Fake Tax Documents on Loan Application: Can This Be Fixed??

Whether presenting a fake tax document on a loan application triggers criminal liability is not a simple question with a single answer. It depends on a wide range of factors, and, in many cases, on the ability of the federal government to prove that you knowingly and intentionally presented the falsified or inaccurate document.

I. Proof of Scienter (Knowing and Intentional Conduct)

Most federal statutes establish fraud and other white-collar offenses as crimes requiring proof of scienter, i.e., the defendant’s knowledge of the facts that make his or her conduct unlawful. In other cases, federal statutes require proof of willful, knowing, or intentional conduct. While federal prosecutors may attempt to build cases upon allegations of negligence in many circumstances, criminal liability itself requires proof of one of these higher levels of culpability. Consequently, accounting errors, misunderstandings of tax law, and related oversights may not be enough to support a federal fraud charge.

II. Intent, Use, and Recipient

As the previous section notes, a fake tax document can support a variety of federal offenses, and the specific offense at issue will depend on the document’s nature, use, and recipient. For example, if a fake tax document is presented in connection with a loan application to a privately owned financial institution, this may trigger different potential charges than if the document is presented to the government in connection with an attempt to obtain federal benefits. There is no single federal offense that specifically or exclusively covers all circumstances involving inaccurate or fake tax documents presented on loan applications. Various statutes may apply depending on the specific facts involved, and so a deep understanding of the relevant criminal law is essential.

III. Elements of the Offense

Each federal offense that could potentially cover the presentation of a fake tax document on a loan application requires proof of all of the elements that make up the offense. While each statute has different elements that must be proven in order to establish a conviction, the general elements of the most common federal white-collar offenses are similar in nature and scope. Prosecutors must prove each and every element of the relevant statute to a degree that leaves the fact-finder convinced beyond a reasonable doubt. Any gaps in proof, and any evidence that does not meet a particular statute’s specific requirements, can present meaningful opportunities to mount a successful defense.

Which Charges Can the Use and Recipient of a Fake Tax Document on a Loan Application Trigger?

As the previous section explains, whether the use of a fake tax document on a loan application constitutes a federal offense depends on various factors. These include, but are not limited to, your intent, whether the document was used in connection with a loan application that was approved or denied, whether the funds were used for the purpose for which they were obtained, and whether you later falsely certify that you are eligible for loan forgiveness. Depending on the circumstances, presenting a fake tax document on a loan application can trigger any of the following federal charges:

I. PPP Loans

Submitting a Fake Tax Return on a PPP Loan Application

Submitting a fake tax return as part of a PPP application to an SBA lender or directly to the SBA can trigger bank fraud under 18 U.S.C. § 1344 or making false reports and statements to the SBA under 18 U.S.C. § 1014. Submitting a fake tax return on a PPP loan application to an SBA lender or directly to the SBA can lead to federal criminal prosecution even if the lender or the SBA denies the application. This is because fraud involving PPP loans may be prosecuted under federal fraud statutes, and an attempt to defraud a lender or the federal government may be criminal even if the application is denied.

Misusing Loan Proceeds

If the application is approved and proceeds are issued, unauthorized spending can lead to charges of PPP fraud as well. Even though PPP fraud is a broad federal offense, the misuse of loan proceeds can create separate allegations of PPP fraud, regardless of whether the original application contains inaccuracies.

Certifying PPP Loan Forgiveness Fraudulently

If an applicant fraudulently certifies forgiveness after receiving a PPP loan, this can also trigger federal criminal prosecution. Even if the initial loan is entirely legitimate, any fraudulent certifications can expose the recipient to liability for fraud under 18 U.S.C. § 1343 and other federal statutes.

II. Other Federal Offenses

Presenting a fake tax document on a loan application can trigger various federal charges outside of PPP fraud as well. This includes:

• Bank Fraud (18 U.S.C. § 1344)
• False Statements or Reports (18 U.S.C. § 1014)
• Wire Fraud (18 U.S.C. § 1343)
• Federal Tax Evasion (26 U.S.C. § 7201), if the conduct also involved a willful attempt to evade or defeat a tax

These offenses carry significant penalties, and it is essential for loan applicants who have mistakenly (or intentionally) presented fake tax documents to be aware of the potential risks they face.

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How Much Can Federal Form Fraud Cost in Prison, Fines, and Repayment?

