Michigan PPP Loan Fraud Lawyers.

The Paycheck Protection Program ceased accepting new applications on August 8, 2020. As a result, most inquiries concerning Michigan PPP loans involve applications that have already been processed.

PPP borrowers who received loans totaling less than $2 million should also be aware that they are deemed to have made the required necessity certification in good faith. This safe harbor protects against fraud-related enforcement actions arising solely from a borrower’s good-faith necessity certification (i.e., its “need” to get a loan).

However, the under-$2-million safe harbor is not absolute, and it does not immunize borrowers from PPP fraud allegations involving application errors, eligibility issues, or other misconduct.

PPP borrowers who have had their loan applications and forgiveness requests approved may also be at risk. Whether or not PPP borrowers qualify for the safe harbor, all Michigan PPP loan borrowers are susceptible to administrative, civil, and criminal consequences. These include criminal charges, civil claims brought under the False Claims Act (including qui tam whistleblower claims), loan repayment demands, and other administrative penalties.

It is important for Michigan PPP loan borrowers to understand that loan approval does not preclude loan scrutiny. Similarly, loan forgiveness approval does not preclude scrutiny of either the application or forgiveness representations. The government will focus its investigative resources on borrowers whose applications present concerns, and forgiveness does not prevent the government from seeking repayment of funds issued under fraudulent applications.

However, that does not mean that the government will necessarily intervene in all cases, and borrowers whose applications may be deemed ineligible will not necessarily face scrutiny. The risk of litigation depends on the specific circumstances of a PPP borrower’s case.

Ultimately, PPP borrowers whose cases are at risk should contact an experienced defense attorney to discuss what they can do to protect themselves and their financial future. An experienced PPP fraud defense attorney who has a clear understanding of the potential risks of PPP loan scrutiny can identify any red flags and then work with you to form a comprehensive defense strategy.

Which PPP Notice or Demand Signals the Kind of Case You Are Facing?

The same will go if you receive a notice of a necessity review for a Michigan PPP loan of $2 million or more. Although this is a good-faith effort by the SBA to ensure that funds have been appropriately allocated, a necessity review by the SBA is not the same thing as a criminal investigation or prosecution, and you should not assume that the SBA will refer your loan application to the SBA-OIG for investigation unless it has grounds to do so; any resulting criminal prosecution would be handled by the Department of Justice.

4. Federal Grand Jury Subpoenas, Search Warrants, and Target Letters

If you have received a subpoena from a federal grand jury, a search warrant, or a target letter from the DOJ, the FBI, or the SBA-OIG, then you may be facing a criminal investigation.

A target letter comes when a federal prosecutor believes there is sufficient evidence to charge you with a crime and that you have knowledge of the criminal investigation. The prosecutor will usually request that you come in for an interview or provide documentation and information. Even if the loan was approved, the federal government may still seek to claw back any funds that were illegally procured.

5. Civil Investigative Demands

On the other hand, if you have received a Civil Investigative Demand (CID) from the DOJ or another federal agency, then this may indicate a False Claims Act investigation. This could be due to a qui tam whistleblower complaint or a direct federal investigation. You should take a similar approach to a CID as you would to a target letter. If you received a CID, contact a Michigan PPP loan fraud defense attorney to discuss the issues involved and to discuss how to respond to the CID and what other steps are necessary to protect your interests moving forward.

6. Civil Inquiries, SBA-OIG Audits, and Audit Reports

Even if you are only facing a civil inquiry, it is possible that this will turn into criminal proceedings. If civil investigators find evidence of intent or a pattern of fraud, then they can refer the matter to the appropriate federal authorities for criminal investigation and prosecution. The same goes with SBA-OIG audits. Although a loan audit is not the same as a fraud investigation, the government is conducting PPP audits for various reasons. If investigators find evidence of fraud or a loan violation during the audit process, the information may be referred to the SBA-OIG Investigations Division for investigation and, where appropriate, to SBA officials or the Department of Justice for civil or criminal enforcement.

Spodek Law Group keeps an attorney on call around the clock, which is the whole point of a number you can ring at two in the morning.

What Federal Statutes Can Turn PPP Conduct into Civil or Criminal Exposure?

