Mississippi PPP Loan Fraud Lawyers.

Can a Mississippi PPP Loan Allegation Become a Federal Charge After Repayment? A false certification, if it creates exposure, can expose a business owner to criminal liability regardless of whether the loan was repaid. This is because the criminal statutes that apply to Mississippi PPP applications and federal PPP loans generally do not make an unfavorable outcome the central question in a criminal inquiry. Instead, criminal PPP investigations center on whether a business owner or applicant knowingly executed a scheme to obtain bank funds by means of false or fraudulent pretenses.

While a civil inquiry can demand repayment in full, a federal PPP criminal inquiry requires evidence of culpable behavior under a federal fraud statute. With PPP, several different fraud statutes can be applied. Some of the most common federal bank fraud provisions include: - Bank Fraud (18 U.S.C. § 1344): This provision applies to “Whoever knowingly executes, or attempts to execute, a scheme or artifice (1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.” (uscode.house.gov) - False Statements Affecting Institutions (18 U.S.C. § 1014): This provision applies to “Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of a listed institution or agency, including the Small Business Administration, in connection with an application, loan, or related transaction.” (uscode.house.gov)

Federal Bank Fraud Penalties

A federal bank fraud conviction under a federal PPP loan fraud charge can impose severe penalties, as noted above. In addition to these, a federal bank fraud conviction can also lead to: - Restitution;

• Forfeiture;
• Supervised release;
• Guideline sentencing;
• A record that carries other substantial penalties;
• and,
• Other civil penalties, such as treble damages under the federal False Claims Act.

How does a Mississippi PPP inquiry move from SBA review to prosecution?

SBA Review, An SBA review is not itself a criminal charge or indictment, but it is often the first step toward a criminal PPP investigation. In many cases, it is also a step toward a criminal PPP prosecution. Information supplied during an administrative review can also later inform the inquiry conducted in the criminal investigation.

Grand Jury Subpoena, A grand jury subpoena for records, testimony, or both means the government is investigating. It is not an accusation of wrongdoing or guilt. However, a subpoena is not optional, and it requires a response. While there are ways that Mississippi PPP loan fraud lawyers can use the legal process to narrow, withdraw, quash, or otherwise modify the subpoena, in most cases, an appropriately tailored response is necessary.

Search Warrant, A search warrant is also an investigative tool. It differs from a grand jury subpoena in that a search warrant is not optional, and it signals that the government believes it has acquired evidence that justifies conducting a search of the recipient’s property. A search warrant is not evidence that the recipient is guilty of any specific offense, but a search warrant can be evidence of the government’s grounds to conduct the search.

Criminal Charges / Indictment, A criminal PPP charge or indictment is the next step in the process. Criminal charges and indictments can proceed in federal trial districts such as the United States District Court for the Northern District of Mississippi or the United States District Court for the Southern District of Mississippi. These are two separate federal trial districts.

Which Mississippi District Court Applies to My PPP Allegations?

The Northern and Southern Districts of Mississippi are two separate federal trial districts. In Mississippi federal PPP cases, the prosecution may proceed in either of the two districts, depending on which district is appropriate. Venue generally must be based on the district where the charged offense was committed, subject to applicable offense-specific venue rules; the location of an investigating agency alone ordinarily does not establish criminal venue. (law.cornell.edu) Criminal charges can be filed in venue where the conduct occurred; Other federal criminal cases in the Northern and Southern Districts must be filed in a district with proper criminal venue, generally the district where the charged offense was committed, subject to applicable venue rules. (law.cornell.edu) Depending on the allegations involved, a Mississippi PPP defendant in either of these districts may be able to move for a change of venue.

Which PPP certifications and records will investigators compare?

Planning

• Goal: Detail the specific certifications and records federal investigators compare to support PPP loan fraud allegations.
• Key Areas of Inquiry: - Business size/eligibility. - Certification and application details. - Payroll and tax documentation. - Use of proceeds and forgiveness requests.
• Specific Allegations to Address: Inflated payroll, nonexistent employees, falsified tax records, and personal expenditures.
• Tone: Direct and informative, focusing on the evidence gathering process.
• Structure: - Start with the eligibility criteria and how it’s challenged. - Discuss application certifications. - Detail the records investigators scrutinize. - Explain how records are compared to identify alleged fraud.

