North Dakota PPP Loan Fraud Lawyers.

The Small Business Administration administered PPP loans through participating financial institutions. When the SBA determines that a borrower obtained and/or kept funds by fraudulent means, this can trigger separate SBA, criminal, and False Claims Act proceedings.

What Can Lead to PPP Loan Fraud Allegations?

False and deceptive loan applications, duplicate applications, and improper spending are three of the most common allegations in PPP loan fraud cases. All three are investigated by federal law enforcement agents. If an investigation reveals grounds for civil or criminal charges, the SBA or the Department of Justice will file a PPP loan fraud complaint.

What is a PPP False Claims Act Case?

If a PPP borrower knowingly made or used a materially false statement or presented a false or fraudulent claim in connection with the funds he or she received, he or she may face civil liability under the False Claims Act. In False Claims Act cases, the Department of Justice can pursue treble damages for qualifying government losses. In these cases, the United States must prove that the defendant violated the law; however, the Department of Justice does not need to prove that the defendant intended to violate the law.

What Do I Need to Prove to Win a PPP False Claims Act Case?

Under the False Claims Act, the United States must establish that the defendant:

• “Knowingly” presented a false claim; or
• “Knowingly” made or caused to be made a false statement or record material to a false or fraudulent claim.

To “knowingly” present a false claim or “knowingly” make a false statement involves “actual knowledge,” “deliberate ignorance,” or “reckless disregard” of the truth.

Essentially, the False Claims Act applies an actual-knowledge, deliberate-ignorance, or reckless-disregard standard of liability. As a result, unlike criminal fraud offenses such as bank fraud, proof of specific intent is not required to prove a False Claims Act violation.

Which Records Must North Dakota PPP Borrowers Preserve When Scrutiny Begins?

If you are a North Dakota PPP borrower that has recently received scrutiny or a subpoena from the SBA, or DOJ, or if you are worried about potentially facing a PPP loan fraud investigation, the best course of action is to preserve all documents that could be relevant.

During PPP loan fraud investigations, federal investigators can rely on a variety of different types of evidence. Bank records, payroll records, tax filings, emails, and testimony from interviews can all be useful for proving fraud, as can other evidence.

Who Will Federal Investigators Interview During a PPP Loan Fraud Investigation?

Federal law enforcement agents can target their inquiries to a variety of different people who may have information relevant to the investigation. If your company received a PPP loan and you are being accused of fraud, you may be targeted, as may your company’s employees, accountants, lenders, business associates, and anyone else with knowledge about the financial situation of your company.

What are the Next Steps Following a PPP Loan Fraud Subpoena?

A PPP loan fraud subpoena may require you to answer one or more of the following demands:

• Producing certain documents;
• Producing certain data;
• Providing written answers;
• Providing in-person testimony,

The Fifth Amendment protects an individual against providing compelled self-incriminating answers. However, with respect to responding to a subpoena for documents or data, there is no “privilege” against complying with the subpoena by producing the requested records.

Additionally, while a respondent may have a privilege against providing a self-incriminating answer, this privilege does not protect against the offense of lying to federal investigators. An attempt to avoid self-incrimination by knowingly and willfully making a materially false statement about information within your knowledge can create an additional criminal offense under 18 U.S.C. § 1001.

Which PPP Eligibility, Spending, and Forgiveness Facts Drive Fraud Allegations?

The PPP program was intended to provide temporary financial support for businesses’ payroll costs, as well as a variety of specified business operating expenses. This included costs related to continuing operations, rent, mortgages, utility bills, and even employee healthcare. However, PPP borrowers were required to use the funds only for authorized purposes, including payroll costs and specified eligible nonpayroll expenses.

Under the PPP loan program’s Loan Forgiveness and Repayment process, borrowers were required to use “at least 60 percent” of their PPP loan proceeds to pay “payroll costs” eligible under the PPP loan program in order to qualify for full forgiveness of the funds they received. In other words, borrowers who spent 59 percent of their funds on eligible expenses were entitled to only partial loan forgiveness. In the process of applying for PPP loan forgiveness, borrowers also certify that they made use of the funds solely for “eligible business expenditures.”

Because of the inherent risk of PPP fraud, the federal government implemented additional measures to prevent fraudulent activity and to target PPP loan fraud in the event that it occurs. Borrowers that are found to be ineligible for PPP loans can face criminal charges for each false statement that they made. Borrowers that obtain their PPP loans by fraudulently making duplicate or excessive applications can face criminal charges under the bank fraud statute. Borrowers that provide false information when applying for PPP loan forgiveness can face fraud charges separate from any charges related to their application and receipt of the funds.

What Are the Criminal Penalties for PPP Fraud?

What Is PPP Bank Fraud?

Many allegations involving the PPP loan program involve bank fraud under 18 U.S.C. § 1344. This statute imposes a maximum fine of $1,000,000 or imprisonment for not more than thirty years, or both, for knowingly executing or attempting to execute a scheme to defraud a financial institution or to obtain its money or property by means of false or fraudulent pretenses, representations, or promises.

What Is PPP Wire Fraud?