The potential consequences of presenting fake tax documents on a loan application are significant, and for many individuals, the maximum penalties under federal law pose an immediate concern. In many loan fraud cases, federal prosecutors will pursue a variety of different charges, which can include:

Bank Fraud (18 U.S.C. § 1344)

Criminal convictions for bank fraud under 18 U.S.C. § 1344 can result in fines up to $1 million and up to 30 years in federal prison. This is one of the most commonly charged federal offenses in loan fraud cases involving fraud against a federally insured financial institution.

False Statements or Reports to the SBA (18 U.S.C. § 1014)

A conviction for making false reports or statements to the SBA under 18 U.S.C. § 1014 can also result in up to 30 years of imprisonment and up to $1 million in fines.

Wire Fraud (18 U.S.C. § 1343)

Under 18 U.S.C. § 1343, a conviction for wire fraud (i.e., executing a scheme to obtain money by fraud via a “wire, radio, or television communication in interstate or foreign commerce”) can carry a sentence of up to 20 years of federal imprisonment.

Federal Tax Evasion (26 U.S.C. § 7201)

A conviction for federal tax evasion under 26 U.S.C. § 7201 can carry up to five years in federal prison.

While these are the statutory maximum penalties, the U.S. Sentencing Guidelines play a major role in determining a defendant’s sentence. In many cases, prosecutors advocate for a “loss amount,” but the sentencing court determines the applicable loss under the Guidelines. Depending on this calculation, the sentencing guidelines could suggest decades of imprisonment, and in some cases, the government will aggressively argue for these sentences. However, federal sentencing guidelines are advisory, and a federal judge ultimately decides the appropriate prison sentence.

Restitution, Forfeiture, and Repayment

In addition to potential imprisonment, federal fraud cases can result in substantial restitution, forfeiture, and repayment obligations. Prosecutors are increasingly likely to pursue charges for criminal forfeiture, which, for qualifying convictions, can require forfeiture of property constituting or derived from proceeds obtained as a result of the offense. Criminal restitution is also possible, and practically guaranteed in many cases, with your repayment obligation calculated based on the amount that the government or lender allegedly lost. In cases involving loans, repayment obligations may also arise independently, whether through a settlement during the pre-charging stage or a sentencing order.

What Can a Borrower Do When Inaccurate Tax Documents Surface After a Federal Loan Application?

If you submitted a PPP loan application, your conduct is under scrutiny from the moment you first applied, throughout the PPP certification and loan repayment process, and through the moment you certified forgiveness. This means that if you (or your intermediary) presented inaccurate tax documents at the beginning of the process, federal investigators will evaluate how this factor weighs in alongside any other allegations, evidence, or omissions throughout the remainder of your PPP conduct.

I. If an Intermediary Submitted a Fraudulent Document

You may also face scrutiny if an intermediary submitted a false tax document (or any other false information) without your knowledge. Unfortunately, while you may not be legally responsible for the actions of a fraudulent intermediary, you still face the risk of scrutiny. This may also increase your risk of facing scrutiny in relation to fraudulent statements or omissions, as the intermediaries in your case could potentially testify that you knew about the inaccuracies at the time you certified forgiveness.

II. If You Make a False Statement to a Federal Investigator

While you have to be careful about saying too much, the same is true for what you say when you do speak with federal investigators. Making false statements is one of the most common grounds for charges in PPP fraud investigations, and under 18 U.S.C. § 1001, knowingly and willfully making a materially false statement or concealing or covering up a material fact by trick, scheme, or device in a matter within federal jurisdiction can constitute a separate felony.

III. If You Are Contacted by a Federal Agency or Authority

Federal authorities may intervene on behalf of the federal government for various reasons. Because of the various agencies involved in the PPP loan process, federal agencies and authorities that have been involved in PPP fraud cases have included:

• Federal Bureau of Investigation (FBI)
• Internal Revenue Service Criminal Investigation (IRS-CI)
• SBA Office of Inspector General (SBA OIG)
• Department of Justice (DOJ)

IV. If You Receive a Target Letter

If you receive a target letter, this means you need to speak with an experienced federal criminal defense attorney right away. Federal prosecutors send target letters to individuals to let them know that an indictment is being considered. A target letter does not equal an indictment, but federal prosecutors will not send it unless you are in their crosshairs. This means you could be charged with a federal crime at any time.

If You Want Someone to Look at Your Case

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