What Are the Maximum Fines for PPP Loan Fraud?

What Are the Maximum Fines for PPP Loan Fraud?

The Paycheck Protection Program (PPP) was created in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide forgivable loans to small businesses impacted by the COVID-19 pandemic. However, widespread confusion over PPP loan eligibility and use of funds led to accusations of fraud and abuse. So what are the potential penalties for PPP loan fraud?

Overview of PPP Loan Fraud

There are three main types of PPP loan fraud that prosecutors are pursuing charges for:

• Application Fraud: Lying on PPP loan applications about number of employees, payroll costs, or other eligibility criteria to receive larger loans or loans businesses weren’t entitled to
• Misuse of Funds: Using PPP loans for unauthorized purposes instead of allowable expenses like payroll, rent, utilities, etc.
• Forgiveness Fraud: Submitting false or fraudulent information when applying for PPP loan forgiveness to have loans forgiven that didn’t meet program criteria

Even just attempting to commit fraud can lead to criminal charges under federal attempt and conspiracy statutes.

Federal Charges & Penalties

While the CARES Act has no built-in penalties for PPP loan fraud, prosecutors rely on several pre-existing federal fraud statutes to bring charges, including:

• Bank Fraud (18 U.S.C. §1344) – Up to 30 years imprisonment and/or $1 million fine
• Wire Fraud (18 U.S.C. §1343) – Up to 30 years imprisonment and/or $1 million fine (if a financial institution is affected)
• False Statements (18 U.S.C. §1001) – Up to 5 years imprisonment and/or $250,000 fine (individuals) or $500,000 fine (organizations)
• Attempt & Conspiracy (18 U.S.C. §1349) – Fines and imprisonment up to the maximum for the underlying fraud offense

Prosecutors often bring multiple charges under these statutes based on each act in furtherance of the fraud scheme. So penalties can stack up quickly.

Pursuing Charges Aggressively

The Department of Justice is aggressively investigating PPP loan fraud cases. Tactics include:

• Data analytics to detect red flags and patterns of potential fraud
• Undercover operations and confidential informants gathering evidence
• Interviews, subpoenas, warrants, and other investigative tools

Dozens of prosecutions have commenced since 2020. U.S. Attorney General Merrick Garland stated the DOJ “will not tolerate abuse of the important programs that were designed to assist hardworking Americans during the pandemic.”

Civil False Claims Act Lawsuits

In addition to criminal penalties, PPP loan recipients can face civil False Claims Act (FCA) charges for defrauding the government. Remedies can include:

• Treble damages (three times actual losses)
• $11,000 to $22,000 penalty for each false claim

Private whistleblowers can even file qui tam suits on behalf of the government and receive 15-30% of recovered funds.

PPP Loan Repayment

If criminally convicted or found civilly liable for PPP loan fraud, offenders will likely have to fully repay loan amounts plus fees and interest. The Small Business Administration can also pursue administrative enforcement demanding repayment.

Avoiding Allegations of Fraud

If you obtained a PPP loan, take steps to avoid the appearance of fraud, including:

• Carefully review program rules to ensure full compliance
• Maintain meticulous records of eligibility certifications, loan use, and forgiveness applications
• Be transparent with lenders by asking questions and clarifying ambiguities
• See legal counsel if contacted by investigators or accused of PPP loan fraud

The penalties for PPP loan fraud are severe. However, experienced defense counsel may identify procedural flaws in investigations or argue you acted in good faith given widespread confusion over constantly changing PPP rules and requirements.

If facing civil FCA or criminal fraud charges under federal statutes like bank fraud or false statements, skilled legal advocates can negotiate reduced penalties or even get charges dismissed. Don’t wait to get experienced legal help.

For more on potential defenses or finding a top lawyer to protect your rights, check out the following references:

• Avvo lawyer directory
• Paycheck Protection Program fraud charges – Lawyers.com
• r/pppfraud subreddit – Discussions on PPP fraud issues