New York PPP Loan Fraud Lawyers.

One common assumption is that PPP loan fraud allegations only apply to fraudulent companies or “shell companies.” However, even legitimate companies can be at risk. One way that legitimate companies may end up in the crosshairs of the SBA, DOJ, and other federal authorities is by making a material misrepresentation on the company’s PPP application. Even if the application was filled out in good faith, it could nonetheless contain a material misrepresentation that triggers a government inquiry, or even federal criminal charges.

II. Application Fraud and Loan Misuse Concerns Are Different Legal Issues

Another common misconception is that all allegations of “PPP loan fraud” are the same. However, PPP application fraud and PPP loan misuse are materially different legal issues with materially different defenses. In PPP application fraud cases, the government must establish that a business provided false or misleading information in order to fraudulently obtain the loan. In PPP loan misuse cases, however, the government may allege that the business spent PPP proceeds on prohibited purposes or otherwise used them outside the purposes permitted by the PPP program.

III. PPP Forgiveness Fraud and PPP Loan Default are Different Issues as Well

PPP loan forgiveness fraud and PPP loan default are also materially different issues with materially different defenses. While fraud involving a PPP loan-forgiveness application can be prosecuted as a federal crime, PPP loan default (and PPP loan repayment problems) may involve civil or criminal consequences.

IV. Civil and Criminal Investigations are also Different and Demand Different Responses

Finally, investigations by the SBA and other federal agencies are also materially different from criminal investigations. While investigations by the SBA and other agencies can lead to criminal charges, they often carry only civil consequences. When facing an investigation by a federal law enforcement agency, a New York business’s next steps will depend on whether the investigation is criminal or civil in nature, and whether it involves the Department of Justice (DOJ), the SBA, or another federal agency.

Who may contact a New York PPP borrower, and what can the government review?

I. Who Can Contact You About Your PPP Loan?

A variety of different federal law enforcement agents may contact you about your PPP loan or other pandemic-relief benefits. While the Department of Justice (DOJ) is responsible for investigating and prosecuting PPP fraud, the DOJ generally relies on other agencies to conduct investigations while prosecuting cases through its Criminal Division and U.S. Attorneys’ offices. When you need to speak with a lawyer about facing the U.S. Department of Justice or another federal agency’s inquiries about your business’s PPP loan or repayment record, we strongly encourage you to call our New York PPP loan fraud defense lawyers immediately. In addition to the DOJ, other federal authorities that can target PPP recipients include:

• The U.S. Department of Justice (DOJ), As the DOJ’s Criminal Division and the U.S. Attorneys’ offices, the DOJ is responsible for prosecuting PPP fraud cases that fall under federal criminal law.
• The SBA’s Office of Inspector General, The SBA’s Office of Inspector General investigates both criminal and civil PPP loan fraud cases, focusing on business borrowers that misrepresented their PPP applications or failed to use PPP loan proceeds as permitted.
• The Federal Bureau of Investigation (FBI), The FBI works alongside other federal law enforcement agencies to investigate PPP fraud, and this includes federal prosecutors and the SBA’s personnel as well.
• The U.S. Small Business Administration (SBA), With oversight of the EIDL and PPP programs, the SBA Office of Inspector General is responsible for conducting audits to find evidence of fraud, waste, and abuse involving pandemic relief funds.
• The U.S. Department of Health and Human Services Office of Inspector General, The HHS OIG works with several other agencies to target pandemic fraud, including fraudulent claims for funding under PPP and EIDL loans.

II. What Can the Government Review?

If the government is investigating you or your company for PPP loan fraud, there are a variety of ways that government officials can conduct a review. With this in mind, you must work closely with an experienced New York PPP loan fraud defense lawyer to effectively protect your company’s reputation, finances, and future. This is especially true if you face a federal subpoena, a federal agent interview, or another form of government oversight.

If federal agents are at your door, the firm's advice is the same as every defense lawyer's: say you want your lawyer, then stop talking.

How Can Prosecutors Distinguish a Knowing PPP Falsehood From a Mistake?

