Pennsylvania PPP Loan Fraud Lawyers.

Can a PPP Loan Repayment Dispute Become a Civil or Criminal Matter?

Yes. PPP matters can proceed criminally, civilly (generally under the False Claims Act), or through both tracks. The federal government has several authorities it can use in cases involving fraud, false claims, or other allegations of wrongdoing, and the Justice Department (DOJ) has the authority to pursue criminal or civil charges based on a case-by-case basis.

H3: What Are the Potential Consequences of a PPP Loan Fraud Prosecution?

A criminal conviction for a federal PPP loan fraud offense (or offenses) can result in numerous consequences. In addition to restitution, which generally must be paid back to the lender or the government if the lender is unable to recover, it also can support government forfeiture of either the proceeds of fraud or other assets. Even if a federal PPP loan fraud prosecution does not result in a conviction, it can have serious consequences that warrant a vigorous defense.

H3: Does the Government Need to Prove Intent in a PPP Loan Fraud Prosecution?

Generally, yes. Most federal criminal offenses, including many involving fraud, require the government to prove that the defendant knowingly and/or intentionally engaged in deceptive conduct. As a result, proving the facts of a case is only one part of a PPP loan fraud defense; defending against intent and the government’s reliance on circumstantial evidence is also extremely important.

H3: What is the Burden of Proof in a Federal Criminal Prosecution?

In a federal criminal prosecution, the government bears the burden of proving each element of its case beyond a reasonable doubt. While the government is usually able to prove the relevant facts in a federal PPP loan fraud case, showing that these facts meet the elements of a criminal offense and warrant a criminal conviction is more difficult.

H3: What is a False Claims Act (FCA) Civil Investigative Demand?

A False Claims Act (FCA) Civil Investigative Demand (CID) generally indicates that the government is pursuing a civil investigation against an individual or company under the FCA. These cases are common, and they present unique challenges as they can also be investigated by other law enforcement agencies and the Justice Department and can also have serious consequences.

H2: Which PPP Eligibility and Forgiveness Facts Can Investigators Test Against Your Records?

H3: What Does It Mean to Be “Affiliated” with Another Company Under the SBA’s Rules?

Depending on a company’s structure, it may be considered affiliated with another company or companies under the SBA’s affiliation rules. The rules, found at 13 CFR § 121.301, generally allow the SBA to combine the employee counts of “affiliated” businesses in certain cases. For example, if a company is affiliated with another company that has an employee count that brings the combined employee count above the eligible limit, the first company may not be eligible for a PPP loan.

H3: What Certifications Did Businesses Have to Make for PPP Eligibility?

PPP borrowers had to make several certifications in order to receive federal funds. To receive a PPP loan, borrowers generally had to certify that: (i) they were eligible for a PPP loan under the CARES Act and were not ineligible under the Cares Act; (ii) the PPP loan was necessary to support the company’s continued operations due to “economic uncertainty” brought about by the COVID-19 pandemic; (iii) the company met the PPP eligibility requirements under the CARES Act and applicable SBA rules; and, (iv) the company would use the loan proceeds only for permitted business purposes under the PPP rules.

H3: Which Expenses Qualified for PPP Forgiveness?

Forgiveness was based on the PPP borrower’s use of the loan proceeds. The permitted expense categories generally included:

• Payroll costs;
• Rent or similar payments;
• Mortgage interest;
• Utilities; and,
• Insurance and other qualifying expenses.

To have 100 percent of their forgiven proceeds excused, borrowers generally had to use at least 60 percent of their proceeds to support payroll costs. Forgiveness for the remaining 40 percent of the proceeds depended on the borrowers’ use of their loan proceeds for other permitted categories. Using PPP proceeds for personal expenses also made those amounts ineligible for forgiveness.

H3: What Documentation is Needed to Prove Forgiveness Eligibility?

Borrowers who sought forgiveness had to submit an application to the SBA. These applications required certifications and supporting documentation, such as payroll journals, tax filings, and other records. If a borrower failed to certify that it used the loan proceeds in accordance with the law, or if it certified inaccurately, this may constitute a crime.

Spodek Law Group states its position plainly on its own front page: we owe loyalty to only you.

H2: How Do Pennsylvania PPP Investigations Move from Records to Federal Charges or Civil Demands?

H3: Who is Involved in Federal Pandemic-Fraud Investigations?

Federal pandemic-fraud investigations involve several different federal agencies, and prosecutors play a key role as well. The SBA-OIG and DOJ play central roles, and the FBI, IRS, and the Department of Health and Human Services (HHS) are often involved as well. The agencies may work together to determine what facts have been established and what steps are warranted, and DOJ prosecutors will then determine whether to move forward with civil or criminal charges (or both).

H3: What are the Potential Pitfalls of Deleting or Altering Business Records During a Pandemic-Fraud Inquiry?

