- Making false statements to have loans forgiven
- Reselling PPP loan funds received
- Using stolen identities to apply for fraudulent loans
The Justice Department has ramped up prosecutions related to COVID relief fraud, charging hundreds of individuals with PPP and EIDL fraud since 2020. Penalties can include fines up to $1 million and imprisonment up to 30 years for major fraud cases. Even mistakes on applications can be considered fraud if false information is knowingly provided.
Responding to SBA Audits or Investigations
Many cases begin with an SBA audit of a PPP or EIDL loan application or forgiveness request. Red flags like inconsistent numbers, questionable supporting documents, and unusual spending patterns may trigger an investigation.If contacted by SBA auditors or investigators, business owners should consult with a lawyer immediately. An experienced attorney can help craft responses to information requests, assert rights and protections, and avoid self-incrimination.
Fighting PPP or EIDL Fraud Charges
If formally accused of COVID relief fraud, having skilled legal counsel is essential. An attorney experienced in federal fraud cases can identify weaknesses in the prosecution’s arguments and build an aggressive defense. Some potential defenses include:
- Lack of intent – The prosecution must prove you knowingly provided false information with intent to defraud. Mistakes or misunderstandings may rebut intent.
- No loss to the government – If PPP funds were used properly or repaid, there may have been no loss or minimal loss to the government.
- Duress – External pressures like avoiding bankruptcy or laying off staff may have influenced bad choices.
- Entrapment – Aggressive sales tactics by lenders could be raised as a defense in some cases.
In addition to substantive defenses, an attorney will challenge procedural missteps, flaws in evidence collection, violations of rights, and any bias by investigators. Thorough pre-trial investigation and motions can uncover important facts and issues to defeat the charges.If charges are filed in multiple jurisdictions, a lawyer can seek to consolidate the cases to streamline the defense.
Avoiding Criminal Convictions and Jail Time
For those facing PPP or EIDL fraud convictions, keeping the consequences to a minimum is critical. An experienced federal criminal defense lawyer can advocate for:
- Diversion programs or deferred prosecution agreements to avoid a criminal record
- Plea bargains to lesser charges to reduce penalties
- Minimal fines, restitution, and supervised release rather than prison time
- Retaining eligibility for future SBA loans
In some cases, civil settlement agreements with the Department of Justice may preclude criminal prosecution. Skilled negotiators can also petition for a suspension or debarment from federal loan programs rather than outright exclusion. This preserves options for the future.
Avoiding Collateral Consequences
Beyond direct penalties, PPP or EIDL fraud convictions can have significant collateral impacts on finances, career, and reputation. An attorney may be able to help minimize consequences such as:
- Loss of professional licenses and debarment from state and local contracts
- Difficulties obtaining business financing in the future
- Exclusion from industry groups and associations
- Reputational damage and loss of customers
- Restricted international travel due to criminal record
In some cases, expungement of criminal records may be possible after a period of time to remove obstacles resulting from a conviction. Lawyers can also advise on rebuilding credit, improving search engine results, and reputation repair strategies.
A Team Approach to Your Defense
Facing PPP or EIDL fraud charges can be overwhelming. The most prudent step is engaging an experienced federal criminal defense attorney who can objectively assess your situation, advise on risks, and build the strongest case possible. A skilled lawyer will also coordinate with financial experts, accountants, technical consultants, and other professionals to cover all bases.A team approach combining legal advocacy and financial strategizing offers the best chance of success. With an effective defense, it may be possible to avoid criminal prosecution, minimize penalties, and move forward.