Content

Which PPP Certifications and Records Will Investigators Compare? When investigating Mississippi PPP fraud, federal investigators typically look for evidence of the applicable statute’s required scienter and a materially false statement by the PPP recipient’s business owner. While various types of fraud can be charged under various federal criminal statutes, a recurring investigative focus for Mississippi PPP recipients has been the alleged inflation of payroll and total numbers of employees, and the falsification of tax records to show fictitious, nonexistent employees.

In each of these cases, PPP eligibility for the initial loan may have turned on a business owner’s misrepresentation about his or her business. For example, the initial PPP eligibility for a forgiveness-eligible loan generally applied to businesses with 500 or fewer employees. This criteria was subject to the SBA’s affiliation rules and counting employees could involve counting employees at affiliates, if the SBA’s affiliation rules applied, and that might increase the total number of employees above 500. In addition to this, all Mississippi PPP loan applicants were required to provide numerous certifications and make additional representations with regard to eligibility, necessity, payroll, and the intended use of the loan proceeds.

Among others, federal PPP investigators look for documentation from the following sources: - PPP Application and Loan Certificate - PPP Forgiveness Requests and Forgiveness Certification Materials - Payroll Records, Employee and Independent Contractor Compensation Records, 1099s and W-2s - Federal Tax Filings and Business and Personal Tax Filings - Business and Personal Bank Statements - Email Correspondence, Social Media Posts, and Online Messaging Records - Interviews and Questioning of Employees, Independent Contractors, Affiliates, and Others Involved in the Loan Application - and, - Other Relevant Records and Certifications In order to substantiate allegations of bank fraud and other crimes, federal PPP investigators will typically compare certifications provided during the loan application process against relevant payroll records, tax records, bank records, and other documentation. In this process, they will attempt to identify discrepancies between certifications and records. If Mississippi PPP fraud investigators find that the PPP recipient falsely certified eligibility, then they will then proceed to examine PPP recipients’ forgiveness requests and forgiveness materials. Inflated payroll, nonexistent employees, falsification of tax records, and personal spending are recurring issues in PPP cases involving criminal allegations. While repayment is required for loan proceeds that are not forgiven, repaying PPP loan proceeds, in many cases, does not eliminate potential civil and criminal liability when it involves any form of criminal PPP fraud.

Why can a PPP repayment dispute still become a civil FCA case?

The False Claims Act, 31 U.S.C. § 3729 et seq., is a broad federal statute that makes it unlawful to knowingly present a claim to the federal government that is either (i) false or fraudulent, or (ii) for payment based on information that is false or fraudulent. It also makes it unlawful to knowingly make false or fraudulent statements or representations to the federal government in connection with receiving a federal payment or seeking payment based on a federal contract. With regard to scienter, 31 U.S.C. § 3729(b) explicitly provides that for purposes of the False Claims Act, the term “knowingly” includes: “(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information;” Importantly, the False Claims Act does not require proof of a specific intent to defraud. This represents a key difference between the False Claims Act and criminal fraud statutes, many of which do require proof of the specific intent to defraud. While the Department of Justice has sought criminal prosecution for some recent PPP loan fraud allegations, the DOJ has also pursued several other PPP-related matters in civil proceedings under the False Claims Act. Under the False Claims Act, civil penalties can include treble damages, plus an inflation-adjusted penalty for each false claim or fraudulent representation. The Department of Justice has focused many of these civil cases on various types of alleged fraud committed by PPP recipients. By pursuing these cases under the False Claims Act, the Department of Justice has been able to seek penalties without need to satisfy the “knowing or willful” or “intent to defraud” intent requirements found in the federal criminal statutes. This is partially because the False Claims Act’s “reckless-disregard” scienter standard is broad and allows the government to seek civil penalties based on evidence of reckless conduct. In this regard, the reckless-disregard scienter standard presents a significant risk for recipients of PPP loans who are facing potential fraud allegations. Unlike criminal prosecutions, where proving intent can be a substantial hurdle for the government, a civil False Claims Act inquiry can proceed with the government’s evidence showing that a party acted in reckless disregard of the truth.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.