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Corporate Audits for PPP Loan Fraud Lawyers

April 1, 2022 Federal Criminal Attorneys

Corporate recipients of the Paycheck Protection Program, or PPP loan, often get audited at the time when the company files a loan forgiveness application. The rapid deployment of the PPP loan money opened up the program to applicants that were not the intended beneficiaries. Instead of assuming that the business owner was acting in good faith, many prosecutors took the stance that fraud was being deliberately committed. Any effective defense strategy will challenge this basic assumption as false.

Fraud and PPP Loan Forgiveness

The Department of Justice is also pursuing cases of PPP loan fraud aggressively. Companies seeking to avoid this conflict can take proactive measures to ensure that they remain compliant with the rules governing these loans and the forgiveness programs. Fraud is defined by the participation of the population intended to be excluded from the program. This was never written as a universal benefit even though the pandemic undeniably had a universal impact. Enforcement mechanisms are funded to prevent businesses who took PPP loans from qualifying. This is still a contested area of the law because of the vague nature of the program, its uneven distribution and mishandled administration. The pandemic brought uncertainty and hardship to many businesses of all sizes; it’s an act of bad faith to simply assume the worst in every case.

Corporate Audits Reduce Risk of Prosecution

There are several ways to minimize and reduce the risk of prosecution under this onerous enforcement regime. The first method is to challenge the legal principle in court. This may require adopting a strategic defense posture that is supported by popular opinion. For example, it is widely understood that the resources that went to enforcing the exclusionary aspects of the PPP loan were given to these enforcement activities instead; they may or may not uncover actual cases of fraud. The conversion of the loan program into a universal benefit would instantly neutralize the fraud issue in its entirety, for example.

Since the universal benefit angle was inadequately pursued, the enforcement of the loan’s strict rules took higher priority, above salvaging the economy as a whole. Corporate audits can effectively reduce the risk of prosecution from the DOJ or SBA. Company owners and directors might have found it easy to accept the loan money, and it can come as a shock to see the aggressiveness of the federal agencies when pursuing prosecution. The terms of this agreement enabled certain loans to be forgiven if they were properly spent. The terms weren’t excessively onerous, but they were specific.

Defending Against PPP Fraud Allegations

Allegations of fraud can be challenged by asserting the lack of clarity in the original rollout of the loan program. This legal strategy is a matter of shifting the onus from the business onto the administration. There are responsibilities that must be followed at the federal level in order to have the legal position to assert that fraud exists. However, with the sudden rollout of the CARES Act, there was a high level of confusion that should come into account before making a credible allegation of fraud. Problems with the loan programs began early during the pandemic, and no responsible defense lawyer should allow that fundamental point to remain unchallenged.

Fraud Checks and Legal Representation

There are many reasons to consult with a qualified PPP loan fraud attorney. Legal services can assist in the process of clearing the record and proving that the company behaved in good faith. This should be the default assumption, yet this position must often be asserted. Our clients make better decisions when the information available is accurate and useful. This service is part of our complete package. We help businesses facing allegations of PPP loan fraud to mitigate the effects of the charges or overcome them altogether.

Corporate audits function as a form of transparency. This allows external entities with a stake in the company to review the internal operations and come to a conclusion about the issue of fraud. The investigation will seek to determine if the company is compliant with the policies regarding the PPP loans. Audits allow company executives to mount a credible defense against any allegations or investigations of fraud.

Legal Defense Strategies

Any company receiving PPP loans may potentially face this risk. There are numerous cases where the DOJ and U.S. Treasury Department have decided that fraud was committed under this excessively restrictive loan program. Company leaders facing investigation must decide whether the premise of the law can be viably challenged, proving that the loans were used within the intent of the law.

Corporate audits can be done in tandem with other legal strategies as well. Since the legal process depends on a clear understanding of the rules of governance, mismanagement of the loan distribution can also be called into question in the line of defense. Consult with an experienced PPP loan defense attorney before pursuing any particular legal strategy.

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