The Office of the Attorney General has instructed all U.S. Attorneys to make it a priority to methodically investigate and prosecute crimes related to the coronavirus pandemic, which can make defeating criminal charges for alleged fraudulent activity involving the Paycheck Protection Program (PPP) a tremendously difficult task. Since May, the Department of Justice has criminally charged more than a dozen individuals in 11 states suspected of defrauding the Small Business Administration’s loan program of millions of dollars, and the rigorous scrutinizing of PPP loan recipients won’t stop there. Federal officials have promised to crack down on any abuse of the Paycheck Protection Program and borrowers now face a serious risk of criminal prosecution. If you have been arrested or charged with PPP loan fraud, or if you discover that you are the target of a PPP federal investigation, your first course of action should be to consult an experienced PPP fraud attorney who specializes in federal criminal cases.
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Since its inception, the Paycheck Protection Program has distributed nearly five million loans worth $518 billion and is accepting applications through August 8, 2020. Initially, the loan program included $349 billion in funding, but the Paycheck Protection Program and Health Care Enhancement Act, signed into law in April 2020, replenished the program with an additional $321 billion. The PPP doled out funds generously, allowing borrowers to self-certify that they were in need of emergency assistance, with limited safeguards in place to prevent fraud, and now that borrowers are beginning to apply for loan forgiveness, the government has put in place an extensive review process and will go after those believed to have unfairly taken advantage of the emergency funds or failed to follow the program’s strict yet shifting rules. If your company secured a loan through the Paycheck Protection Program and you are applying to have the loan forgiven, you can expect to face a great deal of scrutiny as the federal government moves to take down businesses suspected of PPP fraud. Our PPP attorneys are here to help companies under federal investigation for fraud, and we expect to continue getting calls as more PPP fraud cases are filed by the DOJ.
What if I am the target of a PPP fraud investigation? What kinds of certifications accompany a request for loan forgiveness? What can I use PPP funds for?
What is the Paycheck Protection Program?
The Paycheck Protection Program is a federal loan program designed to provide small businesses and self-employed individuals struggling to stay afloat during the coronavirus pandemic with the funds needed to retain their workforce and keep their business running. The purpose of the loan program, which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is to provide business owners with a direct incentive to keep their workers employed, in the form of a low-interest, forgivable loan backed by the SBA. PPP loan forgiveness is based on the employer keeping all employees on the payroll or quickly rehiring employees who were laid off and maintaining the employees’ salary levels. In order for PPP loans to be forgiven in full, at least 60% of the loan must have been used to cover payroll costs and the other 40% to cover “eligible expenses,” which is defined as mortgage interest payments, rent and lease payments, and utilities.
PPP Loan Fraud
Fraud is a type of white-collar crime, which is to say it is a nonviolent crime committed by a business or government professional for the purpose of financial gain. The FBI and other federal law enforcement agencies have gone to great lengths to combat fraud and other white-collar, financially motivated crimes, and PPP fraud is no exception. Among the criminal charges federal prosecutors are pursuing in connection with PPP loan fraud are bank fraud, wire fraud, mail fraud, tax evasion and identity theft. As federal offenses, these crimes carry harsh penalties. A federal charge of bank fraud, for instance, carries a statutory maximum sentence of 30 years in prison, plus a potential fine of up to $1,000,000.
Even if you didn’t actually receive PPP funds through the Paycheck Protection Program, you could still face criminal charges under federal attempt or conspiracy statutes for fraudulently applying for a PPP loan. Or you can be criminally charged for making false statements to federal agents or SBA auditors during a PPP fraud investigation or audit, or for submitting a fraudulent loan forgiveness certification. The various criminal statutes federal prosecutors can use to pursue charges against those suspected of defrauding the Paycheck Protection Program are abundant and the consequences of these federal charges are far-reaching.
Federal Investigations Related to PPP Loan Fraud
The federal government has made it abundantly clear that it will investigate and prosecute any individuals or business owners who obtained or attempted to obtain PPP funds by fraud. Less than two months after the CARES Act was signed into law, the Department of Justice issued a press release announcing the first arrests on charges of fraudulently seeking Paycheck Protection loans. The charges were filed against two Rhode Island businessmen alleged to have conspired to seek forgivable loans guaranteed by the SBA. Among the charges levied against the criminal suspects were bank fraud, conspiracy to commit bank fraud, aggravated identity theft and conspiracy to make false statements to the SBA. “Every dollar stolen from the Paycheck Protection Program comes at the expense of employees and small business owners who are working hard to make it through these difficult times,” said Assistant Attorney General Brian A. Benczkowski of the DOJ’s Criminal Division, in the press release. “The Criminal Division is committed to working with our law enforcement partners to root out abuse of the important relief programs established under the CARES Act.”
Unfortunately, businesses suspected of committing PPP loan fraud will have to face more than just the Department of Justice. The Chair of the Senate Committee on Small Business and Entrepreneurship has stated that it intends to conduct “aggressive oversight of the Paycheck Protection Program (PPP), including whether companies made false certifications to the federal government to receive PPP loans,” and the SBA announced in May that it will audit all loans amounting to more than $2 million following applications for loan forgiveness.
Current PPP Fraud Cases
So far, more than a dozen fraud cases have been filed in connection with the Paycheck Protection Program. These early PPP loan fraud cases involve defendants who are suspected of flagrantly committing fraud. For instance, lying on PPP loan applications, misusing PPP funds (using loans for unauthorized purposes other than payroll costs and eligible expenses) or falsifying tax or business records. However, as PPP fraud investigations proceed, the government may find that proving charges against PPP loan recipients over allegations that they did not have a legitimate need for the funds, or those who initially qualified for a loan but were later deemed ineligible as the terms and conditions of the loan program continued to fluctuate, will likely be much more difficult. As in any criminal case, federal prosecutors are tasked with proving criminal wrongdoing beyond a reasonable doubt in PPP fraud cases, and given the confusion surrounding the loan program as far as who qualified for loans and what the money could be used for, the government may have a hard time showing bad faith.
How a PPP Fraud Attorney Can Help
The federal statutes being applied to cases of PPP loan fraud come with harsh penalties and these statutes are very broadly defined – meaning they can be used to prosecute a wide variety of false representations and certifications – two major reasons you want to have an experienced federal criminal defense lawyer arguing your case against the federal government. If you have questions about PPP loan compliance or if you believe you may be at risk for a PPP fraud federal indictment, don’t wait to seek legal guidance from a reputable PPP attorney. Our focus is federal criminal defense and we can ensure that your case is handled properly right from the start. If you have been arrested by federal agents on suspicion of PPP fraud, we can advise you of your rights and help put you in a better position to avoid criminal charges. If you are charged with a crime, we can help you navigate the criminal justice system and ensure that you understand the charges filed against you. Whatever situation you find yourself in, having a qualified defense attorney on your side can significantly improve your chances of achieving a favorable outcome in your case.
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The criminal code of the federal government does not contain specific laws that prohibit Paycheck Protection Program fraud. Instead, the Department of Justice is relying on general federal fraud statutes to pursue criminal charges in PPP loan fraud cases, including those that make it a crime to commit bank fraud, wire fraud or identity theft, or to make false statements to federal agents, to the SBA or to a financial institution. If you are in need of a PPP fraud attorney, our legal team is here to help. We specialize in federal criminal defense and we have the knowledge and expertise necessary to stand up against the federal government and argue your case on your behalf. Contact our firm today to find out how we can help.