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SBA Fraud / PPP Loan Fraud Defense Lawyers

April 1, 2022 Federal Criminal Attorneys

In March of 2020, the government instituted the CARES Act to help individuals and businesses to mitigate the economic impact of the COVID-19 pandemic. The PPP (Paycheck Protection Program) was an integral part of the CARES Act. It was implemented to help small businesses retain employees and keep afloat during difficult economic challenges.

The PPP was given $350 billion to help these businesses and yet ran out of funds quickly. Many eligible businesses were unable to get much-needed funds. Since the money went so quickly, many of the businesses that did receive funds are now under scrutiny and there’s some suspicion of fraudulent activity.

Are You in Danger of Prosecution for PPP Loan Fraud?

If your business received a loan from the PPP, then you may be under suspicion for PPP loan fraud. There are several government agencies, particularly the OCC (Office of the Comptroller of the Currency in the U.S. Treasury) that are looking into what went wrong with the PPP rollout. Since the money went so quickly and since there are examples of fraud in many other government assistance programs, there’s reasonable suspicion that fraud was involved in much of the PPP loans.

Even if you didn’t commit fraud, you may still be investigated. A lawyer can help you mitigate the damage and ensure that you’re not unjustly convicted.

Types of PPP Fraud

There are several allegations regarding the PPP that may be considered fraud. Some businesses intentionally engaged in these fraudulent practices, while others unintentionally committed fraud. Below are some of the different types of fraud.

Loan Stacking

Loan stacking is the process of applying for loans from two or more lenders. Businesses that received PPP money from more than one lender are guilty of loan fraud. The OCC will be focusing on loan stacking as they think it may be the most common type of PPP fraud since the money went so quickly.

Application Fraud

Businesses had to meet several criteria to be eligible to receive PPP funds. It’s suspected that many businesses lied on their applications to meet the eligibility requirements. They may have lied about the number of employees on payroll or listed some employees as independent contractors to keep their numbers low. Some companies falsely reported their income needs in order to get more money.

Since the pandemic created a need for these businesses to get their money quickly, no official agency had the capacity to verify the information on applications. Businesses were expected to make these applications in good faith, but many businesses used this to their advantage and falsified their information. Additionally, some businesses attempted to act in good faith, but mistakenly misrepresented information.

Ineligible Spending of Funds

The PPP was specific in how the loaned money could be spent. Businesses were not given the option to spend it at their discretion. The money was only to be spent on purposes that could keep their business afloat while most of the country was in lockdown.

The money could only be spent to cover employee paychecks or payments concerning your place of business – specifically mortgage or lease payments and utility bills. Any spending outside of these payments is considered fraudulent.

Other Fraudulent Uses

Not only will the OCC investigate businesses who are suspected of fraudulent activities, but they’ll also look into the individuals involved, especially in cases where there was significant fraudulent activity.

What does this mean for business owners? If your business is under investigation, you’ll likely be investigated as well. If found guilty of fraud, you could face millions of dollars in fines and even time in prison.

Loan Forgiveness Fraud

The PPP designated money that was meant to be paid back with a low interest rate. However, it also allowed for loan forgiveness for some businesses. To have their loans forgiven, businesses were required to submit documents showing that their business met all eligibility requirements and used the money for approved purposes.

It’s likely that many businesses falsified these documents and the OCC will check into the validity of these documents.

Misuse of Information During Fraud Investigation

Accusations of fraud don’t just concern business’s behavior during the application and utilization periods for PPP funds. Fraud can also occur during a fraud investigation. Many companies who know they’re guilty of fraud (whether intentionally or unintentionally) may try to falsify documents during the investigation in order to avoid prosecution.

What to Do If Your Company is Investigated

If your company is under investigation, you need to hire a lawyer to guide you through the process. Even if you didn’t intentionally commit fraud, you may still face prosecution. A lawyer can ensure that you’re in compliance with the law and that you don’t doing anything fraudulent during the investigation.

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