South Carolina PPP Loan Fraud Lawyers.

An allegation that you received a PPP loan you were not entitled to, lied on your application, or used the loan proceeds improperly can lead to criminal prosecution, civil enforcement action, or both. The U.S. Department of Justice has taken aggressive enforcement positions in both contexts, and civil cases that seek monetary penalties will not necessarily prevent criminal prosecution.

Receiving loan forgiveness, which does not generally require extensive scrutiny of the borrower’s original application, may not provide complete protection. As we explain here, forgiveness of a PPP loan does not prevent the government from investigating later, denying forgiveness, or pursuing civil and criminal penalties if the loan application was inaccurate or the loan proceeds were improperly used.

Our attorneys are also familiar with the issue of so-called loan stacking. Loan stacking describes receiving funding from more than one lender as a result of fraud, whether on your business’s PPP loan application or elsewhere.

PPP loan allegations can also center on the misuse of PPP funds. This includes using funds for purposes other than payroll and related expenses, even if your business qualifies as an eligible industry, or in violation of specific limitations imposed for specific categories of business. This also includes violations like using funds to pay off-shore executives.

South Carolina presents a unique situation in the federal court system. Unlike many other states, South Carolina is covered by only one federal judicial district, the District of South Carolina. If you have been accused of PPP loan fraud in South Carolina, there is a good chance your case is being handled in the District of South Carolina.

Repayment, particularly repayment in excess of the loan amount, may be an effective strategy in resolving PPP fraud allegations. If the allegation involves a civil claim or the risk of criminal prosecution, we can help you evaluate if repayment is an appropriate response given your unique circumstances.

Which PPP Eligibility Tests Matter Beyond Employee Count?

The Paycheck Protection Program was created on March 27, 2020, through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Small Business Administration (SBA) administered PPP. Participating banks and other lenders issued loan proceeds, processed applications, and approved or denied loans under the PPP’s delegated-lending structure.

When determining a business’s eligibility under PPP, the SBA had to analyze the business’s employee count. In addition, the SBA took into account the business’s affiliated companies. The concept of “affiliation” was critical to the SBA’s size standard analysis. Under, “Affiliation”, 13 CFR § 121.301, an applicant was considered affiliated with another entity if the other entity possessed ownership, control, or both over the applicant. This meant that even if the applicant had less than 500 employees, if the entity controlling the applicant had 500 or more employees, then the applicant might have been an ineligible business entity.

The Small Business Administration has an “alternative size standard” for PPP. Under the PPP’s alternative size standard, a business could qualify if, as of March 27, 2020, it had maximum tangible net worth of no more than $15 million and average net income after federal income taxes, excluding carry-over losses, of no more than $5 million for the two full fiscal years before the application.

When we determine eligibility, this alternative size standard test also matters. While the SBA initially did not have the same controls that it later developed to avoid fraudulent claims, it now scrutinizes borrowers’ claims more closely, making it critical to ensure that all pertinent information regarding an entity’s eligibility is disclosed to the SBA. We will work with the SBA to make sure you meet all eligibility criteria, and we are able to help businesses and individuals to prove the eligibility that entitles them to the loan and loan forgiveness.

How do federal agents investigate a South Carolina PPP borrower?

If the government is pursuing your case criminally, it must prove that you acted with specific intent to defraud. The government must be able to prove that you knowingly provided false information. If you provided incorrect information based on an accidental error or the information was vague or ambiguous, then this will likely have an effect on the government’s criminal case. There are several defenses that our team of attorneys can raise when facing the risk of criminal prosecution. These include defenses such as good faith reliance on one’s accountant or financial advisor.

In addition to overcoming the affirmative defenses that we are able to raise, prosecutors will still need to prove your case beyond a reasonable doubt. This is different from proving your liability in civil matters, and prosecutors must be able to prove every element of their criminal charges against you to secure a conviction.

Federal agents could contact you in a number of ways. If you see agents from the Federal Bureau of Investigation (FBI), Internal Revenue Service - Criminal Investigations (IRS CI), or the Small Business Administration’s Office of Inspector General (SBA OIG) arriving at your business, it will likely be to question you. Agents have contacted borrowers via telephone and may attempt to get a loan applicant to agree to meet at their office.

Another important area of the federal government’s investigative powers are subpoenas. These legal documents can force you to produce responsive, nonprivileged documents, or compel you to testify in front of a federal grand jury, subject to applicable privileges and other legal protections.

An essential part of the federal investigation process are legal obligations to preserve records. If you are under investigation, destroying, altering, or hiding records that are relevant can result in additional criminal charges, including an obstruction of justice charge.

The attorneys at Spodek Law Group carry more than fifty years of combined experience between them.

How do qui tam procedure and federal fraud limitations differ?

The False Claims Act is one of the most important federal statutes for all types of enforcement involving federal fraud allegations. “any person who-(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;” Under the FCA, the government can seek a monetary judgment from a person or entity that “any person who-(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;”

The False Claims Act includes qui tam provisions as well, which allow “whistleblowers” who are known as “relators” to pursue action on behalf of the government for violations of the law. These qui tam provisions may allow a private citizen to seek the recovery of money owed to the government. If the False Claims Act applies, then a whistleblower can pursue the recovery of money that was allegedly stolen from or fraudulently received from the government on the government’s behalf. The relator, or “whistleblower,” generally receives 15% to 25% of the recovery if the government intervenes and 25% to 30% if the government declines to intervene and the relator prosecutes the action.

One of the False Claims Act’s qui tam provisions are civil, rather than criminal, in nature. This is an important distinction, as relators can never file criminal charges against others. Civil litigation under the False Claims Act is a significant risk for businesses and individuals accused of PPP fraud, so it is important to talk to an attorney about these risks as soon. Here too, the qui tam provisions are governed by 31 U.S.C. § 3730.

How much can a South Carolina PPP case cost in prison and restitution?

The maximum sentence for wire fraud under 18 U.S.C. § 1343 is twenty years per count, or thirty years when the violation involves a declared disaster or affects a financial institution. When pursued, wire fraud charges often carry accompanying charges for bank fraud under 18 U.S.C. § 1344, which carry a maximum penalty of thirty years per count. Along with this, prosecutors often pursue a charge for providing false information to federal officials in violation of 18 U.S.C. § 1001. A violation of 18 U.S.C. § 1001 can carry up to five years of federal prison.

When calculating a restitution amount, the prosecution may seek restitution for the victims’ provable pecuniary loss caused by the offense.

Here are some example convictions for PPP fraud. While a grand jury may determine whether probable cause supports an indictment, the judge ultimately determines a defendant’s sentence and restitution amount, and it is important to learn from the cases of others to understand how these outcomes could differ in your case.

• Lori Hammond submitted more than $11 million in fraudulent PPP and EIDL loan applications, personally received $3,162,038.50, and was sentenced to eighty months in federal prison and ordered to pay $2,722,932.50 in restitution.
• In a PPP fraud scheme in Georgia, one individual was sentenced to fifteen years.

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A federal prosecutor will pursue prison time in PPP cases if a defendant is found guilty in court. The maximum sentences for PPP fraud are steep. Of course, there are many different outcomes in federal court. Prosecutors are more likely to seek jail time in cases where the defendant has a long history of fraud. A primary goal of your defense should be to keep your sentencing history from influencing the court’s decision.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 888 348 8028.