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Understanding DOJ Investigations and Charges in cases of PPP Loan Fraud

The COVID-19 pandemic has undoubtedly caused a significant economic downturn across the world, with many businesses suffering losses, downsizing, or facing complete shutdown. In response to these challenges, the US government instituted the Paycheck Protection Program (PPP) to help businesses stay afloat. While PPP provided much-needed financial relief to several businesses, this program has also opened up loopholes for fraud. Reports show that a considerable number of PPP loans have gone to ineligible recipients or been used in unauthorized ways. Consequently, the DOJ has launched investigations and filed several charges for PPP loan fraud, which is a severe offense with severe consequences. If you or your company is facing investigation by the DOJ, understanding what is at risk, and taking measures to minimize the impact is essential. In this article, we will provide an overview of the DOJ PPP loan fraud investigations.

The DOJ is Targeting Individuals and Companies Involved in PPP Loan Fraud
The DOJ is aggressively pursuing charges against individuals and businesses suspected of applying for PPP loans fraudulently, submitting fraudulent loan applications, and using PPP loan funds illegally. The DOJ is also targeting individuals and companies that provided false certifications for PPP loan forgiveness. The DOJ seeks to punish anyone who defrauds this important program, as evident in a recent DOJ press release. Therefore, anyone accused of PPP loan fraud must take the matter seriously and prepare appropriately to address the charges.

The DOJ is Actively Pursuing Charges in Several PPP Loan Fraud Cases
Several PPP loan fraud cases have already been identified, and the DOJ has filed charges in many cases. Charges range from creating fictitious companies, falsifying payroll information to obtain PPP loans, using PPP loan funds to pay for personal expenses, attempting to obtain multiple PPP loans, and other forms of PPP loan fraud.

Collaboration between DOJ and Other Federal Law Enforcement Agencies to Combat PPP Loan Fraud
The DOJ is not working alone to combat PPP loan fraud. Other critical federal agencies are partnering with the DOJ to expose individuals and businesses that unlawfully exploited this program. Some of the agencies include the 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 (IRS) Criminal Investigations.

Potential Defenses During DOJ PPP Loan Fraud Investigations
PPP loan fraud accusations pose a significant risk to both individuals and businesses. There are several potential defenses available to companies and individuals accused of PPP loan fraud. To have a strong defense, individuals and businesses need to work with experienced and competent attorneys specialized in defending fraud cases.

Paycheck Protection Program Compliance
Demonstrating compliance with PPP terms is a common defense against PPP loan fraud. If your company lawfully obtained a PPP loan, established a segregated PPP loan account, and documented the appropriate use of its PPP funds, proving compliance can lead to a quick resolution. However, individuals and companies must be extremely cautious with sharing information during investigations or audits, as sharing unauthorized information can incriminate suspects.

Lack of Intent to Defraud
Federal culpability for PPP loan fraud requires intentional attempts to defraud. Lack of intent could provide a defense against allegations of PPP loan fraud where individuals and companies unintentionally obtained a PPP loan despite being ineligible, misused PPP funds, or provided false forgiveness certification. Nevertheless, unintentional PPP loan fraud can still attract civil prosecution under the law, leading to significant penalties.

Potential Charges in Federal PPP Loan Fraud Investigations
PPP loan fraud can attract various civil and criminal charges under pre-existing federal statutes when the CARES method does not include penal provisions for PPP loan fraud. Here are some of the offenses that the DOJ uses in PPP loan fraud cases.

Making False Statements
Making false statements to the SBA or PPP lenders is a federal crime under 18 U.S.C. 1014, which is punishable if a fraudster knowingly supplies such false information or uses it to influence an agency’s action.

Bank and Wire Fraud
Bank fraud (18 U.S.C. 1344) and wire fraud (18 U.S.C. 1343) are federal offenses committed by using fraudulent pretenses or schemes to defraud a financial institution or obtain any asset owned or controlled by a financial institution.

Aggravated Identity Theft
A fraudster found using another person’s identification in connection with a specified felony offense can be prosecuted under 18 U.S.C. 1028A. The DOJ has already used this statute in PPP loan fraud cases where others attempt to obtain fraudulent loans.

Tax Evasion
PPP loan fraud cases may face allegations of tax evasion, where underpayment of payroll tax or failing to report income acquired from PPP loan-funded business activities are criminal offenses.

Making False Statements to Federal Agents
Individuals or company executives can face prosecution under 18 U.S.C. 1001 for making false statements to federal agents during PPP loan fraud audits or investigations.

Conspiracy and Attempt
Multiple companies and persons jointly working on fraudulent attempts to obtain PPP loans can be prosecuted for conspiracy under 18 U.S.C. 371 and 18 U.S.C. 1349 or attempted PPP loan fraud under 18 U.S.C. 1349.

False Claims Act Violations
The federal False Claims Act imposes penalties for fraud targeting federal government programs. The DOJ can pursue civil charges when PPP loan application or forgiveness certification fraud is unintentional, while intentional PPP loan fraud can lead to criminal prosecution.

Conclusion
PPP loan fraud accusations can lead to severe personal and professional consequences for suspects. Therefore, anyone accused of PPP loan fraud should seek legal assistance from experienced attorneys capable of handling fraud cases. Todd Spodek is a reputable defense attorney who can help you navigate such serious charges. As a dependable defense attorney, Todd Spodek can help you develop a strategy to address the allegations adequately, work with federal agencies, and secure a positive outcome.