PPP LOAN FRAUD INVESTIGATIONS

PPP loan fraud investigations are on the rise across the country.  Federal prosecutors and criminal investigators from various federal agencies are actively looking for possible PPP loan fraud, EIDL loan fraud, and other CARES Act violations in an attempt to recover money that may have been fraudulently obtained from COVID-19 relief programs.

Our firm has helped dozens of people resolve PPP fraud investigations, many times without any criminal charges being filed against them. When we are hired to represent someone in a PPP or EIDL loan fraud case, we immediately contact the investigators and any prosecutor who may be assigned to the case. We find out why our client is under investigation, and we try to determine the evidence the government has against them. We then work with our client to review the relevant documents (many times with the assistance of experience forensic accountants) to see if we have a solid defense to any fraud allegations. We then explain the circumstances of the client’s situation to the government and offer information that the agents or prosecutor may not have know. In many cases, we are able to help our clients avoid any criminal charges. In cases where charges have already been filed, we assist our clients in negotiating the best resolution possible or fighting the case in court.

Because our firm has helped clients in PPP and EIDL fraud investigations all across the country, we know what rules and procedures apply to these cases, and we know what the government is looking to find. Our defense lawyers have extensive experience in these investigations that other lawyers simply do not have.

Click here to visit our updated list of all PPP, EIDL, and CARES Act fraud cases in the U.S.

PPP loan fraud is when an individual or business submits false information in an application or certification for a loan under the federal Paycheck Protection Program (PPP). The PPP was created to help companies stay in business during the coronavirus pandemic by providing forgivable loans to cover payroll and operating expenses. Businesses can apply for PPP loans through commercial banks but must meet several criteria for eligibility. Even after a business obtains a PPP loan, it must abide by strict requirements and limits on how businesses can spend the funds.

The focus of a PPP loan fraud investigation is to determine whether charges should be brought against someone for violating one or more of the strict requirements of the PPP loan program. Generally, federal prosecutors have been targeting businesses and individuals who may have violated the PPP loan program by:

• Making a false statement on the PPP loan application
• Applying for PPP loans from multiple lenders (“loan stacking”)
• Using PPP loan money for an improper or unapproved purpose
• Submitting a false certification for PPP loan forgiveness
• Not being truthful to agents during a PPP loan audit or investigation

A person charged with PPP loan fraud may face serious criminal and civil penalties. Although there are several possible criminal laws that may be involved in a PPP loan fraud case, the most common criminal charges are the following:

Wire Fraud (18 U.S.C. Section 1343) – This is when someone uses “the wires” (this includes using the internet or the phone) to steal money by making false statements or promises. The penalty depends on the amount of money taken, up to 20 years in prison.

Bank Fraud (18 U.S.C. Section 1344) – This is similar to wire fraud but involves making false statements to a bank or other financial institution. A violation of this law can carry up to 30 years in prison.

False Statements to a Financial Institution (18 U.S.C. Section 1014) – This law makes it illegal to lie to a bank or other financial institution. Generally, this involves false statements made on a loan application or in documents submitted to the bank to qualify for the loan. It also carries up to 30 years in prison. (The banks have great lobbyists in Congress.)

Conspiracy to Commit Fraud (18 U.S.C. Section 1349) – This law makes it a federal crime to enter into an agreement to violate the federal fraud laws, even if the person doesn’t actually take any money or make any false statement. The penalties for conspiracy are the same as the penalty for the fraud crime that is the purpose of the agreement.

If you have been contacted by a federal agent or other official about a PPP loan, you need to be very careful. There have been several recent cases where people who decided to talk to investigators without a lawyer ended up being charged with obstruction or making a false statement to the agents, in additional to PPP loan fraud. We advise our clients to contact us first before they discuss their loan application or business with a federal agent, and certainly before they agree to provide any documents or business records to the government.

