Nashville PPP Loan Fraud Attorney.

At Spodek Law Group, we use the requirements that applied when your PPP application was submitted to check its disputed figures against the business records behind them. Our federal trial lawyers have more than 50 years of combined experience.

Tracing the payroll figure in your application

For this illustration, we’ll follow a C corporation completing the March 18, 2021 First Draw Form 2483 with payroll figures and supporting records from calendar year 2019. The form’s “Average Monthly Payroll” figure is multiplied by 2.5 to calculate the payroll-based portion of the loan amount requested. The authorized representative signing the form certifies that the information is “accurate in all material respects” in both the application and its supporting documents and forms.

We put the payroll figures and attachments sent to the lender beside the corporation’s 2019 payroll records. Form 941 reports Medicare wages on line 5c, column 1. We total those quarterly figures for 2019, then use payroll reports to add only pretax employee contributions excluded from Medicare wages. We then subtract the portion of each employee’s annual compensation above $100,000 from that wage total. This corporate calculation also excludes compensation paid to employees whose principal place of residence is outside the United States.

To those adjusted wages, we add eligible employer contributions for group insurance and retirement, along with state or local taxes assessed on employee compensation. Those additions are documented in the corporation’s benefit records and state wage records. The adjusted wages plus the documented eligible additions give the corporation’s eligible 2019 annual payroll total.

Suppose the corporation’s eligible annual payroll after those adjustments is $240,000. Dividing $240,000 by 12 gives an average monthly payroll of $20,000. Multiplying that $20,000 by 2.5 gives a payroll-based loan component of $50,000.

What the records show about a fraud allegation

For property wire fraud, one possible theory involving a questioned PPP application, the government must prove beyond a reasonable doubt that the accused devised, intended to devise or knowingly participated in a scheme to deprive another of money or property through material deception by misrepresentation or concealment, acted with fraudulent intent, and used or caused the use of interstate or foreign wire communications to further the scheme. The payroll figure is material if it could influence the lender’s decision about the amount requested. The wire-fraud instruction covers false representations made knowingly or with reckless indifference to their truth, and the government must also prove that the accused intended to obtain someone else’s money or property through deception. Who supplied the disputed payroll number, and what did the signer know before the application was submitted?

On January 21, 2022, the U.S. Attorney’s Office for the Middle District of Tennessee announced a money-laundering charge against Shawn Palmer. Prosecutors said Palmer’s June 2020 PPP application reported 27 employees and an average monthly payroll of $205,748. The business had two employees, according to prosecutors. According to the announcement, Palmer sent documents to a helper working on his application, and those documents were then submitted to Kabbage. The 2024 judgment records that Palmer pleaded guilty and was adjudged guilty of money laundering. Under the wire-fraud theory discussed above, an honest mistake is inconsistent with an intent to defraud. Knowingly false or fraudulent representations prevent an asserted honest belief from establishing good faith. Comparing a surviving draft with your submitted application can show whether the disputed payroll number changed between those versions. Messages connected to those versions may help identify who supplied the disputed figure and what information reached the signer before submission.

When forgiveness records are also questioned

The July 30, 2021 Form 3508 requires borrowers to document payroll payments claimed for the forgiveness covered period. Bank statements or payroll-payment reports document cash compensation paid to employees, while payment records support the employer benefit amounts included in the forgiveness claim. The borrower signing this form certifies having verified the eligible payroll and nonpayroll payments claimed for forgiveness and certifies that the application and supporting materials are accurate in all material respects. The signer also certifies that tax documents supplied to the lender, if applicable, are consistent with those submitted or to be submitted to the IRS or the relevant state tax or workforce agency.

Using the documents to answer the request

A written answer to SBA’s payroll question can put the submitted figure beside the recalculated amount and show how the business records support each step of the calculation. SBA requires the lender to request more information from you in writing when information indicates that you may be ineligible for the loan, the loan amount claimed or the forgiveness amount claimed. SBA may also request that information directly from you. SBA considers all information you supply in response, and failing to respond may result in an adverse determination about your eligibility, loan amount or forgiveness amount.

Under Rule 17(c)(2), a court may modify or set aside a federal criminal document subpoena on a prompt motion if compliance would be unreasonable or oppressive.

Tell our team what has happened in your PPP inquiry so far, and share the communication you received, including any response date it states, along with the submission being questioned. Contact Spodek Law Group for a free consultation.