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U.S. Department of Justice Investigates PPP Loan Fraud: Protect Your Business with These Measures

The COVID-19 pandemic has caused serious financial problems for businesses, and the US government responded by launching the Paycheck Protection Program (PPP). This program provided federally-backed loans to eligible businesses, which amounted to hundreds of millions of dollars. Unfortunately, despite its noble intentions, the program became vulnerable to fraud due to its size and urgency in distributing funds. As a result, the US Department of Justice (DOJ) has launched a massive investigation into PPP loan fraud, which can have dire consequences for businesses, owners, and executives. In this article, we’ll explore what you need to know to protect your business against fraud investigations.

The Department of Justice is Serious About Prosecuting PPP Loan Fraud

PPP loan fraud has caused significant financial losses, and the Department of Justice is taking action to tackle the issue. The DOJ is actively investigating businesses and individuals who are involved in submitting fraudulent loan applications, misusing PPP loan funds, and misleading the Small Business Administration (SBA) during the loan forgiveness application process. The DOJ has made it clear that it will pursue aggressive actions against individuals who defraud the PPP: “The Paycheck Protection Program was designed to help Americans struggling with financial hardship during the pandemic. Our office will be aggressive in targeting anyone who defrauds this critical program”.

The Department of Justice is Already Pursuing Charges in Several PPP Loan Fraud Cases

The DOJ has escalated the investigation by filing charges in multiple cases. Individuals and businesses have already faced charges with creating shell companies and falsifying payroll information to obtain PPP loans, using PPP loan funds for personal expenses unrelated to the business, attempted fraud by applying for multiple PPP loans, and various other forms of PPP loan fraud.

The DOJ is Collaborating with Other Federal Law Enforcement Agencies

The DOJ is working alongside other federal agencies in the fight against fraud under the PPP. These agencies include the U.S. Small Business Administration Office of Inspector General (SBA-OIG), the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), the Federal Bureau of Investigation (FBI), and the Internal Revenue Service Criminal Investigations (IRS-CI). These agencies are jointly responsible for identifying and providing evidence of individuals and businesses that unlawfully took advantage of federally-backed loans offered under the PPP.

Possible Defenses to Allegations of PPP Loan Fraud

If you or your business is facing investigation for PPP loan fraud by the DOJ, it is vital to seek legal counsel immediately. Several other defense strategies may become available, but it is crucial to have a competent attorney who can support you in navigating the complex field of legal problems.

Firstly, it may be enough to demonstrate PPP Compliance. Suppose you can provide evidence that your business has legitimately received the PPP loan, established a PPP loan account, and recorded its appropriate use of its PPP funds; you may reach a satisfactory resolution. However, when providing information to the DOJ, companies should be cautious. Once shared, the DOJ cannot touch and could lead to criminal proceedings for PPP loan fraud.

Another defense strategy involves demonstrating that there was no intent to defraud. In criminal cases, the prosecutor generally attempts to prove that the defendant had the intent to commit fraud. Should you inadvertently obtain a PPP loan despite being unqualified, misuse PPP funds, or provide fraudulent forgiveness certification; your lack of intent can provide evidence that could be your defense. Although it is possible to prosecute unintentional fraud as a civil offense, this could result in significant fines, treble damages, loss of federal program eligibility, and other penalties.

Charges That Could Result from PPP Loan Fraud Investigations

Although the PPP lacks penal provisions for the prosecution of PPP loan fraud, fraud under the Paycheck Protection Program may trigger a range of civil and criminal charges under several pre-existing federal laws. Some of these charges may arise from PPP loan fraud investigations:

Making false statements to the SBA
Making false statements to an FDIC-insured bank
Bank fraud
Wire fraud
Aggravated identity theft
Tax Evasion
Making false statements to federal agents
Conspiracy
Attempt
False Claim Act violations

Conclusion

PPP loan fraud is a severe issue that could have detrimental consequences for businesses, owners, and executives. Facing a DOJ investigation into PPP loan fraud can be intimidating, but by taking the right measures, you can protect yourself and your business. Seek legal guidance immediately should you need to navigate the complexities of the investigation and mount a strong defense. Todd Spodek’s legal team is suitable for this task and is poised to support business owners facing allegations of PPP loan fraud.