NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 12th September 2023, 11:38 pm
Tennessee PPP – SBA – EIDL Loan Fraud Lawyers
The COVID-19 pandemic led to an unprecedented amount of federal relief funding being made available to small businesses and individuals, including through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program administered by the Small Business Administration (SBA). While this funding provided a lifeline for many businesses struggling with the economic impacts of the pandemic, the large amounts of money flowing rapidly through new programs also created opportunities for fraud.
In Tennessee, federal prosecutors have been aggressively pursuing cases against individuals who allegedly obtained PPP and EIDL loans illegally. Defendants have faced charges of wire fraud, bank fraud, making false statements, and aggravated identity theft. Penalties for conviction can include years in prison, restitution, and forfeiture of assets. The government has also pursued civil charges in some cases to recover funds obtained through alleged fraud.
Overview of PPP and EIDL Loan Programs
The Coronavirus Aid, Relief, and Economic Security (CARES) Act created the PPP to provide forgivable loans to small businesses to cover payroll, rent, utilities and other expenses during COVID-19 shutdowns and slowdowns. EIDL loans are meant to help businesses meet operating expenses during disasters. The programs were administered on a rushed basis and some controls were loosened to get money out quickly, which created opportunities for abuse.
To obtain a PPP loan, applicants had to certify that current economic conditions made the loan necessary, and that funds would be used to retain workers and maintain payroll. Forgiveness requirements could be met by spending at least 60% on payroll costs. EIDL loans required certifying that the applicant suffered substantial economic injury from COVID-19.
The government alleges many defendants made false statements about their business’ details, number of employees, and use of funds among other claims. Larger PPP loans were available to businesses with more employees and higher payroll costs, which provided incentive to inflate figures. Some defendants allegedly created fake businesses or stole identities to apply for loans.
Charges and Cases in Tennessee
Federal prosecutors in Tennessee have filed charges against individuals and groups accused of PPP and EIDL fraud, including:
- In October 2022, four people were sentenced for obtaining $335,000 in PPP loans using fake documents and business names. They pled guilty to wire fraud and money laundering conspiracy. One defendant also got a fraudulent $150,000 EIDL loan.
- In August 2021, a Knoxville woman pled guilty to wire fraud and identity theft for fake businesses that applied for $744,000 in PPP loans and sought a $150,000 EIDL loan. She falsified documents and used a stolen identity.
- In March 2021, two Memphis-area men were indicted for allegedly filing at least 90 fraudulent PPP and EIDL loan applications seeking $8.1 million. They were charged with wire/bank fraud conspiracy.
- In February 2021, charges were filed against a man who got a $2 million PPP loan claiming to have 250 employees, when he actually had none. He pled guilty to wire fraud.
These represent a sampling of cases pursued in Tennessee. Prosecutors have emphasized that PPP and EIDL fraud will be aggressively prosecuted. Penalties can be severe depending on the amounts involved.
Federal Laws Related to PPP and EIDL Loan Fraud
Prosecutors typically charge defendants accused of PPP or EIDL fraud under several federal criminal statutes, including:
- Wire fraud – using interstate wires or communications to execute a scheme to defraud or obtain money under false pretenses. Carries up to 20 years imprisonment.
- Bank fraud – scheme to defraud a bank or obtain bank funds through false statements. Up to 30 years imprisonment.
- Aggravated identity theft – using someone else’s personal identifying information during a crime. Adds mandatory 2 years imprisonment consecutive to other sentences.
- False statements – knowingly making false statements connected to SBA loan applications. Up to 5 years imprisonment.
Prosecutors can also pursue forfeiture and recovery of funds obtained through fraud using civil statutes like the False Claims Act. This allows the government to recover up to triple damages in some cases.
Defenses and Strategies Against PPP and EIDL Fraud Charges
Although charges like wire fraud and identity theft carry potentially severe penalties, experienced federal criminal defense attorneys can raise arguments to challenge the government’s case, including:
- You lacked intent to defraud and made an honest mistake on loan applications.
- You did not make any material false statements on the applications.
- The lender failed to follow program requirements and did not rely on your statements.
- You acted in good faith and any errors were minor and unintentional.
- The government is overreaching by charging you criminally for what should be a civil matter.
An attorney can also scrutinize the strength of the prosecution’s evidence and possibly move to have charges dismissed. For defendants who choose to plead guilty, counsel can advocate for lesser charges or more lenient sentencing.
Avoiding Allegations of PPP and EIDL Loan Fraud
The best way for borrowers to avoid allegations of PPP or EIDL fraud is to be truthful on applications and use funds only for allowed purposes. Consult an attorney if you have any concerns about your loan or how funds were used. Self-reporting any issues to the lender or SBA may mitigate penalties down the road.