Wire fraud is another criminal charge that the government can seek for PPP loan fraud. Under 18 U.S.C. § 1343, the government must prove that the defendant “used” or “caused to be used” wire communications in the furtherance of a scheme “to defraud” or to obtain money or property by means of “false or fraudulent pretenses, representations, or promises.” With a twenty-year maximum prison term, wire fraud is a serious criminal offense that the government will use in many PPP loan fraud prosecutions.

What Is the PPP False Statement Charge?

18 U.S.C. § 1014, the federal false-statement statute, imposes a maximum fine of $1,000,000 or imprisonment for not more than thirty years, or both, for knowingly making a false statement or report, or willfully overvaluing property or security, for the purpose of influencing specified entities, including the Small Business Administration. This section was also used to target fraud in other types of lending and credit transactions.

“I am a straight shooter,” Todd Spodek says of his own practice. “I tell clients exactly where their case stands.”

How Do SBA Review, Subpoenas, Searches, and Grand Juries Change the Case?

PPP fraud cases can take a variety of forms, and the consequences for being suspected of PPP fraud can vary widely as well. In fact, for many people targeted in PPP loan fraud investigations, there is a significant risk that their investigation will never result in criminal charges or civil litigation. In other cases, PPP loan fraud investigations can and will lead to federal prosecution, and a clear understanding of how the process works is essential for taking an informed and strategic defense approach.

The typical PPP loan fraud case progresses as follows:

Search Warrant

A search warrant is a court order that authorizes a search of a certain place at a certain time for specific types of evidence. Agents are only permitted to seize evidence that falls within the authorized scope of the warrant.

While getting a search warrant can be an unpleasant experience, a search warrant does not necessarily mean that the subject will be charged. And in some cases, a search warrant is the most efficient and least intrusive way to investigate potential claims of PPP fraud because it allows federal agents to move on with the investigation without having to go to court to obtain the evidence they seek.

Target Letter

A target letter is a letter that is mailed to the subject in a federal grand-jury investigation, usually by the Department of Justice. With a target letter, the government is telling you that you are suspected of committing a federal offense, though it is not an indictment. If you received a target letter from the government in the mail, you should contact an experienced federal criminal defense attorney right away.

Grand-Jury

A grand-jury proceeding is a formal proceeding in which a jury determines whether there is enough evidence to justify the charges of an indictment. Grand-jury proceedings usually occur before a trial, and they are conducted in secret. If you are being charged in connection with the PPP loan program, your defense attorney should immediately find out if you are the subject of a grand-jury investigation.

Filing Criminal Charges

The federal government can and will file criminal charges in PPP loan fraud cases that meet the government’s criteria. Federal criminal investigations can go on for years, and the government can and will pursue prosecution only if it believes that a criminal conviction is warranted. However, the federal wire fraud statute generally carries a five-year limitations period. This means that the federal government generally will have five years to file criminal charges after an alleged violation occurred, though this limitation can be extended if it applies to multiple offenses.

What Federal Charges, Deadlines, and Sentencing Consequences Can Follow?

The most common federal charges in PPP loan fraud cases include bank fraud, wire fraud, and aggravated identity theft. Federal prosecutors will routinely seek to apply these charges when seeking to protect the federal government’s taxpayers’ dollars.

While the consequences of PPP fraud are numerous and potentially severe, it is important to understand that these consequences depend on a wide range of variables.

When facing federal prosecution for a criminal offense, you will need to know what to expect from the process. Generally, your defense attorney will be able to provide an accurate forecast of how the case will proceed, and you will be able to plan your defense with an informed expectation of the outcome.

What Other Charges May Be Alleged in a PPP Loan Fraud Prosecution?

In addition to the most commonly-charged offenses for PPP fraud, federal prosecutors may pursue a variety of other criminal charges, including:

• Aggravated Identity Theft: In cases involving the use of another’s identification information in an attempt to fraudulently obtain PPP loan funds, federal prosecutors will frequently seek to add charges for aggravated identity theft under 18 U.S.C. § 1028A. This statute imposes a mandatory consecutive two-year sentence, and it is one of the criminal charges that federal prosecutors are highly likely to pursue for PPP loan fraud.
• Conspiracy: Federal prosecutors may seek conspiracy charges under 18 U.S.C. § 371 against those who allegedly agreed to commit federal offenses or to defraud the United States.
• Money Laundering: If you are accused of concealing, transferring, or spending proceeds that you obtained through fraud, you may face money-laundering charges under one of a variety of different federal statutes.
• Obstruction: As with most cases involving alleged fraud, PPP loan fraud cases will often involve allegations of obstruction. This can result in additional charges for concealing a crime, withholding or destroying evidence, or intimidating witnesses during an investigation.

What Are the Sentencing Consequences for PPP Fraud?

The U.S. Sentencing Guidelines apply the fraud guideline in §2B1.1 to PPP fraud and other fraud offenses. Along with other mitigating factors, certain case-specific facts can significantly increase the risk of facing an extended prison term. These include:

• A large loss amount;
• The number of victims;
• Your role in the alleged fraudulent activity;
• Allegations of obstruction;
• Allegations of sophisticated means;
• Previous convictions for similar offenses; and,
• A lack of acceptance of responsibility.

Speak With Counsel Before You Answer Anything

If agents have contacted you, the order matters: counsel first, answers second. Spodek Law Group has been practicing since 1976 and defends federal matters nationwide, coast to coast, from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028.