Negotiating a Plea Deal in PPP Fraud Case.

Negotiating a guilty plea is a decision that needs to be made on a case-by-case basis. Even though most federal criminal cases are resolved through negotiated pleas rather than jury trials, it would be a mistake to assume a negotiated plea is the “right” answer to facing federal criminal charges. When making a strategic decision, the most-important factors are the strength of the evidence, the negotiated benefits on the table, and the risks of a jury trial.

What Is the Average Sentence for a PPP Fraud Conviction?

There is no reliable average sentence for a PPP fraud conviction, and even if you were able to establish the average sentence for the thousands of cases that have been filed, it likely would not be useful for determining your specific risk. In federal sentencing, the range of potential outcomes can be vast. The best way to assess the risks of a jury trial is by focusing on the specific facts and circumstances of your case.

What Is the Typical Sentence in a PPP Fraud Case?

The statutory maximum penalties for PPP-related offenses do not necessarily provide insight into what the typical sentence would be in a PPP fraud case. While the law establishes maximum penalties for various crimes, it also allows for a wide range of sentencing dispositions. Understanding the facts of your case and developing a comprehensive understanding of the potential for a successful defense strategy are much more important for determining your risk.

What Is the Downside of Pleading Guilty to PPP Fraud?

A potential downside of pleading guilty to PPP fraud is that it will ordinarily result in a conviction on your record. While prosecutors can make recommendations for a particular sentence (and while these recommendations are often followed), federal judges make the final sentencing decision. Therefore, a negotiated plea deal can reduce your charges and sentencing exposure but it cannot guarantee any specific judicial sentence.

How Do PPP Investigators Turn Applications, Bank Records, and Interviews Into Plea Leverage?

PPP investigations are a comprehensive process that often involve a coalition of federal agencies, including the Department of Justice, the Small Business Administration Office of Inspector General (SBA OIG), the Federal Bureau of Investigation (FBI), and the IRS Criminal Investigation Division. Many of these agencies also work with private financial institutions during the course of their investigations.

Generally speaking, PPP investigations aim to establish the commission of a federal criminal offense by demonstrating:

• Misrepresentation during the PPP application process, or the post-application process; and
• Criminal intent to defraud.

Federal charges are common, and wire fraud (18 U.S.C. § 1343) is one of the most frequently alleged crimes in PPP fraud investigations. In some cases, federal agents also look for opportunities to add charges such as filing false statements (18 U.S.C. § 1001) or identity theft. When these charges appear, they typically stem from interactions with investigators.

When federal agents execute search warrants, seize records, or interview employees, they typically rely on two sources of information: the PPP application and the certification for forgiveness. Then, investigators compare these sources of information with other records, such as the company’s federal tax filings, payroll records, bank statements, professional licensing database, and other pertinent records. By identifying apparent inconsistencies and discrepancies, they can build a case for misrepresentation.

How Can Bank Records Be Used to Assess PPP Fraud?

When assessing a potential PPP fraud charge, bank records can provide evidence regarding each of the elements of a crime. For example, investigators use bank records to:

• Document that the PPP loan application and certification for forgiveness were false.
• Disprove defenses that a PPP loan was used for eligible purposes.
• Demonstrate the amount of the fraud (which can trigger increased sentencing exposure).
• Demonstrate that the funds were used to make luxury purchases or transferred to other accounts.

These are among the key types of evidence that PPP investigators use to build their cases. Along with bank records, email and text message data can also be used as evidence. Investigators can look for pertinent information in emails and text messages, metadata, and social-media posts in hopes of finding statements that reveal a company owner’s knowledge or intent, or that reveal other elements that could trigger criminal charges.

At Spodek Law Group the strategy on a case starts the same day the client calls.

Why Can a PPP Fraud Sentence Differ Sharply from the Statutory Maximum?

