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U.S. Department of Justice (DOJ) Investigation for PPP Loan Fraud – Protect Your Business
The Paycheck Protection Program (PPP) is established to support small businesses with forgivable loans at a critical time during the COVID-19 pandemic. However, it has become vulnerable to fraud as several companies, not impacted by the pandemic, have taken advantage of the system. They have submitted false applications and made unauthorized use of the funds. Such circumstances have resulted in an increasing number of PPP loan fraud cases, and the DOJ is actively investigating them. They are aggressively prosecuting the individuals and companies involved in the fraud. If you or your company is currently facing a DOJ investigation for PPP loan fraud, you need to protect yourself. Here are a few things you should know to safeguard yourself and your business:
The DOJ is on the lookout for individuals and companies that have submitted fraudulent loan applications, falsified payroll information to obtain loans, and submitted fraudulent certifications for PPP loan forgiveness. They are also pursuing those who are using the PPP funds for personal expenses. The DOJ is serious about this matter, given the criticality of the PPP funds, and they will not tolerate anyone taking advantage of the system. A recent DOJ press release stated that “Our office will be aggressive in targeting anyone who defrauds this critical program.”
The DOJ has already filed criminal complaints against several companies involved in PPP loan fraud cases. These cases include the creation of shell companies to obtain PPP loans, falsifying payroll information to get PPP loans, attempting to obtain multiple PPP loans, and other PPP loan fraud forms.
The DOJ is collaborating with other federal agencies to identify and prosecute individuals and companies who are unlawfully taking advantage of 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).
PPP loan fraud allegations can have severe implications for enterprise owners and executives. Specialized companies like Todd Spodek Law understand the defenses that companies can claim during a DOJ PPP loan fraud investigation. Some of the defenses that can apply based on the charges being put forward in the comprehensive statutes above include:
Presenting proof of compliance can serve as the first defense to show that your company lawfully obtained a PPP loan, established a segregated PPP loan account, and documented all appropriate use of the funds.
Allegations of fraud that lack intent can lead to the dismissal of the charges. Lack of intention could be used as a defense in such cases.
Although the CARES Act that created the Paycheck Protection Program does not provide penal provisions for PPP loan fraud, such fraud can result in criminal charges under several pre-existing federal statutes. These include:
| Federal PPP Loan Fraud Investigations Charges | Code |
|---|---|
| Making False Statements to small business administration (SBA) | 18 U.S.C. § 1014 |
| Making False Statements to an FDIC-Insured Bank | 18 U.S.C. § 1014 |
| Bank Fraud | 18 U.S.C. § 1344 |
| Wire Fraud | 18 U.S.C. § 1343 |
| Aggravated Identity Theft | 18 U.S.C. § 1028A |
| Tax Evasion | 26 U.S.C. § 7201 |
| Making False Statements to Federal Agents | 18 U.S.C. § 1001 |
| Conspiracy | 18 U.S.C. § 371 and 18 U.S.C. § 1349 |
| Attempt | 18 U.S.C. § 1349 |
| False Claims Act Violations | 31 U.S.C. §§ 3729 – 3733 |
The DOJ is investigating PPP loan fraud cases that should concern business owners, executives, and others. The allegations can have significant consequences, and if found guilty, you could face charges under several pre-existing federal statutes. As presented in this article, there are specific defenses that companies and individuals can apply. Regardless of the defense, it is essential to remedy any mistakes made and ensure transparency in your finances.
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