Whether PPP conduct exposes a borrower to federal fraud charges will depend on the specific circumstances of the case at hand. With that said, if federal investigators uncover evidence of fraud (or what they perceive as fraud), the same conduct can generate liability under any of the following federal statutes:

1. Wire Fraud (18 U.S.C. § 1343)

In appropriate PPP cases, prosecutors can bring charges under the wire fraud statute. This covers cases in which a borrower allegedly obtained PPP funds based on a scheme, artifice, or trick to obtain funds by which “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice” would facilitate the commission of the offense. This is a broad statute, and this statute, along with others, can give federal investigators flexibility in determining how they target potential PPP fraud cases.

2. Bank Fraud (18 U.S.C. § 1344)

Bank fraud is the crime of knowingly executing or attempting to execute a scheme or artifice to defraud a financial institution, or to obtain its money or property by false or fraudulent pretenses, representations, or promises. If you obtained your PPP loan from a financial institution, you could potentially face fraud charges under 18 U.S.C. § 1344. This is especially true when investigators determine a loan application was not necessarily fraudulent on its face, but rather the recipient attempted to deceive the bank.

For example, if you obtained a PPP loan, and the loan application had evidence of fraud in it, then you could potentially be charged with bank fraud. But, if your application was truthful, yet you obtained a PPP loan from the laender, and you used the loan funds in ways not authorized by the program, then you might be facing charges for bank fraud. In this situation, your good-faith use of the loan funds for a period of time before the fraudulent act does not preclude the fraudulent act from violating the federal statute.

The government may pursue liability under the False Claims Act as well. PPP borrowers that are accused of providing misleading information to the federal government are subject to treble damages or double damages, as well as the civil penalties for which they may be responsible under 31 U.S.C. §§ 3729-3733.

If you are accused of obtaining a PPP loan by means of fraud and want to defend against potential liability under the False Claims Act, you will need to meet with a Michigan federal PPP loan fraud defense attorney promptly.

The aforementioned examples are just a sampling of what could potentially happen. Each charged federal fraud offense requires proof of its own statutory elements, and this means that you could potentially be charged with multiple counts of fraud if federal prosecutors find that your conduct is fraudulent under multiple federal statutes.

Even if you have not been arrested yet, if you’re being investigated, you need to contact a Michigan federal PPP loan fraud defense attorney to evaluate the specific circumstances of your case. If necessary, you’ll want to avoid making any hasty and ill-advised mistakes. Your attorney will then provide advice tailored to your case based on the law in Michigan.

How Can a Michigan PPP Loan Applicant/Borrower Preserve Evidence?

Preserving evidence will involve ensuring that all relevant documentation is readily available to your Michigan PPP fraud defense attorney. This should include payroll information, financial statements, and other records. If you can prove you used the loan funds for eligible expenses, this should mitigate your risks for prosecution.

Additionally, any documentation you have regarding the loan’s use should be thoroughly analyzed. Many businesses have employees who may know something that could benefit your case, or even know something that could complicate it. Therefore, engaging with employees and conducting discussions will be vital in preparing for defense or settlement proceedings.

What Disputed PPP Representations Can Cause Problems?

Many loan applicants have submitted applications that could present problems. This is particularly true in cases where borrowers reported their payroll or employee count incorrectly. All PPP loan applications involve certifications and representations by the applicant, which the applicant then must be prepared to defend against during litigation.

Some of the most common disputes in federal PPP fraud cases include:

• Payroll: When PPP loan applicants overestimate their payroll or employee count, this can lead to an improperly-inflated loan amount.
• Payroll Tax Records: If a PPP loan applicant had a loan approved based on fraudulent payroll tax records, this could result in a fraudulent loan application.
• PPP Loan Forgiveness Application: A PPP loan applicant that provided false information in its application for PPP loan forgiveness can generate separate fraud exposure as well.
• Disclosing Use of Loan Funds for Prohibited Expenses: PPP borrowers must disclose use of loan funds for prohibited expenses, and knowingly allowing an employee to use PPP loan funds to purchase drugs or personal luxury items can create liability for criminal prosecution.

The good news is that, if you do not delete or alter any evidence of loan fraud, you should be able to limit your risks to potential federal fraud charges and repayment obligations.

Remember, whether the loan application involved false information, or whether your company fraudulently obtained loan forgiveness, you can still defend against any allegations. In any event, your defense team can help you understand your risks and prepare a defense that protects you from liability and incarceration.

Talk It Through With a Lawyer

Every case turns on its own facts. Todd Spodek is the managing partner of Spodek Law Group, a second generation firm his father opened in 1976, and the firm takes federal criminal and white collar matters nationwide. Call 888 348 8028 to talk it through.