The Department of Justice has joined forces with several other federal investigative agencies to put a stop to alleged PPP loan fraud, and the aggressive measures the government has employed to safeguard the Paycheck Protection Program may be cause for concern for PPP loan recipients nationwide. Even business owners who believe they obtained PPP loans in good faith may find themselves targeted by a federal PPP fraud investigation if there is any question about their eligibility for funds or forgiveness, or whether the funds were used for authorized purposes.
The difficulty with the PPP lies in the fact that the U.S. Small Business Administration (SBA) allowed lenders to rely on borrowers’ self-certifications to determine their eligibility, which increased the potential for both deliberate fraud and honest mistakes or miscalculations. Unfortunately, the burden of PPP loan compliance rests squarely on the shoulders of the borrowers, not the lenders, and any borrowers with questions about loan compliance are encouraged to seek legal counsel as quickly as possible. Our attorneys at Federal Criminal Defense Pro specialize in fraud defense and other legal matters that fall under the jurisdiction of the federal government. With the help of our PPP fraud attorneys, you may be able to avoid a PPP federal investigation or criminal charges.
The Paycheck Protection Program
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing more than $2 trillion in emergency financial assistance to small businesses and others affected by the coronavirus pandemic. Part of the Act included the creation of the Paycheck Protection Program (PPP), which was designed to encourage small business owners to retain their workforce during COVID-19. The loan program provided a direct incentive for businesses to keep their workers on the payroll in the form of a loan backed by the SBA, all or part of which could be forgiven provided the borrower complied with the terms and conditions of loan forgiveness. Forgiveness is based on borrowers retaining their workforce and using at least 60% of the loan amount for payroll costs and the other 40% for eligible expenses (i.e. interests on mortgages, utilities, and rent and lease payments).
The sheer volume of PPP loan applications that were submitted and the speed at which they were processed raised serious concerns about the potential for PPP fraud. Initially, the Paycheck Protection Program included $349 billion in funding, but an additional $321 billion was added to the loan program in April 2020, with the introduction of the Paycheck Protection Program and Health Care Enhancement Act, for a total of $670 billion. By mid-July 2020, with the August 8 application deadline looming, more than $518 billion in PPP funds had been distributed to nearly five million loan recipients. The terms and conditions of the Paycheck Protection Program also shifted several times in the months after the program was introduced, which left many recipients of PPP funds unsure where they stood as far as eligibility and forgiveness.
PPP Fraud Cases Our Attorneys Handle
The majority of the criminal charges levied by the federal government in PPP fraud cases are based on recipients of PPP funds allegedly providing bad-faith certifications on PPP loan applications or applications for loan forgiveness, misrepresenting the amount of funds needed, and/or using PPP funds for unauthorizes purposes. The following are some examples of federal crimes the Department of Justice has included in criminal complaints related to PPP loan fraud, a brief explanation of each charge, and the penalties associated with a conviction.
Bank fraud – 18 U.S.C. § 1344
Bank fraud (18 U.S.C. § 1344) is a crime occurring when a person knowingly executes, or attempts to execute, a scheme with the intent to: defraud a financial institution; or obtain money, funds or other property owned by or under the control of a financial institution by means of false or fraudulent pretenses, promises or representations. The penalties associated with a bank fraud conviction include a maximum fine of $1,000,000 and/or imprisonment for a maximum prison term of 30 years.
Wire fraud – 18 U.S.C. § 1343
Wire fraud (18 U.S.C. § 1343) occurs when someone, “having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice.” If you are charged with wire fraud in connection with a Paycheck Protection Program loan, you could face up to 20 years in prison. If the alleged wire fraud involves a financial institution or any benefit disbursed in connection with a major disaster or emergency, the potential punishment includes up to 30 years in prison and/or up to $1,000,000 in fines.
Aggravated identity theft – 18 U.S.C. § 1028A
Aggravated identity theft (18 U.S.C. § 1028A) is another federal offense that has been charged in connection with PPP loan fraud. This type of offense occurs when someone, during and in relation to a felony crime such as bank fraud, wire fraud or making false statements, “knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person.” A criminal defendant found guilty of aggravated identity theft in a federal PPP loan case faces a two-year prison term, in addition to the punishment for the underlying felony offense.
Making false statements to the SBA or a financial institution – 18 U.S.C. § 1014
Making false statements to the SBA or a financial institution are two offenses that are covered under the same federal criminal statute – 18 U.S.C. § 1014. Pursuant to this statute, it is a federal crime to make any false statement or report on a loan application for the purpose of influencing the actions of the SBA or any federally insured bank. A conviction under 18 U.S.C. § 1014 is punishable by up to $1,000,000 in fines and/or a prison sentence of up to 30 years.
Making false statements to federal agents – 18 U.S.C. § 1001
Making false statements to federal agents is also a federal crime, which means you could face criminal penalties under 18 U.S.C. § 1001 if you make any false or fraudulent statements or representations to federal agents during a PPP loan fraud audit or investigation, or if you submit any documentation to the federal government knowing that it contains false or fraudulent information. The penalty for a violation of 18 U.S.C. § 1001 is up to five years in prison.
Attempt and Conspiracy – 18 U.S.C. § 1349
Even if you don’t succeed in fraudulently obtaining a loan through the Paycheck Protection Program, you could still face criminal charges under the federal attempt and conspiracy statute (18 U.S.C. § 1349). This law states, “Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.”
Call Us Today for a Free Federal PPP Fraud Consultation
The Criminal Division of the Department of Justice, along with its partner agencies, has already begun investigating and prosecuting alleged PPP loan fraud cases nationwide, and additional arrests and charges are expected in the coming weeks and months, as PPP loan recipients begin to apply for loan forgiveness. Our criminal defense attorneys at Federal Criminal Defense Pro are well-versed in dealing with a variety of federal fraud allegations and our expertise can help you get the best possible outcome in your case. Whether you have been arrested on suspicion of PPP fraud, you have received a target letter from the federal government, or you believe you may be at risk for PPP fraud charges, do not hesitate to seek legal guidance from our federal criminal defense attorneys. The consequences associated with allegations of federal PPP loan fraud are substantial and our reputable legal team can help.