We have been contacted by several people who had bank accounts frozen or seized by the government as part of a PPP loan fraud investigation. If this happens to you, don’t panic. The fact that a bank account has been seized does not always mean criminal charges are next. But there are steps you need to take immediately to respond to this action if you want to contest the seizure or protect yourself from criminal charges. We believe it’s best to be proactive. Don’t ignore the problem and expect it to go away. The fact that funds have been frozen is a strong indication that a criminal investigation may be underway.

Being proactive in a PPP loan fraud investigation can go a long way in avoiding criminal charges. Although there are several criminal prosecutions already underway, federal grand juries are limited right now due to wide-spread coronavirus restrictions. That means an experienced federal defense lawyer can help steer the case to a civil disposition – like paying back the money and a fine – instead of federal criminal charges.

If you are concerned about possible PPP fraud charges, you should strongly consider hiring an experienced federal defense attorney and taking these common-sense steps to protect yourself and your business:

1. Gather all your business and personal financial records and make a digital copy of them. You will need these to document your loan request and to support your defense.
2. Do not throw away, shred or otherwise destroy any business records, especially any that were used to prepare your loan application or certifications. Not only may you need these documents later, destroying any important document in anticipation of a PPP loan fraud investigation can lead to a separate criminal charge.
3. Let all your employees know that they can report their suspicions about PPP fraud to management without fear of retaliation. If they feel they can’t talk to you, they may decide to go directly to government or a whistleblower lawyer. That can start an investigation that’s expensive to defend, even when there’s been no violation of the PPP rules.

Our attorneys, experienced paralegals, and independent consultants have been very successful in helping business owners navigate PPP and EIDL loan fraud investigations.

Once we are hired to represent the client, we immediately contact any investigator or government agent involved in the mater to make sure there is no further contact with our client. We will also contact any financial institution that may be holding funds belonging to the business or individual involved. We then take several additional steps, depending on the facts of the specific case and the status of the investigation:

1. Obtain all loan applications and all supporting documents from the business to review for any alleged errors.
2. Gather and preserve all relevant business documents that may support the need for the loan or the use of the funds received.
3. Interview any CPA, accountant, or financial advisor, if one was used or consulted in applying for the loan.
4. With the business owner’s permission and consent, interview any relevant employees who may be able to support the ned for the loan or the use of funds.
5. Discuss the case with a forensic accountant regularly consulted by our firm to review the company’s financials and provide an opinion on the information contained in the loan application
6. Present any available arguments for mitigation or mistake to the government agents, investigators, or prosecutor to structure a payback or other resolution of the matter, if appropriate.

Our federal defense attorneys are closely monitoring PPP loan fraud cases and developments. We have already advised our clients on how best to navigate these investigations and avoid criminal charges. If you have been charged with PPP loan fraud, or think you may be the target of a PPP loan fraud investigation, call us now for a confidential consultation.

Read about our firm’s success in federal criminal cases.

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We have successfully represented clients in federal criminal cases across the United States. Our firm has offices in Atlanta GA, Alexandria VA, and Washington DC, and we frequently travel to other federal courts to represent people in serious federal criminal cases.

Recent PPP loan fraud prosecutions suggest that the Department of Justice is devoting substantial time and resources to PPP loan fraud investigations. The SBA Office of Inspector General has issued a report citing “serious concerns” of potential fraud in its disaster loan program directed to coronavirus relief.

While PPP loan fraud prosecutions are being brought across the country, the Special Inspector General for Pandemic Recovery (SIGPR) and the U.S. Attorney’s Office in the Eastern District of Virginia have launched a joint effort to target businesses and individuals apply for PPP loans. As a result, we expect to see many more prosecutions out of the Eastern District of Virginia, where our firm has litigated several criminal and civil cases.

Acting Assistant Attorney General speaks at press conference about recent DOJ enforcement of PPP criminal fraud cases. The effort will be lead by the Criminal Division’s Fraud Section and coordinated on a national basis. This suggests aggressive enforcement, and the potential for shaky cases as the Government tries to throw a big net.

Justice Department announces charges brought against 57 people for PPP fraud, representing $175 million in alleged fraud. The Department suggests that “criminal rings” are orchestrating this fraud, without providing any real details.

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