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The COVID-19 pandemic has turned the world upside down, with most businesses and individuals struggling to make ends meet. The U.S. government responded by approving the Paycheck Protection Program (PPP) in March 2020, administered by the Small Business Administration (SBA), to help alleviate the situation. PPP offered forgivable loans to companies and individuals in need. Unfortunately, some individuals and companies saw an opportunity to take advantage of the program by engaging in PPP loan fraud.
The U.S. Department of Justice (DOJ) has launched investigations into allegations of PPP loan fraud. The Department will not hesitate to prosecute any individuals or companies that submitted fraudulent loan applications or misused PPP loan funds. These investigations are carried out by the DOJ’s Criminal Division Fraud Section in collaboration with various other federal agencies, including the FBI, IRS-CI, SBA-OIG, and FDIC-OIG.
PPP loan fraud is a considerable problem for the US government, with billions of dollars lost to fraudsters. To counter this, the DOJ has taken an aggressive approach and initiated criminal suits and charges against suspects engaging in PPP loan fraud. As stated by the DOJ in a recent press release, “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.”
PPP loan fraud comes in many forms, with some of the most common types being the falsification of payroll information by creating shell companies, using PPP loan funds for personal expenses, and attempting to obtain multiple PPP loans. The DOJ has already filed charges in several cases involving PPP loan fraud.
Any individual or company accused of PPP loan fraud by the DOJ faces severe consequences. However, there are some potential defenses that such entities could use based on the specific charges placed under the statutes listed above.
The first defense is to demonstrate compliance with PPP’s terms. Being accused of the fraudulent use of PPP loan funds can result in a reasonably swift resolution of the case if the accused party can prove compliance.
Generally, criminal culpability at the federal level requires intent to defraud. Therefore, if an organization inadvertently obtained a PPP loan despite being ineligible to do so or submitted a fraudulent forgiveness certification, proving a lack of intent could provide a defense against the charges.
Many federal statutes can trigger charges in PPP investigations, such as making false statements to the SBA or FDIC-insured bank, bank fraud, wire fraud, aggravated identity theft, tax evasion, making false statements to federal agents during an audit or investigation, conspiracy, attempt, and False Claims Act violations.
PPP loan fraud is a severe offense with severe consequences, including hefty fines and potential imprisonment. It is vital to comply with PPP’s terms and maintain proof of compliance when necessary. Companies or individuals accused of PPP loan fraud should immediately contact their legal representatives to discuss the potential defenses and legal strategies to use in their cases.
| What is PPP Loan Fraud? | PPP Loan Fraud Charges | Defenses During DOJ PPP Loan Fraud Investigations |
| PPP loan fraud is when individuals and companies unlawfully obtained PPP loans and submitted fraudulent loan applications or made unauthorized use of PPP loan funds. | The most common types of PPP loan fraud are creating shell companies and falsifying payroll information, using PPP loan funds to pay for personal expenses, and attempting to obtain multiple PPP loans. Charges can range from making false statements to an FDIC-insured bank and federal agents during an audit or investigation to conspiracy, attempt, and False Claims Act violations. | Potential defenses for PPP loan fraud include proving compliance with PPP’s terms and demonstrating a lack of intent to defraud. |
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