PPP Loan Fraud Investigations: What to Do if Arrested or Charged

Under Investigation for PPP Loan Fraud?

If you have been contacted by the Department of Justice or a federal agency and fear you are under investigation for PPP Loan Fraud, there are many steps that you can take to minimize your criminal exposure and fight to achieve the best outcome in your legal matter.

Since the PPP Loans originate from federal funding, federal authorities are the primary agents that investigate and prosecute crimes committed from the fraudulent use of PPP Loans. There are many severe consequences that can come from a conviction of a federal crime resulting from PPP Loan fraud such as years of prison time or millions of dollars in restitution fees.

In this article, you can learn about what the PPP Loan is, how PPP Loan Fraud occurs, federal crimes the Department of Justice can charge for PPP Loan Fraud, and defenses available to you against these allegations.

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What is a PPP Loan

On March 27th, 2021, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act into law. The CARES Act distributed $2.2 trillion dollars of relief to government agencies and the American people in order to stimulate the economy during the COVID-19 pandemic.

The Small Business Administration created the Paycheck Protection Program with $349 billion in funds they received from the CARES Act in order to help “businesses keep their workforce employed during the COVID-19 crisis.” The program received additional funding as Congress approved more spending for Coronavirus relief. As of May 31, 2021, companies can no longer apply for a PPP Loan; at this time, however, eligible companies can still apply for PPP loan forgiveness. Companies that were eligible to receive a PPP Loan were potentially able to borrow up to $10 million.

Examples of Acceptable Uses for SBA PPP Loans:

• Payroll

• Employee benefits

• Rent

• Utilities

• Interest on mortgage

• Debt obligations

Companies that used at least 60% of the proceeds from their PPP Loan for payroll specific costs are eligible to receive loan forgiveness during a covered 8 to 24 week period.

What is PPP Loan Fraud

An accusation of committing PPP Loan Fraud is a very serious matter. These complaints may come from a federal oversight agency or directly from the Department of Justice. Broadly speaking, PPP Loan Fraud occurs when an individual attempts to obtain or use funds allocated to the Small Business Administration via the CARES Act for wrongful personal gain instead of the loan’s intended use.

There are two broad ways in which an individual can commit PPP Loan Fraud:

1. Using funds from the PPP Loan for non-eligible expenses

2. Submitting untruthful or deceptive documents to the SBA or an approved lender in order to obtain either a PPP Loan or PPP Loan Forgiveness under false pretenses

The PPP Loan was created in order to protect employees from losing their jobs due to a lack of funding during the COVID-19 pandemic by helping employers maintain their payroll. The Department of Justice, however, has investigated many individuals in the last year for their alleged fraudulent use or attempted use of PPP Loan funds.

Examples of fraudulent actions taken to obtain PPP Loans:

• Lying about the number of employees working for a given company on the PPP Loan application

• Lying about employee wages on the PPP Loan application

• Submitting requests for a PPP Loan for a fictitious business

• Applying for PPP Loans from multiple lenders

• Sending false certifications or documents with the PPP Loan application

Some examples of documented improper uses for PPP Loans include:

• Purchasing a Lamborghini

• Staying at luxury hotels and purchasing high end clothes

• Spending funds at a strip club 

• Buying rare Pokemon cards

There are many different examples of investigations that the Department of Justice has conducted in order to prosecute individuals for their alleged improper use of PPP Loans. If you have found yourself as the subject of one of these investigations, we can answer what charges you might be facing and the defenses you have available.

What Criminal Charges Can You Face for Committing PPP Loan Fraud

Although violating the terms of a PPP Loan is a federal offense, there is not a specific charge within the U.S. Code for committing PPP Loan fraud. Rather, there are a variety of broad, “all encompassing” federal criminal charges that an assistant U.S. Attorney can prosecute in federal court.

Examples of common crimes you can be charged with for committing PPP Loan Fraud are:

• Conspiracy to Commit Fraud

This crime is committed when two or more people gather to make a plan to commit a crime and then take some sort of action to further their plan. These individuals do not need to be successful in their plan to be charged with conspiracy; rather, the individuals merely need to conspire to commit the crime.

• False Statements to a Financial Institution

This crime is committed when an individual lies to a bank or some other financial institution. For PPP Loan Fraud, this can occur if an individual sends false documents to a lender in order to obtain a loan.

• Bank Fraud

This crime is committed when an individual illegally obtains money, assets or property owned by a financial institution. For PPP Loan Fraud, this can occur when an individual successfully obtains funds from the SBA using deceitful methods.

• Wire Fraud

This crime is committed when an individual uses some form of impersonal or “wired” communication method (phones, computers, email, radio, etc) in order to deceitfully steal money.

The most severe sentences for these crimes can include several years in prison. Typically, when it comes to PPP Loan Fraud, the Department of Justice will attempt to charge an individual for multiple counts of one the listed crimes above. As a result, it is very important to contact a skilled and experienced Federal Defense Attorney if you are the subject of a PPP Loan Fraud investigation.

Legal Defenses For PPP Loan Fraud

There are several legal avenues a federal defense attorney can take to defend you for committing PPP Loan Fraud. Each case is different and the approach that an attorney can take will depend on the evidence that federal authorities have against you.

Examples of legal defense strategies a federal defense attorney can use in a PPP Loan Fraud case are:

• Lack of intent

In order to prove fraud, the federal government needs to prove that you intentionally misrepresented facts on your application for a PPP Loan. If a defense attorney maintains that the defendant had a misunderstanding while filing the application, it will be difficult for the prosecutors to prove that the defendant had an intent to defraud.

• Identity

Prosecutors need to prove that the defendant was in fact the person who submitted the false application and received the funds in question. This requires federal authorities to have strong, conclusive evidence. Depending on the strength of the prosecutor’s case, this strategy may be a viable option. All of the evidence that federal authorities have against the defendant must be disclosed before prosecution can commence which allows the defense to determine how to proceed.

• Mistake of Fact

If a federal defense attorney uses the Mistake of Fact strategy, then he or she argues that the defendant had a legitimate misunderstanding at the time when he or she committed the illegal action. The mistake must be valid and reasonable for this strategy to be successful.

If you are indeed found guilty for a criminal charge resulting from PPP Loan Fraud, a skilled federal defense attorney can still work to help you achieve a favorable and lenient outcome at your federal sentencing hearing. The penalties and sentences vary greatly per PPP Loan Fraud case. A federal defense attorney that has experience navigating the federal sentencing guidelines for a particular charge can help facilitate a discussion where a judge downward departs from recommended penalties for an offense.

Facing Charges for PPP Loan Fraud? We Offer Free Consultations.