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DOJ Investigation for PPP Loan Fraud: Here’s What You Need to Know

The Paycheck Protection Program (PPP) served as a great relief for companies and individuals amid the COVID-19 pandemic. PPP loan was designed to support the businesses affected due to the virus outbreak; however, many firms have taken advantage of this opportunity, using these loans to fund personal expenses, and some loan applications have turned out to be fraudulent. In response, the US Department of Justice (DOJ) has initiated an investigation and prosecution of PPP loan fraud cases under several federal statutes. If you find yourself the subject of a PPP loan fraud investigation, you need to understand the potential risks and consequences involved. Here’s what you need to know.

The DOJ is Aggressively Pursuing PPP Loan Fraud Cases

The DOJ has displayed such aggression towards individuals and businesses who have submitted false certification forms, or loan applications for PPP loan forgiveness or have exploited PPP loan funds. According to a DOJ release, the department is unwavering in its efforts in prosecuting guilty individuals or businesses: “Our office will be aggressive in targeting anyone who defrauds this critical program.”

The DOJ is Collaborating with Other Federal Law Enforcement Agencies

Though the DOJ is the primary agency investigating the PPP loan fraud cases, it is not alone. It is working with many other federal agencies, such as 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), to identify and prosecute individuals, and firms that have unlawfully taken advantage of the PPP loans.

PPP Loan Fraud: Potential Consequences

Individuals and businesses found guilty of PPP loan fraud face severe, long-lasting consequences. PPP loan fraud conviction comes with a range of hefty penalties that includes fines, restitution, and imprisonment. Furthermore, a guilty verdict could result in suspension or debarring from government contracting, and exclusion from participating in government programs.

Potential Defenses During DOJ PPP Loan Fraud Investigations

Several potential defenses could aid individuals and businesses under PPP loan fraud investigation by the DOJ. The following are some possible defenses that could help evade fraud charges by showing a lack of intent or establishing PPP terms’ compliance:

Prove Compliance with PPP Terms

The most straightforward defense against a PPP loan fraud investigation is to prove that the company followed the PPP guidelines. If the loan was legitimately obtained, and the PPP funds were correctly utilized and adequately documented, the investigation would turn out in your favor.

Lack of Intent

Loans obtained through PPP loan applications could be considered under false pretenses when they do not comply with PPP terms. To prosecute an individual or a company under false pretenses requires intentional conduct. If it can be demonstrated that the presented certification or application did not reflect deliberate intent, lack of intent can serve as a suitable defense.

Potential Charges for DOJ PPP Loan Fraud Investigations

Under different extant US federal statutes, the DOJ can file various charges against businesses and individuals who are found guilty of PPP loan fraud. Here are some possible charges based on PPP loan fraud investigations:

Making False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014)

This act makes any knowing false statement to the SBA for fraudulent purposes a punishable crime. The false statement could relate to the company’s Borrower Application.

Making False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014)

This criminal charge applies to companies and individuals who make fraudulent statements to financial institutions that are insured by the FDIC.

Bank Fraud (18 US Code §1344)

Any person who acquires bank funds through fraudulent pretenses by using deceitful means or influencing the bank’s decisions can face bank fraud charges.

Wire Fraud (18 US Code § 1343)

A fraudulent transaction conducted using the internet falls under wire fraud. Defendants can be charged with using the internet to execute fraudulent schemes to obtain funds.

Aggravated Identity Theft (18 US Code § 1028A)

A guilty verdict could be obtained if someone transfers or uses transferred identification along with committing some specified felonies, including PPP fraud.

Tax Evasion (26 US Code § 7201)

Companies or individuals can be charged with evasion of tax by failing to report company income derived from PPP loans.

Making False Statements to Federal Agents (18 US Code § 1001)

You could land in more trouble for lying to federal agents during a PPP loan fraud audit or investigation.

Conspiracy (18 US Code § 371 and 18 US Code § 1349)

The guilty verdict of a company or an individual for conspiracy to fraudulently obtain PPP federal funds can lead to criminal charges under the federal conspiracy statutes.

Attempt (18 US Code § 1349)

A failed attempt to commit any offense under the Code is still considered an offense.

False Claims Act Violations (31 US Code §§ 3729 – 3733)

If an individual or a company is involved in fraudulent activities specifically aimed at targeting federal government programs, False Claims Act imposes civil and criminal penalties.

Protecting Your Business Against PPP Loan Fraud Investigation

If you, or your business, are under a PPP loan fraud investigation initiated by the DOJ, it is crucial to secure the legal representation possible. The right attorney can help you mount a solid defense against the allegations of PPP loan fraud, helping you protect your company’s reputation and financial interests.

Below are the possible charges for PPP loan fraud investigations:

| Charge | U.S Federal Statutes |
|—————————————————-|————————————————-|
| Making False Statements to the SBA | (18 U.S.C. § 1014) |
| Making False Statements to an FDIC-Insured Bank | (18 U.S.C. § 1014) |
| Bank Fraud | (18 US Code §1344) |
| Wire Fraud | (18 US Code § 1343) |
| Aggravated Identity Theft | (18 US Code § 1028A) |
| Tax Evasion | (26 US Code § 7201) |
| Making False Statements to Federal Agents | (18 US Code § 1001) |
| Conspiracy | (18 US Code § 371 and 18 US Code § 1349) |
| Attempt | (18 US Code § 1349) |
| False Claims Act Violations | (31 US Code §§ 3729 – 3733) |