The potential pitfalls of deleting or altering business records during a federal pandemic-fraud inquiry are immense. Even if a company has not knowingly or intentionally committed fraud, its actions with respect to relevant records can trigger separate liability. This could include obstruction of justice or witness tampering, and if it involves the willful destruction of documents or otherwise misleading the government, then the government will likely pursue federal charges, even if it determines that a PPP loan was forgiven based on substantial or good faith evidence.

H3: How Will I Know if I am Under Investigation?

For many businesses and individuals, the only sign that they are under investigation for suspected PPP fraud is when the government executes a search warrant, issues a subpoena, or sends a target letter. This is because, in these types of cases, the government often begins by asking questions in order to build a case. This will mean that the more information you receive from the government, the more likely it is that it has determined it is warranted in following through with a criminal investigation.

H3: How Can I Resolve a Pending Pandemic-Fraud Investigation?

Our attorneys work with prosecutors to resolve pending pandemic-fraud investigations as early and quickly as possible. While an early resolution cannot always be achieved, the best early outcomes include a declination from the government, an agreement for civil settlement, deferred prosecution, or a negotiated guilty plea. With this in mind, once you receive a target letter or have your offices or home searched, it is important to start working with your attorney to resolve the inquiry promptly.

H3: How Do Investigators Confirm or Refute PPP Fraud Allegations?

The process for confirming or refuting allegations of PPP loan fraud is relatively straightforward. Investigators may review the borrower’s PPP application and compare it to payroll records, tax filings, bank records, and other documents. The extent of their review will depend on the scope of the investigation, and for a criminal investigation, they will typically investigate whether the borrower knowingly or intentionally filed a false certification.

H3: Are the Statistics Reported in December 2022 Indicative of Current Pandemic-Fraud Enforcement?

The statistics reported in the DOJ’s April 9, 2024 report describe historical enforcement. The figures released were summarized by the DOJ as “Since March 2020, SBA-OIG has initiated over 1,000 investigations involving complaints of fraud; received more than 270,000 SBA-OIG Hotline complaints; and, using data analytics, identified more than 104,000 actionable leads.... As of September 1, 2023, the FBI has opened over 1,800 PPP related cases and arrested 518 individuals.” that occurred from July 2020 to September 2022. This announcement also emphasized that pandemic-fraud prosecutions would remain a priority throughout the coming years.

H2: What Charges, Financial Consequences, and Defenses Can Follow a Pennsylvania PPP Allegation?

H3: What are the False Claims Act, its Financial Consequences, and Its Defenses?

The False Claims Act, 31 U.S.C. § 3729, imposes liability for knowingly presenting or causing to be presented a “false or fraudulent claim” or, in some circumstances, a “materially false record or statement” in order to support a fraudulent claim for payment. In the context of PPP loans, the DOJ has used the Act to target both borrowers and lenders. Because the False Claims Act has an extremely broad scope, liability under the Act can result in substantial financial exposure, including treble damages plus a civil penalty for each violation.

Defenses to a False Claims Act investigation generally involve showing that the facts are not as the government alleges, that the records involved are accurate and complete, or that the individual or company that made certifications under the False Claims Act had no knowledge or intent to defraud. In a False Claims Act action, the United States must prove all essential elements of its cause of action, including damages, by a preponderance of the evidence; the Act provides specified civil penalties and treble damages for covered violations.

For information about our False Claims Act defense practice, see our pages on civil fraud defense.

H3: What are the Penalties for Bank Fraud Under 18 U.S.C. § 1344?

Under 18 U.S.C. § 1344, bank fraud carries a maximum 30-year prison term. The federal bank fraud statute generally prohibits knowingly executing or attempting to execute a scheme to defraud a financial institution or to obtain money or property from a financial institution by false or fraudulent pretenses.

H3: What are the Penalties for Wire Fraud Under 18 U.S.C. § 1343?

18 U.S.C. § 1343, the federal wire fraud statute, prohibits the use of interstate wire transmissions to execute or attempt to execute a fraudulent scheme. For convictions under the wire fraud statute, defendants can face up to 20 years of imprisonment, but if the violation occurs in relation to or involves a benefit connected with a presidentially declared major disaster or emergency, or affects a financial institution, the maximum sentence increases to 30 years.

H3: What are the Penalties for Qualifying Aggravated Identity Theft Under 18 U.S.C. § 1028A?

Additionally, a conviction under 18 U.S.C. § 1028A for qualifying aggravated identity theft requires a consecutive two-year term of federal imprisonment. If the underlying offense is for PPP loan fraud, the two additional years of imprisonment are added to the sentence for any other charges if the borrower used another person’s or entity’s PII (Personally Identifiable Information) during the PPP loan application process, for example.

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.