Grand Jury Subpoena for PPP Loan Documents: What to Do.

When we assist with PPP-fraud grand jury inquiries, our first steps involve assessing the subpoena. We evaluate its scope, its deadline, and other pertinent information, and we also identify and address issues such as custodians, privileges, and production. The scope of your subpoena could be very broad, or it could be relatively narrow; the deadline may be fast or far off. With that said, the first thing you need to do is communicate with counsel and learn about the specific demands of the grand jury subpoena in order to begin assessing the steps you need to take.

2. Preserving Records

If you received a subpoena duces tecum, the type of subpoena that demands documents or other tangible evidence, rather than a subpoena ad testificandum (one that demands testimony) or a combined subpoena demanding both testimony and records, then preservation should be your first instinct, not deletion, alteration, or retrospective correction. Even if you feel you made mistakes when applying for or using your PPP loan, it is crucial not to tamper with your records. With that said, even if you suspect your records might be problematic, you will also need to move quickly to respond to the subpoena, as ignoring a grand jury subpoena can result in contempt of court or other sanctions. Your counsel should be able to negotiate the scope of a grand jury subpoena so that you only produce the records and documents that are absolutely necessary.

3. Determining What the Grand Jury Subpoena Demands

Depending on how the Department of Justice (DOJ) is building its case, your grand jury subpoena could demand testimony, financial records, emails, business documents, or even cell phone data. In any event, the subpoena’s scope can vary widely. If you are not sure why the DOJ is seeking your testimony or why it is seeking your business records and related information, you should not talk to anyone about your PPP loan or your business’s loan until you have discussed this with counsel.

4. Interacting with Federal Agents

While you are not required to answer questions to federal agents without counsel present, you should be aware that federal agents who answer your calls or visit your office will often call you “Mr.” or “Ms.” and will speak politely to you. Do not be deceived into thinking that they are not interested in criminal prosecution. Knowingly and willfully making a materially false statement to federal agents and investigators can lead to criminal exposure under 18 U.S.C. § 1001.

Which PPP Records Can Investigators Demand?

When investigating a loan recipient for PPP fraud, federal agents will want to compare the recipient’s original loan application to subsequent loan forgiveness applications, bank records, payroll data, and tax filings. With that said, the scope of a grand jury records subpoena can be very wide. In the case of PPP-fraud investigations, federal agents may examine corporate formation documents, they may examine issues involving corporate affiliations and ownership (subject to the restrictions in 13 CFR § 121.301), and they may obtain other records from banks, payroll companies, accountants, employees, and business partners.

2. How Far Back Can the Government Reach With a Records Subpoena?

The Department of Justice (DOJ) has not issued guidance regarding how far back a grand jury records subpoena should typically reach. Even so, if you are concerned that your PPP-fraud records subpoena asks for financial records that are too old to be relevant, your counsel should negotiate with the DOJ to narrow the scope of the subpoena.

The government may use subpoenas to demand your financial records from third parties as well. These third parties, such as your bank and payroll provider, will only be able to provide the records they have in their possession. The government, in turn, can obtain those records from these providers and use them to support their case against you. This is particularly important if you have intermingled your business and personal accounts. Forensic accountants can be employed to trace your use of PPP funds through these commingled accounts.

3. What Are My Options If I Received a Records Subpoena that Is Too Broad or Demands Information for Which I Cannot Be Sure I Can Comply?

If you have received a subpoena that is too broad and asks for too much information, or asks for information that you cannot possibly produce, you should consult with your criminal defense counsel about challenging the subpoena. Federal Rule of Criminal Procedure 17(c)(2) provides that, on a prompt motion, a court may quash or modify a subpoena if compliance would be unreasonable or oppressive.

4. What if I Simply Need More Time?

If you are able to comply with the subpoena, but you just need more time to gather and organize the requested records, you can request an extension of the production deadline.

Spodek Law Group is one of the few firms running every filing, invoice and document through an online portal, which is how it takes cases outside New York.

When Can a PPP Subpoena Require Testimony?

