Top 10 Legal Defenses Against PPP Loan Fraud Allegations

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. We’ve got over 40 years of combined experience handling federal fraud cases, including PPP loan prosecutions. If you’re reading this, you’re probably worried about an investigation or already facing charges. We get it – and we’re here to walk you through what defenses actually work when the DOJ comes after you for PPP fraud.

PPP fraud prosecutions aren’t slowing down. The statute of limitations is 10 years for wire and bank fraud, which means investigations will continue through 2030. Most prosecutors are counting on you not knowing that these cases have serious weaknesses – weaknesses we exploit every day. This article breaks down the strongest legal defenses against PPP fraud allegations.

Why PPP Cases Are Weaker Than Prosecutors Admit

The Paycheck Protection Program was chaos from the start. The SBA issued guidance, then changed it. Banks gave conflicting advice. Rules shifted weekly throughout 2020 and 2021. Prosecutors hope you don’t realize how often the program changed – because proving you knowingly committed fraud when the rules themselves were unclear becomes nearly impossible.

We pull every version of SBA guidance published during the application period. Your application might’ve complied with the rules at the time you submitted it, even if later guidance contradicted those requirements. Creating a timeline showing compliance with contemporaneous rules makes prosecutors nervous. They need to prove criminal intent beyond a reasonable doubt, and program confusion cuts directly against that.

Lack of Criminal Intent

Federal fraud charges require proving you acted with intent to defraud. Mistakes aren’t crimes. If you misunderstood eligibility requirements or miscalculated payroll expenses without intent to deceive, that’s a defense. The prosecution must show you knew the information was false when you provided it.

We build this defense through documentation. Correspondence with accountants, questions you asked your bank, research you conducted about program requirements – all of this demonstrates good faith efforts to comply. One client saved emails showing he’d asked his lender three times whether independent contractors counted toward employee calculations. The lender gave him wrong information. That’s not fraud.

Insufficient Evidence

Prosecutors need evidence that proves guilt beyond a reasonable doubt. Many PPP cases rely on circumstantial evidence like bank records and application discrepancies. We challenge every piece of evidence – its accuracy, its relevance, how it was obtained. Sometimes the government’s entire case rests on a single witness or a forensic accountant’s interpretation of your financial records.

Take payroll calculations. Say the government claims you inflated employee numbers. We subpoena your tax records, 940 forms, state unemployment filings, and compare them to your application. If there’s a discrepancy, we identify why – was it independent contractors you believed qualified? Seasonal workers? Part-time employees you counted as full-time because guidance was unclear? Creating alternate explanations that don’t involve fraud weakens the prosecution’s case substantially.

Statute of Limitations

Different charges have different time limits. False statements carry a 5-year statute of limitations. Wire fraud and bank fraud carry 10 years. We examine exactly when each allegedly fraudulent act occurred and whether charges were timely filed. Sometimes investigations drag on for years, and prosecutors miss deadlines. We’ve gotten cases dismissed because the government waited too long to indict.

Challenging Evidence Obtained Through Improper Searches

If federal agents seized evidence without a proper warrant or violated your Fourth Amendment rights during the investigation, that evidence can be suppressed. We scrutinize search warrant applications for accuracy. Did agents misrepresent facts to obtain the warrant? Was the warrant overly broad? Did they exceed its scope during the search?

Suppressing key evidence can collapse the government’s case entirely. Without access to certain bank records or emails, prosecutors may lack sufficient proof to proceed.

Entrapment

Entrapment occurs when government agents induce you to commit a crime you wouldn’t have otherwise committed. If an undercover agent or cooperating witness actively encouraged you to inflate your application, and you only did so because of that encouragement, this defense might apply. The key question is predisposition – were you already inclined to commit fraud, or did the government create the crime?

Involuntary Misrepresentation

Sometimes inaccurate information appears on your application because of third-party errors – not your own conduct. Maybe your accountant miscalculated payroll. Maybe your lender entered information incorrectly. Maybe you relied on software that generated incorrect figures. If you can show the misrepresentation wasn’t your fault and you didn’t know about it, that’s a defense.

We trace exactly how each piece of information ended up on your application. Who prepared it? Who reviewed it? Who submitted it? If someone else made the error, you’re not criminally liable for their mistake – assuming you didn’t know about it and had no reason to suspect it was wrong.

Actual Eligibility for the Loan

In some cases, the best defense is proving you were actually eligible for the PPP loan you received. Prosecutors sometimes misunderstand program requirements or apply standards that didn’t exist at the time. We reconstruct the eligibility criteria that applied when you applied – not the criteria that exists now after multiple rounds of guidance changes.

Take the “necessity” certification. Early guidance said borrowers needed to certify “current economic uncertainty makes this loan request necessary.” What does that mean? The SBA never clearly defined it. If you had revenue declines or uncertainty about future business conditions in 2020, you met the requirement – even if you weren’t on the verge of bankruptcy. Prosecutors try to impose stricter standards retroactively. We don’t let them.

Lack of Loss to the Government

While repaying the loan doesn’t erase criminal liability, demonstrating that the government suffered no actual loss can be a mitigating factor. If you used PPP funds for legitimate business expenses – even if you shouldn’t have qualified for the loan initially – sentencing guidelines account for actual loss, not intended loss. Some clients fully repaid their loans before charges were filed. These facts significantly impact sentencing and plea negotiations.

Why Spodek Law Group Handles PPP Fraud Cases Differently

At Spodek Law Group, we focus on clients we can actually help – not just anyone who walks through the door. Todd Spodek has handled federal fraud cases for years, including representing clients in nationally-covered cases that made headlines in the New York Post, Bloomberg, and Newsweek. PPP prosecutions require understanding both federal criminal procedure and the specific chaos of pandemic-era relief programs.

We start by analyzing whether the government even has a viable case. Many PPP investigations are built on weak foundations – misunderstandings about program rules, circumstantial evidence, or assumptions that don’t hold up under scrutiny. If we see a path to dismissal or significant charge reduction, we pursue it. If a plea agreement makes more sense, we negotiate terms that minimize prison time and financial penalties.

The worst thing you can do is ignore a PPP fraud investigation. These cases don’t go away. Federal agents are patient. They build cases for months or years before filing charges. If you’re under investigation – or even if you just suspect you might be – contact us immediately. Early intervention gives us the best chance to shape the outcome before charges are filed.

We’re available 24/7. Call us – we’ll walk you through what happens next and whether these defenses apply to your situation.