Indictment vs. Information in PPP Fraud Cases.

Yes, an indictment and an information are both considered formal criminal charges in a federal PPP fraud case. However, they differ in a few key respects:

• A grand jury returns an indictment. The court orders that a grand jury be summoned, and the grand jury, a panel of citizens, decides whether the evidence is sufficient to support a criminal charge. An indictment is not “the first step” toward being charged, it is itself a formal charge of a federal offense or offenses.
• A federal prosecutor files an information. A federal information is a formal charging document that can only be used in limited circumstances, namely, when a defendant has waived their right to an indictment, or the offense is a federal misdemeanor.

When can a federal criminal charge be filed by an information?

The U.S. Constitution requires a presentment or indictment by a grand jury for criminal prosecutions for “capital, or otherwise infamous” offenses. According to the U.S. Supreme Court, “infamous” offenses include federal felonies. However, the U.S. Supreme Court also holds that federal criminal defendants can voluntarily waive their right to indictment in order to permit the government to proceed by information. A defendant who waives their right to an indictment can generally only do so in open court, and only after being advised of the constitutional protections involved.

• For federal PPP fraud charges that can lead to imprisonment for more than one year, an indictment is generally required because those offenses qualify as federal felonies. Therefore, a federal information can be used in cases involving the federal CARES Act and other federal criminal statutes that carry felony-level penalties only if a defendant waives their right to a grand jury proceeding.
• Federal misdemeanors, offenses with potential penalties of one year or less, may generally be prosecuted by information without the need for a grand-jury indictment.

When does someone become a federal defendant?

A person generally becomes a federal defendant at the time when they are formally charged in federal court. In PPP fraud cases, this occurs when the government files a complaint or an information, or when a grand jury returns an indictment in federal district court. If you are currently facing federal investigation for PPP fraud, it is imperative that you understand the implications of being charged as a federal defendant, and the consequences that could arise from a federal indictment or an information.

Which PPP-fraud document or contact do you actually have?

What Does a Criminal Complaint Mean in a PPP Fraud Case?

A criminal complaint is another type of formal charging document, often used to initiate a federal case before a grand jury returns an indictment or a federal prosecutor files an information. Because a criminal complaint can lead to immediate charges, receiving one can be even more alarming than receiving a target letter.

• A target letter comes from a federal prosecutor who is conducting a grand jury investigation. A target letter warns the recipient that the federal prosecutors consider them to be a potential federal defendant.
• A grand-jury subpoena is an order from a grand jury to produce evidence. In PPP fraud cases, it is common for grand juries to order a broad range of information and documents to be produced, and to demand witnesses, including those who received PPP funds, provide testimony.

Are You a “Target” of a PPP Fraud Investigation?

While a target letter is often referred to as a “target letter,” being a “target” of a grand jury investigation does not make you a federal defendant. A person may be considered a “target” of a grand jury investigation even if they did not receive a target letter. They may be identified as a target of a grand jury investigation because they received a grand-jury subpoena, because they received a response to a FOIA request, because their bank account was frozen, or for some other reason.

• A grand-jury subpoena is a legal demand to provide the evidence or information specified; you must either comply, or have a legally recognized basis to resist. A grand-jury subpoena is a legal demand. You must either comply, or you must have a legally recognized basis to resist the demand for information.

Should I Be Concerned Because the SBA Sent an Audit Letter, a Subpoena, or a Search Warrant to My Business?

When the SBA sends an audit letter or an audit subpoena for your business, it is not proof that you are under investigation for federal PPP fraud. A search warrant is evidence that federal agents are conducting an investigation. It is not proof that there are criminal charges pending, and it is not proof that you are a defendant. While audits, subpoenas, and search warrants are important to take seriously, by themselves, these actions do not prove criminal guilt.

What if the Government Froze My Bank Account?

If the government has frozen your bank account, it can be due to an investigation, but this does not guarantee that criminal charges will be filed. With that said, a frozen bank account should always be taken seriously. However, once again, this fact does not make you a federal defendant.

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How Does a PPP Investigation Become a Filed Federal Case?

