CALIFORNIA CRIMINAL LAWYERS

Oklahoma PPP and EIDL Loan Fraud Lawyers

DOJ Investigation for PPP Loan Fraud: Risks and Defenses

A Department of Justice (DOJ) investigation for Paycheck Protection Program (PPP) loan fraud is a severe matter that can have dire consequences for companies, their executives, and other individuals. PPP loan fraud was designed to help struggling businesses that were unable to pay their workers due to the COVID-19 pandemic’s economic aftermath. However, it became a prime target for fraud, with numerous ineligible companies and people obtaining a considerable portion of the forgivable, federally-backed loans issued under the plan, including ineligible business and personal expenses.

The DOJ is keen to prosecute individuals and companies for PPP loan fraud since the program’s cost and publicity were widely advertised, with fraudsters aggressively targeting it. Recently, the DOJ issued criminal complaints and pursued charges for a wide range of federal crimes against individuals and companies suspected of submitting fake loan applications and misusing PPP loan funds. The statement from a recent DOJ press release on the PPP program reads: ‚ÄúOur office will be aggressive in targeting anyone who defrauds this critical program.‚Äù

The DOJ has already filed charges in several PPP loan fraud cases, and it collaborates actively with other federal law enforcement agencies to prosecute all forms of PPP loan fraud. The DOJ is not alone in combating fraud under the Paycheck Protection Program. It is working hand-in-hand with multiple other federal agencies committed to identifying and prosecuting individuals and companies that have unlawfully taken advantage of the federally-backed, forgivable loans offered under the PPP. These agencies include the U.S. Small Business Administration Office of Inspector General (SBA-OIG), Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Federal Bureau of Investigation (FBI), and Internal Revenue Service Criminal Investigations (IRS-CI).

Table A: Potential Charges in Federal PPP Loan Fraud Investigations

| Statute | Description |
| — | — |
| 18 U.S.C. § 1014 | Making false statements to the Small Business Administration (SBA) |
| 18 U.S.C. § 1014 | Making false statements to an FDIC-insured bank |
| 18 U.S.C. § 1344 | Bank fraud |
| 18 U.S.C. § 1343 | Wire fraud |
| 18 U.S.C. § 1028A | Aggravated identity theft |
| 26 U.S.C. § 7201 | Tax evasion |
| 18 U.S.C. § 1001 | Making false statements to federal agent/s |
| 18 U.S.C. § 371 and 18 U.S.C. § 1349 | Conspiracy |
| 18 U.S.C. § 1349 | Attempt |
| 31 U.S.C. §§ 3729 – 3733 | False Claims Act violations |

A DOJ PPP loan fraud investigation can result in significant risks for individuals and companies under scrutiny. Nevertheless, several potential defenses can be argued against allegations of PPP loan fraud. Although the situation is a high-stakes one, it is not hopeless. The law office of Todd Spodek relies on multiple defenses specific to the Paycheck Protection Program and based on the specific charges put forward under the relevant statutes. These defenses include:

Defenses Against PPP Loan Fraud Allegations

Paycheck Protection Program (PPP) Compliance

Demonstrating compliance with the PPP’s terms can serve as the first line of defense for many individuals and companies. If your company lawfully obtained a PPP loan, established a segregated PPP loan account, and carefully documented the appropriate use of its PPP funds, providing proof of compliance could lead to a comparatively swift resolution. Companies should be very careful when affirmatively providing information to the DOJ. Inadvertently disclosing incriminating information could enhance the risk of prosecution for PPP loan fraud.

Lack of Intent to Defraud

Federal criminal culpability generally requires an intent to defraud. If you inadvertently obtained a PPP loan despite being ineligible to do so, used PPP funds inappropriately, or submitted a fraudulent forgiveness certification under the CARES Act, your lack of intent to defraud could serve as a defense to the charges listed above. However, unintentional fraud can still be prosecuted as a civil offense, and civil violations of the False Claims Act and other statutes can carry significant penalties.

Although the CARES Act, which created the Paycheck Protection Program, does not contain penal provisions for PPP loan fraud, fraud under the program can trigger civil and criminal charges under numerous pre-existing federal statutes.

Table B: Potential Penalties in PPP Loan Fraud Cases

| Penalties | Description |
| — | — |
| Imprisonment | Up to 30 years |
| Fines | Up to $1 million |
| Restitution | Repayment of fraudulent PPP loan proceeds |
| Asset forfeiture | Seizure of assets obtained through PPP loan fraud |

Some of the likely charges in federal PPP loan fraud investigations are making false statements to the Small Business Administration and to an FDIC-insured bank, bank fraud, wire fraud, aggravated identity theft, tax evasion, making false statements to federal agents, conspiracy, attempt, and false claims act violations.

In conclusion, if you or your company are facing a DOJ investigation for PPP loan fraud, it is crucial to work with experienced legal counsel who can provide guidance and defense throughout the process. The risks and consequences of being found guilty of PPP loan fraud can be severe and have long-term impacts. Defenses are available, including demonstrating compliance with the terms of the PPP, lack of intent to defraud, and other defenses that can be specific to the case.

It is essential to take any communication with the DOJ very seriously and work with attorneys who have experience in this type of investigation to ensure that any response is appropriate and that any risk of self-incrimination is minimized.

Ultimately, the DOJ is intent on prosecuting individuals and companies suspected of PPP loan fraud, and the consequences can be significant. Therefore, it is crucial to understand the potential risks and to work with experienced legal counsel to explore potential defenses and obtain the possible outcome.