The amount of time a person can spend in prison for committing bank fraud under 18 U.S.C. § 1344 depends on the specific charges and the defendant’s prior criminal record. Federal sentencing judges use the United States Sentencing Guidelines to calculate the recommended sentencing range for various crimes. The statutory maximum for bank fraud is thirty years, while a disaster-related wire fraud charge can also carry a thirty-year statutory maximum under 18 U.S.C. § 1343. However, it is not common for defendants to receive sentences close to thirty years, and federal judges have the authority to impose sentences that are well below this statutory maximum.

While federal judges are not mandated to impose a sentence within the guidelines’ recommended range, they typically use these ranges as a starting point. For instance, the Federal Sentencing Guidelines publish several factors that play a role in calculating the recommended range for different crimes. Among these, the loss amount is a major variable in PPP fraud cases. By focusing on legitimate expenditures, including those that appear to be “fraudulent” according to prosecutors, PPP fraud defense attorneys can challenge the prosecution’s calculation of the loss.

But, in cases where a prosecution is likely to be successful, defendants should make informed decisions about whether to fight the case in court or make a negotiated plea. One factor that should be taken into account is the potential for an “acceptance of responsibility” reduction. For example, in cases that fall within the guidelines’ accepted criminal conduct, defendants can receive a three-level reduction for accepting responsibility. With this reduction, defendants can potentially avoid prison time and only be subject to probation, home confinement, or other less-intrusive penalties.

When Is a PPP Fraud Plea Rational?

A negotiated plea deal should only be sought when the benefit of making a plea outweighs the risks of proceeding to trial. If the evidence is overwhelming, the estimated loss is high, or if you are not qualified to seek a reduction in your sentence, then making a plea could be a rational decision. However, if you have a strong defense and are willing to fight for it, then proceeding to trial could be the best option.

Which Negotiated Terms Matter Most After a PPP Fraud Charge?

Most negotiated plea agreements for PPP fraud cases will include a waiver of the defendant’s right to directly appeal the judgment against them. While this can be an important consideration when determining whether a negotiated guilty plea is a rational decision, there are also options for defendants who want to preserve their appeal rights. For example, under Federal Rule of Criminal Procedure 11(a)(2), a defendant can file a conditional plea and only waive their appeal rights for those issues that are specifically addressed in the plea agreement. A conditional plea requires the consent of the prosecutors, as well as the approval of the presiding court, under Rule 11(a)(2).

Another key term that defendants can negotiate in certain circumstances is a substantial-assistance reduction. To qualify for a reduction based on acceptance of responsibility, federal defendants must satisfy the requirements of U.S.S.G. § 3E1.1. A substantial-assistance reduction is based on assistance in the investigation or prosecution of another person, not on acceptance of responsibility. However, these reductions are not automatic. Under U.S.S.G. § 5K1.1, the government must file a motion before the court may consider a sentence below the otherwise applicable guideline range, but the court determines whether a reduction is appropriate and the amount of any reduction.

The most important thing that defendants need to remember about the substantial-assistance reduction is that the government’s motion is not a guarantee. Prosecutors are under no obligation to file a substantial-assistance motion, and defendants cannot necessarily force prosecutors to file a motion merely by cooperating. Consequently, the best way to secure a substantial-assistance reduction for a PPP fraud plea is to negotiate the motion in your plea agreement.

While a negotiated plea agreement with the government does reduce a defendant’s sentencing exposure, it still leaves the sentencing decision in the hands of a federal judge. However, that is not the only sentencing decision the federal judge will make. For example, judges have the authority to determine whether a defendant should be sentenced under a specific guideline, or whether the defendant’s proposed sentence is within the permitted statutory range.

A defendant’s attorney can play a key role at the sentencing stage as well, and defendants are entitled to object to calculations and enhancements that appear in their presentence report. Our PPP fraud defense attorneys can object to the prosecution’s calculation of the amount of loss, and to other issues like unlawful transfer. If successful, these objections can result in a further reduction in your sentence.

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.