How Long Does a PPP Fraud Investigation Take??

Federal law establishes no standard deadline or timeline for the completion of PPP fraud investigations. Consequently, the length of a single investigation can vary significantly. Among the factors that can influence how long a PPP fraud investigation lasts are the amount of evidence available, the amount of loss involved, the number of individuals who must be charged, the number of transactions involved, and the prosecutorial priorities of the DOJ, DOJ OIG, FBI, and other federal agencies involved in the investigation. When our lawyers at Spodek Law Group represent an individual or company in a PPP fraud investigation, we handle all aspects of the investigation. This includes responding to requests for information, dealing with investigators, and aggressively defending our clients at every stage of the process. We ensure that our clients fully understand the risks they are facing and what it will take to protect themselves, and we make informed decisions about seeking loan forgiveness, loan repayment, and other available options. Due to the complexity of PPP fraud cases and the fact that they are still very much on the radar of the DOJ and other federal agencies, it is imperative to engage experienced legal representation quickly. When we defend PPP fraud allegations, our first priority is to find a way to end the investigation as quickly as possible. However, we are prepared to use our substantial knowledge and experience to protect our clients against all forms of scrutiny. The evidence has proven that scrutiny can continue well after repayment or forgiveness. At Spodek Law Group, we rely on a team of attorneys and other professionals. Our lawyers and other personnel defend our clients against PPP fraud allegations. Spodek Law Group serves as defense counsel for PPP fraud investigations and PPP fraud charges nationwide. We defend clients against all types of scrutiny, ranging from initial requests for information from the DOJ OIG and other federal agencies to complex criminal fraud cases involving many of the federal prosecutors and law enforcement agents who were tasked with investigating and prosecuting PPP fraud.

How does a PPP fraud inquiry move from lead to evidence?

A PPP fraud inquiry can have various starting points, such as a bank referral, data flag, tip from a whistleblower or competitor, witness information, or some other type of lead. The federal agencies involved will then determine how to proceed. Typically, this initial step involves looking for red flags by comparing the PPP applications involved with other records. Relevant records for federal agencies to review in this step include payroll filings, tax returns, bank records, and records from any state or local government agency that is working with the DOJ, DOJ OIG, or any other agency involved in the inquiry. Additional steps to gather evidence during a federal inquiry into suspected PPP fraud include (among others):

• Reviewing communications between involved parties including emails and text messages;
• Reviewing all supporting documentation;
• Reviewing contracts, payroll and benefits agreements, and other agreements;
• Contacting accounting firms;
• Interviewing employees of and other individuals around the company that received the loan;
• Reviewing bank records, emails, and other forms of communications from financial advisers, investors, and others;
• Reviewing bank records, emails, and other forms of communications from any and all parties who may have played a role in the application process;
• Contacting individual borrowers and companies directly. As part of gathering evidence to pursue charges in PPP fraud cases, federal agents may interview peripheral witnesses before interviewing the loan borrower or reviewing documents from the loan borrower. When we represent a PPP loan borrower under investigation, we may be able to learn about any investigation by federal agents before our client is contacted. We can learn about an investigation by contacting the federal agencies involved, and we can learn about an investigation as well if federal agents contact our client with an interview request or a document demand. Investigators may request bank records and other documents voluntarily, or they may obtain these records by using a subpoena, search warrant, or court order. At this stage of the investigation, however, investigators may not possess every record that is relevant to their inquiry. Consequently, they will often go through the process of issuing a subpoena, search warrant, or court order to uncover documents that may exonerate or implicate the person or entity under investigation. For this reason, a clear and organized record of all relevant documents is of critical importance. Once the government issues a subpoena, search warrant, or court order, it will be difficult to ensure that the borrower’s records are accurate, truthful, and comprehensive.

Why Do Forgiveness and Repayment Fail to End PPP Fraud Exposure?

One reason for a prolonged investigation is that the act of seeking loan forgiveness can become its own separate allegation. When a PPP loan borrower or company seeks loan forgiveness, the borrower or company is required to make a certification. In many cases, that certification is made based on a set of assumptions, but the certification can become a separate allegation if it is knowingly false, which can lead to additional charges for the borrower or company in addition to the charges arising from the loan application.

Another statute used to pursue fraud under the Paycheck Protection Program is the False Claims Act. The False Claims Act is a federal statute that allows the government to seek civil recovery against a business or individual that knowingly makes a false claim involving government money. Treble damages and civil penalties are also permitted under the False Claims Act.

Civil proceedings under the False Claims Act may be pursued at any time and may be pursued independently of criminal proceedings. Furthermore, civil proceedings under the False Claims Act may be pursued even if prosecutors have declined to pursue criminal charges. When dealing with pandemic-fraud matters that are borderline or that involve a relatively low amount of money, federal prosecutors may pursue the matter civilly under the False Claims Act rather than criminally.

As a result, there are two parallel tracks of federal civil and criminal liability. Federal investigators and prosecutors may have the time and resources to pursue both tracks for the same underlying conduct, and they may choose to pursue both tracks against the same defendants. This results in two different, independent timelines.

As a result of having two different, independent timelines, a PPP loan borrower or company under investigation may find that it has put its criminal investigation to an end, but the federal government’s civil investigation continues. This has the effect of creating additional scrutiny that persists well after a criminal investigation would have ended.

We serve PPP loan borrowers and companies in federal civil fraud investigations. We represent companies and individuals in civil False Claims Act proceedings, including those that are initiated after criminal investigations. We rely on our team to help our clients make informed decisions, reach settlements with federal agencies when appropriate, and avoid unnecessary liability.

When does the limitations period matter more than investigation length?

Typically, a criminal case is an indictment that begins the process of discovery, filing motions, negotiating with prosecutors, and, in some cases, taking the matter to trial.

The vast majority of federal criminal cases are resolved by a plea agreement, although the percentage of cases resolved by plea agreements in the context of pandemic fraud is not yet clear. While the exact percentage of cases resolved by plea agreements is unknown, cases that are resolved by plea agreements typically result in faster resolutions than those resolved in trials.

The statutes of limitations for PPP fraud can be as long as ten years. Federal law provides for a 10-year limitations period for bank-fraud offenses under 18 U.S.C. § 3293. A 10-year limitations period under 18 U.S.C. § 3293 applies to specified financial-institution offenses, including bank fraud and mail or wire fraud affecting a financial institution; it does not generally apply to fraud against the federal government. Because the applicable limitations period depends on the specific federal offenses charged and their circumstances, a PPP borrower may face a substantial period during which the government can pursue criminal allegations. The statute of limitations period dictates whether a party is eligible for criminal charges under the law; however, it does not necessarily dictate when an investigation may be expected to conclude. When dealing with criminal cases, it is more important to focus on making informed decisions based on the information at hand rather than focusing on how long a case may take or when a case may be over. When our lawyers represent a PPP fraud defendant in a criminal case, we focus our attention on reaching the best possible outcome on behalf of our client. We execute our client’s defense strategy, keep our client up-to-date about the status of the case, and advise our client when it is time to reconsider his or her position.

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.