Iowa PPP Loan Fraud Lawyers.

If you are facing a PPP fraud investigation in Iowa, there are several important considerations you should discuss with an experienced federal defense attorney. These considerations include (but are not limited to):

Federal Court in Iowa

In Iowa, federal criminal cases are heard in either the Northern District or the Southern District. These two federal courts are distinct, and any criminal defense lawyer handling an Iowa PPP fraud case must be admitted to practice in the relevant federal district court.

Grand Jury Subpoenas, Search Warrants, and Target Letters

By the time you see an investigator’s face for the first time, receive a grand jury subpoena, receive a search warrant, or receive a federal target letter, the government has already done the bulk of its work. This means the government has already built an investigative file, determined you are a target of its investigation, and uncovered a clear basis for criminal activity. You need to work with a federal lawyer who can immediately get to work on your behalf.

Civil and Criminal Investigations

The issue of whether your investigation is civil or criminal is often an irrelevant one. Civil and criminal investigations often proceed simultaneously over the same conduct. Civil investigations can target PPP borrowers under the False Claims Act or other federal statutes; and criminal grand jury proceedings can target PPP borrowers for federal criminal fraud.

The Importance of Pre-Indictment Defense

Regardless of the nature of the investigation, once it becomes clear that the government has identified you as a potential target, it is critical to seek pre-indictment legal representation. A lawyer can help you pursue a declination, negotiate a civil resolution, or seek favorable terms for a criminal resolution.

Which PPP Eligibility and Loan-Use Disputes Can Become Iowa Fraud Allegations?

PPP fraud allegations generally originate from six areas. First, borrowers may be accused of overstating their payroll costs and/or number of employees. For a second-draw PPP loan, an eligible borrower generally had to demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020; first-draw PPP applicants did not have that revenue-reduction requirement. Second, borrowers may be accused of eligibility fraud. Numerous types of businesses were ineligible for PPP loans under federal law. If the SBA has identified an Iowa business as potentially ineligible, this can lead to an investigation. Third, borrowers can face affiliation allegations. Under the SBA’s affiliation rules (set forth in CFR 121.301), the SBA can count affiliated businesses’ employees against an applicant’s PPP size eligibility. Affiliation analysis can be complex, and if you are facing an investigation under this rule, it is important to contact an Iowa federal defense lawyer immediately. Fourth, federal prosecutors and the SBA have uncovered evidence of “loan stacking” in numerous cases. Loan stacking involves fraudulently receiving PPP funding from more than one lender or from a government entity and a lender, and this has been identified as a key priority for federal authorities. Fifth, federal authorities have uncovered evidence of ineligible use of funds in numerous cases as well. Under the CARES Act, businesses could use PPP loans for payroll costs, rent, mortgage interest, utilities, and to benefit eligible employees. If your loan funds went to non-PPP-eligible expenses, this may be another issue that you need to discuss with an experienced federal defense attorney. Sixth, if your PPP loan funds were not used for qualifying payroll costs in good faith, this may be another issue that you need to discuss with an experienced Iowa federal defense attorney. These are just some of the issues that are most likely to trigger federal PPP fraud investigations and prosecutions.

What Federal Charges and Proof Issues Can Follow an Iowa PPP Allegation?

Criminal Fraud: The Core Question

Regardless of which federal fraud charges are filed against you, the fundamental question will be whether the government can prove that you knowingly submitted false or misleading information as part of your PPP application process. If you acted in good faith, then you did not act with the knowledge required to support a conviction for criminal fraud.

Wire Fraud

Wire fraud is the criminal charge that has been filed against the majority of PPP borrowers in many other jurisdictions. Wire fraud carries a stated federal maximum of twenty years in prison per count for a criminal conviction.

Bank Fraud

Bank fraud is also a potential charge in many PPP cases as well. When a PPP loan affects a qualifying financial institution, criminal bank fraud can carry a stated federal maximum of thirty years in prison per count.

Money Laundering

Money laundering is also an additional charge in many cases. Under 18 U.S.C. section 1956, money laundering carries a stated federal maximum of twenty years in prison per count. This is a charge that is frequently added when defendants have used PPP loan funds to engage in prohibited transactions or when defendants have used their loans for the personal benefit of owners and relatives.

