Voluntary Disclosure: Should You Return PPP Funds Before Charges?

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience defending federal fraud cases. If you received a PPP loan and now realize there were problems with your application, you’re facing a critical decision: should you return the funds voluntarily before the government comes after you? This article explains the risks and benefits of voluntary disclosure in PPP cases.

The short answer is complicated. Returning PPP funds doesn’t guarantee you won’t face criminal charges, but it can significantly improve your position if charges are filed. The decision requires careful analysis of your specific situation – and it needs to happen before federal investigators knock on your door.

The 2020 Safe Harbor Period Has Passed

In April and May 2020, the SBA created a safe harbor period allowing borrowers to return PPP loans by May 18, 2020, if they determined in retrospect that they didn’t need the funds. Borrowers who returned loans during that window avoided enforcement action. That safe harbor ended years ago. If you’re reading this in 2025, that option is gone.

However, voluntary repayment still matters – just not as a get-out-of-jail-free card. It affects how prosecutors view your case, what charges they pursue, and what sentences courts impose. It demonstrates something prosecutors care about: you weren’t trying to steal money, you made a mistake.

Voluntary Repayment Doesn’t Erase Criminal Liability

Let’s be clear about what returning PPP funds doesn’t do. It doesn’t prevent prosecution. It doesn’t guarantee declination. It doesn’t erase the fact that you submitted an application the government believes was fraudulent. Federal prosecutors can – and do – charge people who voluntarily repaid their PPP loans.

The government’s position is that fraud happened when you submitted false information, regardless of whether you later returned the money. Think of it like bank robbery – you don’t avoid prosecution by returning the cash afterward. The crime was complete when you obtained the loan through false statements.

That said, voluntary repayment changes the calculus in meaningful ways. It affects charging decisions, plea negotiations, and sentencing. It transforms you from someone who stole government money and got caught into someone who made a mistake and tried to fix it when they realized the problem.

When Voluntary Disclosure Makes Sense

Voluntary disclosure works best when you discover problems with your PPP application before any investigation starts. Maybe you realize you miscalculated payroll. Maybe you learn that independent contractors shouldn’t have been counted as employees. Maybe you discover your business didn’t actually qualify for the loan amount you received.

If you’re not under investigation and you proactively return the funds with a clear explanation of what went wrong, you create a powerful narrative: honest mistake, not criminal fraud. This doesn’t guarantee prosecutors will decline to charge you, but it makes prosecution less likely.

The key is timing. Voluntary means voluntary – not “I returned the money after FBI agents interviewed me.” If investigators have already contacted you, your bank, or your accountant, it’s too late for true voluntary disclosure. At that point, repayment still helps, but it’s not voluntary in the way that matters to prosecutors.

The Risks of Voluntary Disclosure Without Legal Counsel

Don’t just write a check and hope for the best. Returning PPP funds without legal guidance can backfire spectacularly. Here’s why: when you return the money, you typically need to explain why. That explanation creates evidence prosecutors will use against you if they decide to file charges.

Say you return your $150,000 PPP loan with a letter explaining, “I realize now that I shouldn’t have counted independent contractors as employees.” You just confessed to making false statements on a federal loan application. If prosecutors charge you, they’ll use your own words as evidence that you knew the application was false.

This is where experienced federal defense counsel becomes critical. We structure voluntary disclosures to minimize legal exposure while maximizing the benefits of repayment. We don’t make admissions that create criminal liability. We explain mistakes in ways that negate criminal intent. We document good faith throughout.

How Voluntary Repayment Affects Plea Negotiations

If charges are filed despite voluntary repayment, the fact that you returned the funds becomes a major negotiation point in plea discussions. It affects loss calculations under sentencing guidelines. It demonstrates acceptance of responsibility. It shows prosecutors you’re not someone who intended to defraud the government – you’re someone who made a mistake and tried to fix it.

Loss calculations drive federal sentencing guidelines. If you received $200,000 but returned $200,000 before charges, what’s the loss? The government might argue the loss was still $200,000 because you obtained money you weren’t entitled to. We argue the loss was $0 because the government suffered no financial harm. The truth usually lands somewhere in between, but voluntary repayment significantly reduces the calculated loss – and therefore the recommended prison time.

Partial Repayment vs. Full Repayment

What if you can’t afford to return the entire PPP loan? Partial repayment still helps, but you need to be strategic about it. Returning $50,000 of a $200,000 loan doesn’t eliminate criminal liability, but it demonstrates good faith and reduces the loss amount.

The key is explaining why you’re returning what you’re returning. If you received $200,000 but only $50,000 was based on false information while $150,000 was legitimately owed, returning $50,000 with that explanation makes sense. If you received $200,000 and the entire loan was fraudulent but you’ve only got $50,000 available, partial repayment is better than nothing – but it won’t carry the same weight with prosecutors.

Documented Use of Funds Matters

Before making any decisions about voluntary disclosure, document exactly how you used PPP funds. If you received $150,000 and spent $100,000 on legitimate payroll expenses, that matters. The $100,000 used properly reduces the actual loss even if your application overstated eligibility.

We trace every dollar of PPP funds through bank records, payroll reports, and business expenses. This creates a complete picture of actual harm versus technical violations. Prosecutors care about this distinction. Someone who fraudulently obtained $200,000 and spent it on a Ferrari is different from someone who fraudulently obtained $200,000 and spent it on business payroll – even though both involve fraud.

The Investigation Timeline Matters

PPP fraud investigations move slowly. The statute of limitations is 10 years for wire fraud and bank fraud, 5 years for false statements. This means investigations can happen years after you received your loan. If you’re in 2025 and you got your PPP loan in 2020, you might still be within the window for charges.

Don’t wait for an investigation to start thinking about voluntary disclosure. If you know there were problems with your application, address them now – while it’s still truly voluntary. Once investigators contact you, your options narrow significantly.

Working With Experienced Federal Defense Counsel

At Spodek Law Group, we’ve handled voluntary disclosure situations in federal fraud cases for years. Todd Spodek has experience with complex fraud prosecutions covered by major media outlets like the New York Post, Bloomberg, and Newsweek. PPP voluntary disclosures require balancing multiple competing interests – minimizing legal exposure while demonstrating good faith.

We evaluate whether voluntary disclosure makes sense in your specific case. We structure the disclosure to protect you legally while maximizing benefits. We negotiate with prosecutors about how repayment should affect charging decisions. We document everything to support a mistake narrative rather than a fraud narrative.

If you’re considering returning PPP funds, don’t do it alone. Contact us first – we’ll review your situation and determine the best approach. We’re available 24/7 because these decisions can’t wait.