Navigating PPP and EIDL Loan Fraud Charges in North Carolina

The COVID-19 pandemic led to an unprecedented level of government assistance for small businesses across the country. The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program distributed over $1 trillion in loans and grants to help small businesses stay afloat during pandemic shutdowns and restrictions. However, the speed at which these programs were rolled out also created opportunities for abuse and fraud. Now, federal prosecutors are cracking down on PPP and EIDL fraud cases across the country, including here in North Carolina. If you or your business are being investigated or charged, it's critical that you understand your rights and explore all legal defenses with an experienced attorney.

An Overview of PPP and EIDL Loan Fraud

The PPP and EIDL programs were vulnerable to fraud in several key ways:

Limited vetting of applications due to the rush to distribute funds
Applicants could self-certify eligibility with little documentation
Loans were attractive targets for identity theft and synthetic identity fraud
Minimal oversight of how loan funds were actually used

According to a recent report from the SBA Inspector General, at least $200 billion in potentially fraudulent EIDL and PPP loans were distributed. That's about 17% of the total funds. Some of the common PPP and EIDL fraud schemes include:

Falsifying employee, revenue, or cost numbers on applications
Using stolen identities to apply for multiple loans
Applying for loans on behalf of fake or inactive businesses
Colluding with lenders to rubber stamp unqualified applications
Using loan funds for unauthorized personal purchases and expenses

While some cases involve outright fraud from the start, others are more nuanced. For example, some borrowers may have made honest mistakes on their applications or did not fully understand the loan rules.

Charges and Penalties for PPP and EIDL Loan Fraud

Federal prosecutors are aggressively pursuing PPP and EIDL fraud cases under a variety of charges, including:

Wire fraud
Bank fraud
Making false statements
Identity theft
Money laundering
Conspiracy

Defendants are facing felony charges that can lead to substantial prison sentences and fines. For example:

A Charlotte business owner recently pleaded guilty to conspiracy to commit wire fraud and faces up to 20 years in prison for a $720,000 PPP scam.
A North Carolina man was charged with bank fraud, false statements, and engaging in unlawful monetary transactions for allegedly obtaining $6 million in fraudulent PPP and EIDL loans. He faces up to 30 years in prison per count if convicted.

In addition to criminal penalties, the government will seek full repayment of any fraudulent loans or misused funds. The SBA can also pursue civil False Claims Act cases which allow treble damages.

Building an Effective Legal Defense

Facing federal criminal charges is daunting for any defendant. But an experienced white collar defense attorney can thoroughly analyze the facts of your case and build a strategic defense. Some potential defenses to explore include:

No intent to defraud: For many charges, prosecutors must prove you deliberately set out to commit fraud. Evidence showing a lack of criminal intent could undermine the case.
Loan eligibility disputes: There may be legitimate disputes over whether your business actually qualified for PPP or EIDL loans based on the program rules at the time.
Loan use challenges: The rules on how PPP loan funds could be used evolved over time. You may have reasonable arguments that expenses were allowed.
Recordkeeping failures: Sloppy books or missing records alone are not enough to prove fraud if the prosecution cannot show specific intent.
Parallel civil proceedings: The SBA enforcement process may develop facts helpful to defeating criminal charges.

An attorney can also negotiate with prosecutors for pretrial diversion or reduced charges in appropriate cases. And if charges do go to trial, skilled defense lawyers know how to identify weaknesses in the government's case and create reasonable doubt.

A Proactive Approach Is Critical

Given the scope of PPP and EIDL lending, federal prosecutors will likely be investigating and charging loan fraud cases for years to come. The statute of limitations for these financial crimes was extended to 10 years under the CARES Act. If you know or suspect you are under investigation, it is essential to engage experienced legal counsel immediately. An attorney can interact with investigators on your behalf, present defenses and mitigating factors, and work to resolve the matter before charges are ever filed. Don't wait until you are indicted - that makes the defense process much more difficult. Be proactive in protecting yourself and your business.

The Attorneys at Spodek Law Group Provide Aggressive Representation

The white collar defense attorneys at Spodek Law Group have extensive experience representing business professionals, executives, and entrepreneurs facing PPP or EIDL fraud investigations and charges across the country. We offer skilled and aggressive representation to North Carolina residents accused of COVID relief lending fraud. We will conduct a meticulous review of the facts of your case and the evidence against you. We know how to pinpoint flaws in the government's case and present persuasive defenses. And we will negotiate aggressively with prosecutors to have charges dismissed or reduced whenever possible. Don't leave your fate in the hands of an overworked public defender. The consequences are too severe. To schedule a free and confidential case evaluation with our team of federal fraud defense lawyers, call us at 888-997-2757 or reach out online today.

References

https://www.federallawyers.com/criminal-defense/raleigh-ppp-sba-eidl-loan-fraud-lawyers/
https://www.federallawyers.com/criminal-defense/north-carolina-ppp-sba-eidl-loan-fraud-lawyers/
https://dysartwillis.com/paycheck-protection-program-ppp-loan-fraud-what-you-need-to-know/
https://www.justice.gov/usao-wdnc/pr/charlotte-business-owner-pleads-guilty-wire-fraud-conspiracy-720000-covid-19-fraud
https://www.justice.gov/opa/pr/north-carolina-man-charged-covid-19-relief-fraud
https://www.sba.gov/sites/sbagov/files/2023-06/SBA%20OIG%20Report%2023-09.pdf