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Will I Go to Prison for Accidental PPP Mistakes?
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Will I Go to Prison for Accidental PPP Mistakes?
Getting charged with PPP loan fraud can be really scary. Like, your mind probably goes to the worst case scenario of ending up in prison over an honest mistake. I totally get why you’d freak out. But try to take a deep breath. Let’s walk through what kinds of situations can actually land you in prison over the Paycheck Protection Program loans.
What is the PPP?
As a quick refresher, the Paycheck Protection Program (PPP) was launched in 2020 to help small businesses survive the COVID-19 pandemic. Companies could get low-interest loans that may be forgiven if the money was used for payroll, rent, utilities, etc. Over 11 million PPP loans were given out.
Common PPP Mistakes
When the PPP loans were being rapidly rolled out, lots of business owners made innocent mistakes on their applications and when spending the money. Some common slip-ups include:
- Overestimating payroll numbers
- Using funds for non-qualified expenses
- Lacking proper documentation
- Applying for duplicate loans
Many of these issues can be remedied by working with your lender, providing more documentation, adjusting your loan forgiveness amount, or paying back misused funds. Let’s look at when an accidental PPP mistake could potentially become a criminal matter.
PPP Fraud Charges
Federal prosecutors are going after the most egregious cases of COVID relief fraud. This includes people who:
- Fabricated businesses or employees on applications
- Spent funds on lavish personal purchases
- Applied for multiple loans using fake identities
- Had no legitimate business or employees
These involve outright lies and theft rather than paperwork errors. According to the Department of Justice, over 1,000 defendants have been charged with stealing nearly $1.1 billion total in federal pandemic relief funds as of 2022.
PPP Fraud Penalties
The consequences for PPP fraud depend on the specifics of each case, such as:
- Dollar amount obtained by fraud
- Use of stolen identities
- Past criminal history
- Number of fraudulent loans
Penalties can potentially include:
- Up to 30 years in federal prison
- Restitution payments
- Fines up to $1 million
- Forfeiture of assets
When is Prison Time Likely?
In general, federal prosecutors tend to seek prison sentences for defendants who:
- Stole over $150k – $250k+ in funds
- Had an organized scheme with multiple co-conspirators
- Have a criminal record, especially for fraud
- Do not accept responsibility and cooperate
Harsher sentences often go to ringleaders who masterminded the plot or people who committed identity theft in the process. Significant prison time over an accidental paperwork error is unlikely. But lying to cover up mistakes can make the situation much worse.
Getting Charged with PPP Fraud
Let’s say federal agents show up at your home or business accusing you of PPP loan fraud. Or you get a target letter saying you’re under criminal investigation. What should you do?
- Politely decline to answer questions and ask to speak with a lawyer
- Gather all documentation related to your PPP loan(s)
- Hire a federal criminal defense lawyer ASAP
An experienced attorney can review the evidence and negotiate with prosecutors on your behalf. They may be able to get charges reduced or avoid prison time in appropriate cases. Having skilled legal counsel is essential.
Avoiding Prison for PPP Mistakes
Here are some tips to keep accidental PPP errors from becoming a criminal matter:
- Consult an attorney early if questioned by investigators
- Be upfront about any misunderstandings or errors
- Fully repay misused funds if possible
- Provide requested documentation to lenders/SBA
- Cooperate with authorities to show good faith
Having an open dialogue with lenders and providing paperwork trails can go a long way towards demonstrating your mistakes were not intentional fraud. Being evasive or combative only raises more red flags. Contact a lawyer to protect your rights through the process.
Getting Legal Help
Dealing with accusations of PPP loan fraud is extremely stressful. But a knowledgeable white collar crime attorney can help minimize penalties and possibly avoid prison time for accidental errors. They understand federal sentencing guidelines and can craft an effective defense strategy. Don’t wait to seek experienced legal counsel if facing a criminal investigation over pandemic relief loans.