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Washington PPP – SBA – EIDL Loan Fraud Lawyers

March 21, 2024 Uncategorized

Washington PPP – SBA – EIDL Loan Fraud Lawyers

The COVID-19 pandemic led to an unprecedented level of government assistance for small businesses in order to keep them afloat during widespread shutdowns and economic turmoil. However, the speed at which these aid programs were rolled out, combined with reduced oversight, also opened the door for significant fraud and abuse. This article will examine legal issues around Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) fraud in Washington state, including applicable laws, potential defenses, and implications for those accused of defrauding these Small Business Administration loan programs.

Overview of PPP and EIDL Programs

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020, authorized over $650 billion in forgivable PPP loans intended to cover payroll and other business expenses during COVID-19 shutdowns. An additional $20 billion was approved for EIDL loans and grants to provide working capital for small businesses suffering substantial economic injury due to the pandemic.

While these programs threw a critical lifeline to millions of firms, the speed of disbursement meant reduced vetting of applications and eligibility. The SBA Office of Inspector General estimates over $200 billion in potentially fraudulent EIDL and PPP loans were distributed, out of $1.2 trillion total disbursed.

Applicable Federal Laws on Loan Fraud

Several federal statutes are commonly used to prosecute fraud related to the PPP, EIDL, and other SBA loan programs:

  • Wire fraud – using interstate wires to execute a scheme to defraud or obtain money under false pretenses (18 U.S.C. § 1343)
  • Bank fraud – scheme to defraud a bank or obtain bank funds via false statements (18 U.S.C. § 1344)
  • False statements – falsifying or concealing material facts in a matter within federal agency jurisdiction (18 U.S.C. § 1001)
  • Aggravated identity theft – using another person’s means of identification during certain felony violations (18 U.S.C. § 1028A)

Defendants face up to 30 years in prison for wire and bank fraud, and mandatory consecutive 2-year terms for aggravated ID theft. Other charges like money laundering (18 U.S.C. § 1956) may apply as well.

Common Types of PPP and EIDL Fraud

Some of the most common fraudulent activities reported in PPP and EIDL cases include:

  • Falsified loan applications – overstating number of employees, payroll expenses, cost of goods sold, or other figures to maximize loan amount.
  • Fake supporting documents – fabricating tax forms, bank statements, payroll records to back up application lies.
  • Identity theft – using stolen personal information to apply for loans under someone else’s name.
  • Loan stacking – obtaining multiple loans for the same business from different lenders.
  • Unqualified recipients – government/publicly traded companies, multi-level marketing firms, and other ineligible recipients.
  • Misuse of funds – using loans for personal purchases, debt payments, real estate, and other unauthorized uses.

The alleged fraud amounts in individual cases prosecuted by the Department of Justice range from several hundred thousand dollars to over $35 million.

PPP and EIDL Fraud Defenses

Despite the scope for abuse, these emergency programs still helped millions of small businesses survive the pandemic. For those accused of COVID-19 loan fraud, potential defenses include:

  • Lack of intent – the government must prove you knowingly devised a scheme to defraud and had intent to deceive.
  • Good faith errors – inaccurate information provided unintentionally due to crisis circumstances.
  • Minimal misstatements – small mistakes unlikely to have impacted loan approval or amount.
  • Authorized use of funds – demonstrating loans were spent on payrolls, rent, utilities, etc., not personal purchases.
  • Identify theft/false accusations – proving you did not submit an application or receive funds.

An experienced federal fraud defense attorney can analyze the prosecution’s evidence and identify the best defense strategy for your situation.

Penalties for PPP and EIDL Fraud Convictions

Potential penalties for convictions include:

  • Up to 30 years in prison for wire or bank fraud.
  • Mandatory minimum 2-year consecutive sentence for aggravated identity theft.
  • Fines up to $1 million for individuals, higher for corporations.
  • Restitution of all funds obtained through fraud.
  • Treble civil damages under the False Claims Act.
  • Debarment from federal contracts/loans.

Sentences are based on federal guidelines that account for the fraud amount, sophistication of the scheme, leadership role, criminal history, and other factors.

Collateral Consequences

Beyond direct penalties, a conviction can have significant collateral impacts:

    • Damage to business reputation, relationships, and revenue.
    • Exclusion from future COVID-19 relief programs.
    • Ineligibility for other SBA loans/grants.
    • Potential suspension or loss of professional licenses.

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