A federal prosecutor can file an information or present evidence to a grand jury seeking an indictment if an investigation is launched. This usually occurs if federal agents at the U.S. Department of Justice (DOJ) Fraud Section or at one of the DOJ’s agency partners have identified a need for further inquiries into your PPP loan application or use of the PPP funds you received. This includes agencies like the FBI, Internal Revenue Service Criminal Investigation (IRS-CI), the Small Business Administration Office of Inspector General (SBA-OIG), and the U.S. Attorney’s Office. Investigators from these agencies (and others) may examine a variety of sources in search of evidence. This can range from examining your PPP loan application, PPP documents, and bank records to examining payroll documents, credit card statements, and other spending records, and it can extend to interviews and Grand Jury subpoenas for witnesses, business associates, and customers as well.

Who Makes the Decision About Charges in a PPP Fraud Case?

The federal prosecutors that make the decision about charges in PPP fraud cases are prosecutors in the Fraud Section or the relevant U.S. Attorney’s Office. When necessary, they make these decisions in consultation with the FBI and other relevant federal agency personnel. When an indictment is returned, the grand jury-not the prosecutors-has decided to charge after the relevant prosecutors presented their case to the grand jury.

Is the FBI Involved in a Federal PPP Prosecution?

The FBI is often involved in investigations. As an agency that helps to conduct criminal investigations on behalf of the federal government, the FBI works closely with other federal agencies, and federal prosecutors who assist in these investigations. This means that investigators with the FBI work with investigators at the SBA-OIG and other agencies, and with prosecutors who will eventually file charges if the investigation shows a need to do so.

Who Files an Indictment or an Information in a PPP Fraud Case?

The final determination regarding what evidence to include in an indictment or an information rests with the federal prosecutors at the DOJ Fraud Section, the U.S. Attorney’s Office, or one of the DOJ’s other law enforcement agencies. The agencies involved in conducting criminal investigations, such as the FBI, the IRS Criminal Investigation (IRS-CI), the SBA Office of Inspector General (SBA-OIG), and other law enforcement agencies do not file indictments or information.

What Are the Charges in PPP Fraud?

In order to pursue a federal case against an individual, the federal government must identify the statute it is using to prosecute the case and then identify the facts that support each statutory element. In federal PPP prosecutions, this means that the prosecutors will generally have to prove:

• (i) that you knew the information you provided on your PPP loan application, certification, or payment request was false;
• (ii) that you deliberately deceived the government;
• and, (iii) that this deception was material in the government’s decision.

What deadlines and other exposure can apply in a PPP fraud case?

What is the Statute of Limitations for PPP-Fraud Allegations?

In PPP fraud cases, the statute of limitations is a critical factor. For noncapital offenses, the general federal limitations period is five years under 18 U.S.C. § 3282. However, there is a longer statute of limitations available in certain circumstances. Under 18 U.S.C. § 3293, the limitations period for criminal offenses involving financial institutions can be up to ten years. Section 3293 applies to specified offenses, including mail or wire fraud under 18 U.S.C. §§ 1341 or 1343 when the offense affects a financial institution. The federal courts apply Section 3293 in federal PPP cases, including PPP fraud cases against PPP recipients and their business associates. With a target date of up to ten years, this is a long period for potential exposure. However, the statute of limitations applicable in any particular case will depend on the specific offense charged.

Will the Federal Government Seek Civil Recovery in Addition to Criminal Charges in a PPP Fraud Case?

Along with filing criminal charges in PPP fraud cases, the DOJ Fraud Section, the DOJ’s U.S. Attorney’s Office, and other law enforcement agencies may seek civil recovery as well. While the standard of proof in criminal fraud cases is much higher than that for civil liability, this is because criminal liability is determined by a judge, jury, or other legal authority, and can be the basis for imposing criminal sanctions including fines, restitution, probation, and federal imprisonment.

• The False Claims Act (31 U.S.C. §§ 3729-3733) has been one of the key provisions in the federal government’s efforts to combat pandemic-related fraud. Under the False Claims Act, civil liability can be imposed on a party if the party “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government” While civil liability can sometimes be settled without a criminal conviction or an admission of guilt, it is still an important aspect to take into account when choosing the right legal counsel to defend your case.

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.