False Statements to Financial Institutions

Making false statements to qualifying financial institutions can also lead to prosecution. Under 18 U.S.C. section 1014, making false statements to banks can lead to criminal charges as well. In recent months, federal authorities have also filed these charges in many EIDL fraud cases, and PPP defendants should be aware that these charges are still on the table for them as well.

Attempt and Conspiracy

Attempts to commit fraud and criminal conspiracies can be charged as separate offenses. For fraud offenses under 18 U.S.C. chapter 63, attempts and conspiracies carry the same penalties as those prescribed for the underlying offense. Criminal conspiracies can carry their own statutory maximum penalty as well.

How Can Iowa Businesses Respond When the SBA, FBI, Lender, or Grand Jury Seeks Records?

Civil Investigative Demands (CIDs)

If you received a subpoena titled “§ 3733. Civil investigative demands” then it is likely that your investigation is taking a civil track. In a civil investigation, the government generally looks to obtain restitution for its funds; and, in a criminal investigation, the government looks to punish fraudulent conduct. We can help you get answers to your most urgent questions and work with the federal government to preserve your interests.

The Scope of Federal Government Inquiries

Whether the government sends agents or subcontractors to your Iowa business, there are various government inquiries that you can prepare for. The government will be looking for records such as:

• Bank records
• Payroll records
• Tax filings
• Formation documents
• Ownership and control records
• Records identifying any and all potentially affiliated businesses
• All other potentially relevant documents
• Evidence of use of your PPP loan funds

Identifying Potential Affiliation Issues

In many cases, identifying the need to seek records for affiliation issues mirrors identifying the need to seek records for other PPP issues as well. Ownership and control records are critical for affiliation analysis, but these records can also be relevant for other purposes.

Preserving Relevant Records

If your company is facing a federal PPP loan fraud investigation, you need to work with an experienced federal defense lawyer. If your company is facing an investigation, then there are various records that you must seek to preserve. In light of the risks associated with receiving accusations of federal fraud, it is critical that you do not delete, alter, reorganize, or routinely destroy any records that may be relevant. If you have concerns about records that you previously destroyed, then it is important to work with a lawyer that can provide guidance on how to address this fact before the government discovers it.

Communicating with Employees

When facing a federal PPP fraud investigation, it may also be necessary to speak with one or more of your employees. However, if you and an employee have potentially conflicting interests, then the employee may need to engage independent counsel as well.

Does Repayment or Forgiveness End PPP Exposure?

Loan Forgiveness and Future Scrutiny

In some cases, the government forgives an Iowa PPP loan, and the recipient of the loan believes that it will be able to use its forgiveness to prevent future scrutiny. However, this is not true. If the government forgives a PPP loan but determines that the recipient’s PPP application contained false and misleading statements, then it can still initiate civil or criminal charges.

Civil and Criminal Forfeiture

In addition to trying to get restitution or seeking to convince a court of criminal guilt, the government can seek civil and criminal forfeiture. Civil forfeiture generally targets assets and funds, including:

• Personal accounts
• Business accounts
• Real estate
• Investments
• And other forms of tangible property.

Criminal forfeiture focuses on depriving defendants of property connected to the offense, while restitution focuses on compensating victims for their losses. Civil and criminal forfeiture proceedings can be separate from your criminal case, but the property generally must be linked to the offense; substitute property may be available in limited criminal-forfeiture circumstances.

These proceedings can involve federal grand jury subpoenas, search warrants, and restraining orders issued by federal judges.

Pre-Indictment Restraining Orders

Criminal-forfeiture restraining orders are governed by 21 U.S.C. section 853(e); civil-forfeiture restraining orders are governed by 18 U.S.C. section 983(j). If the government believes you are in possession of assets it may eventually seek for civil or criminal forfeiture, it can seek a restraining order to freeze your assets or otherwise prevent the transfer or sale of your assets before it brings formal charges against you. Federal law allows for the freezing of property subject to forfeiture as proceeds of fraudulent activity, including real property and tangible and intangible personal property.

Repayment Notices

If you received a repayment notice, this may be a very simple issue. A repayment notice without allegations of fraud or any criminal intent generally is more of a compliance issue than a criminal defense matter. However, if you are facing a repayment notice and have other concerns, it is important to speak with an experienced federal defense lawyer.

If You Want Someone to Look at Your Case

Reading about a charge is not the same as having someone read your file. Spodek Law Group keeps an attorney on call around the clock, and the first consultation costs nothing and runs as long as your questions do. The number is 888 348 8028.