Phoenix PPP - SBA - EIDL Loan Fraud Lawyers

The COVID-19 pandemic led to unprecedented government assistance for small businesses in Phoenix and across Arizona, through programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) fund. While these loans and grants provided a lifeline for many firms impacted by the economic fallout, they also created opportunities for fraud and abuse. This article examines legal issues around PPP and EIDL fraud in Phoenix, including applicable laws, potential defenses, and implications for those facing charges.

Overview of COVID-19 Small Business Relief Programs

The CARES Act in March 2020 authorized over $650 billion in PPP loans, intended to cover payroll, rent, utilities and other expenses during COVID-19 shutdowns. Another $20 billion went to the EIDL program for working capital loans up to $150,000. Applicants self-certified eligibility under relaxed standards meant to disburse aid quickly. This reduced vetting led the SBA Inspector General to estimate that over $200 billion in potentially fraudulent loans were distributed nationally out of $1.2 trillion total.

Federal Laws Used to Prosecute PPP and EIDL Fraud

Prosecutors often charge COVID-19 loan fraud under these federal statutes:

• Wire fraud - using interstate wires to execute a scheme to defraud or obtain money falsely (18 U.S.C. § 1343)
• Bank fraud - scheme to defraud a bank or obtain bank funds via false statements (18 U.S.C. § 1344)
• False statements - falsifying or concealing material facts from a federal agency (18 U.S.C. § 1001)
• Aggravated identity theft - using someone else's personal information during certain felonies (18 U.S.C. § 1028A)

Potential penalties include up to 30 years in prison for wire and bank fraud, plus mandatory 2-year consecutive sentences for aggravated ID theft convictions.

Common Types of PPP and EIDL Fraud

Some typical COVID-19 loan scams prosecuted in Phoenix include:

• Inflating business payroll, employees, revenues, or costs to maximize loan amount.
• Using fake documents like bogus tax forms, bank statements, and payroll records.
• Stealing identities to fraudulently apply for loans under someone else's name.
• Obtaining multiple PPP loans by applying to several lenders.
• Unqualified businesses like publicly traded firms receiving PPP loans.
• Spending loan proceeds on personal purchases, debt payments, real estate, etc.

Phoenix PPP and EIDL fraud cases have involved from $17,500 up to $3 million in loans obtained illegally.

Available Defenses in PPP and EIDL Fraud Cases

Despite issues with the loan programs, they still helped many legitimate small businesses. Possible defenses for those accused include:

• No intent - the government must prove you knowingly devised a scheme to defraud.
• Good faith errors - inaccurate information provided unintentionally.
• Minimal misstatements - small mistakes unlikely to have changed loan approval.
• Authorized use of funds - demonstrating loans were used for approved purposes like payroll.
• Identity theft - proving you did not actually apply for or receive the loan proceeds.

An experienced federal fraud defense lawyer can identify the optimal defense based on the prosecution's evidence and conduct targeted investigation.

Penalties for PPP and EIDL Fraud Convictions

Potential penalties include:

• Up to 30 years in prison for wire or bank fraud.
• Mandatory minimum 2-year sentence for aggravated ID theft.
• Fines up to $1 million for individuals, higher for corporations.
• Full restitution of all funds obtained by fraud.
• Treble civil damages under the False Claims Act.
• Debarment from future federal loans, grants, and contracts.

Sentences follow federal guidelines based on loss amount, sophistication, criminal history, and other factors.

Collateral Consequences of a Conviction

Beyond direct penalties, a conviction can lead to:

• Reputational damage, loss of business, damaged relationships.
• Exclusion from future COVID-19 relief programs.
• Ineligibility for other SBA loans and grants.
• Potential suspension or revocation of professional licenses.

An experienced lawyer can advise on options to mitigate these consequences both pre- and post-conviction.

Avoiding Allegations of PPP and EIDL Fraud

To avoid fraud allegations when applying for COVID-19 relief programs:

• Provide accurate employee, revenue, and cost data.
• Maintain detailed records to support figures in applications.
• Only apply to one lender for the same purpose.
• Use loans only for approved uses like payroll and rent.
• Retain receipts and documentation on how funds were spent.

Consulting with legal counsel can help identify any issues and mitigate risks when seeking emergency small business aid.