FEDERAL CRIMINAL LAWYERS

PPP Fraud Defense

You applied for a PPP loan during the pandemic. Now you’re staring at a letter from the SBA Office of Inspector General alleging “PPP fraud” – facing 30 years in federal prison for what you thought was a mistake on an application. Federal prison. Thanks for visiting Spodek Law Group – a second generation law firm with over 50 years of combined experience. Our managing partner, Todd Spodek, has many, many, years of experience defending clients in high-profile federal fraud cases covered by NY Post, Newsweek, and other national outlets – including Anna Delvey and juror misconduct allegations in the Ghislaine Maxwell trial. This article explains what constitutes PPP fraud, the specific federal charges used, what prosecutors must prove beyond a reasonable doubt, and the difference between honest mistake and criminal intent.

Federal Charges

Federal prosecutors stack pre-existing fraud statutes to maximize prison exposure. Wire fraud under 18 U.S.C. § 1343 carries up to 20 years for fraud using electronic communications. Bank fraud under 18 U.S.C. § 1344 carries up to 30 years when false statements are made to financial institutions. Thirty years. False statements under 18 U.S.C. § 1014 carries up to 30 years plus a $1 million fine – the most commonly charged PPP fraud statute. Conspiracy under 18 U.S.C. § 371 adds 5 years if two or more people agreed to commit fraud.

The DOJ stacks these charges: your single PPP application gets charged as wire fraud plus bank fraud plus false statements plus conspiracy – exposing you to 80+ years combined. Restitution alone doesn’t save you from federal prosecution. Constitutional due process requires the government to prove every element beyond a reasonable doubt.

Intent

The government must prove you acted both “knowingly” AND “willfully” to convict. Knowingly and willfully. This is a Constitutional requirement that separates innocent mistakes from criminal fraud. “Knowingly” means you acted with knowledge of the falsity – not by mistake or accident. According to the DOJ Justice Manual § 910, reckless disregard of truth qualifies as “knowingly” – prosecutors argue failing to verify information constitutes recklessness. “Willfully” means the act was done deliberately and intentionally, though it doesn’t require proof you knew you violated a criminal statute. Knowingly and willfully – both elements required.

The government bears the burden of proving BOTH knowledge AND intent beyond a reasonable doubt. Honest mistake defense: relying on your accountant’s calculations, misunderstanding confusing SBA guidance, or making a mathematical error negates criminal intent. Criminal fraud: deliberately inflating employee numbers, using fake tax documents, or recklessly submitting applications without verifying accuracy. Intent matters. Intent is what the government must prove, not what you must disprove.

False Statements

Prosecutors focus on material false statements that affected loan eligibility or amount. Misrepresenting employee count to increase loan amount is commonly prosecuted because loan amounts were calculated based on payroll costs tied to employees. Inflating payroll costs to qualify for larger loans is prosecuted as material false statement. Falsely claiming business existed in February 2020 goes to eligibility.

The “necessity certification” has become major prosecution focus. This is a trap. Every PPP application required certifying: “Current economic uncertainty makes this loan request necessary to support ongoing operations.” Prosecutors argue this was false if your business had substantial cash reserves, paid bonuses during pandemic, or if owners purchased luxury items after receiving PPP funds. Loans under $2 million are PRESUMED good faith regarding necessity certification. Loans over $2 million face heightened scrutiny.

Burden of Proof

Understanding what the government must prove empowers your defense because it shifts focus to prosecution’s burden rather than your need to prove innocence. For wire fraud, prosecutors must prove beyond reasonable doubt: you devised scheme to defraud, you acted with intent to defraud, you used interstate wire communications, and use of wire communications was reasonably foreseeable. For bank fraud, prosecutors must prove you executed scheme to defraud financial institution with intent. For false statements under 18 U.S.C. § 1014, prosecutors must prove four elements: you made false statement, statement was material (capable of influencing SBA’s decision), you knew statement was false when you made it, and statement was made to influence SBA or lending institution. The knowledge requirement is critical: government must prove you KNEW statement was false – not merely “should have known.” Beyond reasonable doubt.

Materiality means the false statement must have been capable of influencing SBA’s decision – trivial errors don’t qualify. Regarding misuse of PPP funds: authorized uses include payroll costs, mortgage interest, rent, utilities, covered operations expenditures, supplier costs, worker protection expenditures. Intentional misuse for unauthorized purposes – personal expenses, luxury purchases, gambling, investments – can be charged as wire fraud or money laundering if prosecutors prove you knew expenditures were unauthorized and intentionally diverted funds. The forgiveness requirement that at least 60% be used for payroll costs creates another prosecution angle: if you intentionally failed to use funds for authorized purposes during covered period, prosecutors may charge fraud in forgiveness application rather than initial application.

Your Fifth Amendment right against self-incrimination means you cannot be forced to provide evidence against yourself – never speak to SBA-OIG investigators or FBI agents without attorney present, even if you believe you did nothing wrong. Invoke. Stay silent.

Closing

Don’t assume mistake automatically constitutes fraud. Don’t talk to FBI or SBA-OIG without attorney present. Don’t believe paying back loan eliminates criminal liability that destroys your future. Repayment after investigation letter doesn’t prevent prosecution. Don’t. Unlike other law firms who tell clients “just pay it back,” Spodek Law Group understands repayment alone doesn’t avoid prosecution – we negotiate civil settlements before criminal charges filed. We are available 24/7 for a risk-free consultation. Call now: 212-300-5196.