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PPP Loan Fraud & Whistleblower Defense Lawyers

April 1, 2022 Federal Criminal Attorneys

There are a variety of penalties that might be imposed on businesses and individuals found in violation of the law in regards to the Paycheck Protection Program, or PPP. Fraud is the most common charge levied against entities and persons who improperly used these funds. There are civil and criminal penalties associated with PPP fraud. Some of the penalties are simple fines and repayment orders. Sometimes, the guilty party may be sentenced to time in prison for committing fraud.

Paycheck Protection Program Fraud

Cases of PPP fraud are soaring around the country, as federal agencies have been granted funding to prosecute companies for fraud instead of converting the original poorly administered PPP program into a universal benefit. The ability to appeal a decision is an important part of any legal defense against accusations of fraud.

It is important to consider the cost-benefit ratio of enforcement activities against the collective social benefits that would ensue if these funds were instead used to ensure universal access to the PPP loan forgiveness program, for example. In a climate of uncertainty, it seems beyond the scope of reason to resort to such aggressive enforcement against businesses that face uncertain financial conditions amidst a deadly pandemic. Any legal reprieve that can be found under these conditions can only strengthen the economy while reducing the burden of hyper-regulating a skimpy social safety net during the pandemic.

PRAC Report and PPP Loan Problems

According to a report released by a body called PRAC, or Pandemic Response Accountability Committee, there were numerous problems in the way the PPP was structured, administered and delivered. Additionally, the fast rollout of the program gave businesses a reasonable appearance of uniformity and access. The SBA also increased their level of guarantee to lenders, and this caused a lowering of the requirements for due diligence. This also increased the likelihood of losses to the SBA.

Loan amounts tended to be unusually high, and there were also expedited timeframes for loan processing, which made it harder for the SBA to apply the normal red flags and weed out applicants who would otherwise disqualify. Due to the lack of sufficient internal controls, these programs were improperly administered in many cases. However, business owners charged with fraud often reacted with indignant outrage at the prospect of being forced to take up the slack of a poorly written and executed piece of legislation.

Rapid relief programs like the PPP loan are most effective when they are universally applied; however, the actual PPP loan contains numerous stipulations that were not widely understood at the early onset of the pandemic. This caused accusations of fraud to soar with small business owners shocked at being put in a position of defending themselves against these charges.

PPP Loan Fraud, Enforcement Funding

The numbers are substantial; there are over 4.5 million businesses that participated in the federally guaranteed and backed loan program. Charges of loan fraud are being levied against small businesses and individuals by the Department of Justice, or DOJ, the IRS and the SBA-OIG.

The efforts to find companies who accepted PPP loans in good faith also uses significant resources; these funds were deliberately allocated to enforcing the exclusive nature of the PPP loan program instead of expanding the program itself to include more people; it could have been a more universally applicable program.

Fighting Unfair Enforcement Measures

Numerous cases have already been filed, and many more are being made against organizations and individuals charged with committing fraud. Effective legal defenders can help you to present a compelling case that proves within a reasonable doubt that the PPP was taken and used in the spirit of the law’s most likely intent.

This strategy aims to sideline the triggering of the pre-existing statutes that come into play in order to charge the business owner with fraud. There is no direct penal clause within the CARES Act, which created the PPP program. However, there are many provisions within existing federal law that allows prosecutors to levy charges of fraud.

Under 18 U.S.C. § 1014, it is illegal to make false statements to the Small Business Administration. This includes borrower application forms, certifications for loan forgiveness and other documents. It is also illegal to make any false statements to a bank insured by FDIC, under U.S.C. § 1014. This prohibition can also be extended to include reports that were submitted to other lending institutions insured by the FDIC.

Fraud and PPP Prosecution

Numerous types of fraud can also be prosecuted under these federal laws. This includes wire fraud, aggravated identity theft, tax evasion, conspiracy, attempted fraud and more. The penalties for false statements, tax evasion, wire fraud, bank fraud and other offenses can carry fines up to $1 million and imprisonment. Contact our law firm to defend your legal rights if your business took a PPP loan and is facing an investigation or charges of fraud.

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