1. What Is the Difference Between a Witness, Subject, and Target?

Federal investigators classify every person who becomes involved in a federal investigation. The three basic classifications are witness, subject, and target.

• A witness is someone from whom the government wants to obtain information. Witnesses are not suspected of criminal involvement. With that said, sometimes a witness may become a subject or target, and sometimes a subject or target may become a witness.
• A subject is someone about whom the government has information indicating the person may have been involved in criminal activity. Subjects generally have similar rights as targets (e.g., for example, the right to appoint counsel).
• A target is a person as to whom the prosecutor or grand jury has substantial evidence linking the person to the commission of a crime and whom the prosecutor regards as a putative defendant.

2. Can My Status Change During a Federal Investigation?

Yes, it is possible to change classifications. For example, witnesses may become targets in a PPP-fraud investigation as federal investigators develop evidence. Conversely, targets may become witnesses if they provide information to federal prosecutors.

3. Can I Invoke My Fifth Amendment Privilege During a Grand Jury Hearing?

While a subpoena’s status as a witness subpoena doesn’t give away the person’s classification, it is entirely possible for a witness to invoke his or her Fifth Amendment privilege during grand-jury testimony. However, this privilege is not unconditional. If you are called to testify in the grand jury, a prosecutor may ask the judge for an order under 18 U.S.C. § 6002. A judge will then order you to testify in exchange for “use and derivative-use immunity.”

4. Can My Criminal Defense Attorney Join Me in the Grand Jury Room?

No. In a criminal grand-jury proceeding, you will generally not have your criminal defense counsel by your side. Instead, you will be expected to testify without your attorney’s presence in the room. You can ask the prosecutor or court to provide a waiting room or some other way to have your counsel nearby, but your defense attorney will not be able to enter the grand-jury room.

How Do Federal PPP Grand Jury Rules Govern Secrecy, Authority, and Enforcement?

1. What is a Grand Jury?

A grand jury's principal function is to determine whether there is probable cause to believe that one or more persons committed a federal offense. However, its proceeding is kept secret. A grand jury listens to evidence, which includes witnesses’ testimony, records, and documents, and then determines if there is probable cause that the target of the grand jury investigation should face criminal charges. It does not determine whether or not the target is guilty or innocent; it merely determines if there is reason to conduct a criminal trial.

2. Is My Grand Jury Subpoena a State or Federal Grand Jury Subpoena?

Grand juries exist in both state and federal systems. When you receive your subpoena, the issuing authority will tell you whether you have received a federal or state grand jury subpoena. If the issuing authority is a federal prosecutor (e.g. the U.S. Attorney’s Office), then you have a federal grand jury subpoena. If the issuing authority is a state prosecutor, the rules and procedures of your subpoena will depend on the rules in your jurisdiction.

3. How Do the Rules for State Grand Juries Differ from the Rules for Federal Grand Juries?

The rules for state grand juries differ greatly by jurisdiction. This means that you will need to learn your state’s rules about subpoena procedures, grand jury secrecy, and other details. If you have received a state PPP-fraud grand jury subpoena, you will find that its characteristics are likely very similar to those of its federal counterpart. You will still need to assume that you will need to carefully assess the factual and legal details of your case in light of the rules that apply to state grand juries.

4. Do False Claims Act (FCA) Civil Investigative Demands Work in the Same Way as Grand Jury Subpoenas?

If you received a Civil Investigative Demand (CID) under the False Claims Act (FCA), then this is different than a grand jury subpoena. A grand jury investigates criminal matters. However, a CID under the FCA will be used to try to obtain penalties and/or damages under the FCA’s civil fraud provisions. With that said, if you received a CID under the FCA, you still need to protect yourself by preserving your records and other evidence, but the next step of the process should be different. For a comprehensive overview of responding to CIDs under the FCA, see our in-depth article.

Talk to Spodek Law Group

Every case turns on its own facts, and general information is no substitute for advice about yours. Todd Spodek, managing partner of Spodek Law Group, and the firm's attorneys defend federal criminal and white collar matters nationwide. Reach the firm at 888 348 8028.