Submitting materially false payroll or employee information is one common way that PPP recipients face fraud allegations under the pandemic-relief fraud initiatives. In addition to issues like false certifications about pandemic-related impacts or the business’s need for funds, knowingly submitting false information about the business’s payroll or payroll employees can create significant exposure. The government can target both initial loan applications and forgiveness applications, and so business owners should carefully review all claims made to the SBA, especially when it comes to the employee-related requirements and limitations of a PPP loan.

Forgiveness applications can be problematic as well, because they create new and separate exposure from the original PPP loan application. If a business submits an application that contains materially false or misleading information, it can trigger scrutiny of the original application as well. This is a dangerous scenario, and as a result, businesses should be extremely careful when submitting PPP forgiveness applications.

What Are the Potential Criminal Charges in PPP Fraud Cases?

While multiple statutes can trigger criminal charges, most criminal investigations involve allegations of wire fraud under 18 U.S.C. § 1343. Under this statute, the government must prove a “scheme or artifice” in furtherance of which any material false statement or fraudulent pretense was made “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, shall be fined under this title or imprisoned not more than 20 years, or both.” Because most financial institutions use the internet to transmit electronic information across state lines, this creates a significant risk of criminal liability. Federal wire fraud allegations under 18 U.S.C. § 1343 generally carry a statutory maximum of 20 years in federal prison, increasing to 30 years when the statutory major-disaster, emergency, or financial-institution provision applies, meaning that even if the government’s investigation is not yet complete, it is imperative to work with a federal defense lawyer to mount a strategic defense.

Another statute that can be used to target PPP fraud is 18 U.S.C. § 1344, which focuses on bank fraud. Under this statute, federal prosecutors must prove a “knowing” scheme in order to defraud a financial institution or obtain money or property owned by the institution. With this in mind, a § 1344 conviction carries a statutory maximum of 30 years in federal prison. While prosecutors may charge a PPP recipient under § 1344 in combination with other statutes, they are even more likely to rely on these specific statutes when facing PPP loan fraud, forgiveness fraud, loan misuse, or other similar allegations.

What Can Happen Outside a Criminal PPP Prosecution?

When facing scrutiny from the U.S. government due to PPP loan fraud, what are some of the most significant (and potentially costly) consequences that companies and individuals can face? Outside of the risk of criminal charges and prison time, a variety of other issues can arise during and after a fraud investigation. Some of the major issues that business owners need to be aware of include:

• The False Claims Act, Codified at 31 U.S.C. § 3729, the False Claims Act (FCA) is a critical tool for federal prosecutors in pandemic-relief fraud investigations. It is often used in civil investigations as well, and it can lead to significant financial liability for fraud that does not reach the threshold of criminal liability.
• Liability for Treble Damages and Statutory Civil Penalties, Under the FCA, companies found liable for PPP loan fraud can face liability for treble damages if the government is able to prove a loss as a result of the company’s fraud. In addition to treble damages, businesses may also face statutory civil penalties under the FCA, which can become extremely expensive since the statutory penalties apply on a per-transaction basis.
• Qui Tam Lawsuits and FCA Relators, The FCA also contains unique “qui tam” provisions that allow private individuals, known as “relators,” to file lawsuits on behalf of the federal government. A qualifying relator can recover up to 30% of the amounts recovered under their complaint, which can provide a significant financial incentive for individuals to come forward when they suspect a PPP recipient of committing fraud.
• Distinguishing Restitution, Forfeiture, and Civil Damages, When dealing with civil PPP fraud cases, it is important to distinguish between restitution, forfeiture, and civil damages. While these all involve the potential for financial consequences, they are distinct legal concepts and apply under different circumstances.
• The Risks of Repaying a Fraudulently Obtained Loan, If a company has improperly obtained a PPP loan, one of the first instincts may be to repay the loan. While this may seem like a way to avoid further problems, repaying a fraudulent loan does not itself shield you or your company from civil or criminal penalties. In fact, repayment can sometimes raise more questions about how you obtained the loan in the first place.

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.