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DOJ Investigations for PPP Loan Fraud: What You Need to Know
The Paycheck Protection Program (PPP) was established to provide financial assistance to businesses affected by the pandemic. However, it has become a potential target for fraudulent activities. The United States Department of Justice (DOJ) is now investigating cases related to PPP loan fraud that may lead to allegations of companies or individuals who submitted fake loan applications or misused PPP loan funds. It is crucial to understand what you need to know if you are facing these charges and seek legal counsel immediately. The following information is what companies and individuals should be aware of regarding DOJ investigations for PPP loan fraud.
The DOJ recognizes the number of dollars that were issued under the PPP program; hence, they are aggressively pursuing anyone suspected of fraudulent activities, making fake certifications for PPP loan forgiveness or misusing PPP loan funds. In other words, the DOJ is using every possible resource to go after those who have committed alleged fraud.
The DOJ has filed charges in various PPP loan fraud cases where individuals have used PPP funds to pay for luxurious personal expenses, attempted to obtain multiple PPP loans, or have used falsified payroll information to obtain PPP loans. It has also charged individuals with creating shell companies to acquire PPP loans.
The DOJ is not working alone in its efforts against PPP fraud. Other agencies such as the U.S. Small Business Administration’s 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) are working with the DOJ to tackle fraud related to the PPP.
There are several defenses available to allegations of PPP loan fraud. Companies and individuals can assert defenses based on PPP compliance rules, factual errors, intent to defraud, among others.
Knowing the potential charges one could face in a PPP loan fraud investigation is essential. Although the PPP relief program did not have any penal provisions for PPP loan fraud, fraudulent activities under the program could trigger criminal and civil charges under numerous federal statutes such as:
Making False Statements to the SBA (18 U.S.C. ¬ß 1014): Anyone who makes a false statement or report to influence the Small Business Administration’s actions, including statements made in PPP loan applications, can face penalties under this statute.
Bank Fraud (18 U.S.C. § 1344): It is a criminal offense to execute a scheme to defraud a financial institution, including PPP lenders, under this statute.
Wire Fraud (18 U.S.C. § 1343): Prosecutors can impose substantial penalties under a wide variety of circumstances under this statute, including schemes to defraud or transfer, or obtain money or property by false pretenses, all of which could be linked to PPP fraud.
Tax Evasion (26 U.S.C. § 7201): Many PPP fraud cases also involve allegations of tax evasion or failing to report income derived from business activities funded by PPP loans.
Making False Statements to Federal Agents (18 U.S.C. § 1001): Company executives or owners can be prosecuted for making false statements to federal agents during a PPP loan fraud audit or investigation under this statute.
Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349): The conspiracy statutes allow for the prosecution of multiple individuals and/or businesses that are collectively involved in fraudulent efforts to obtain federal funds under the PPP.
Attempt (18 U.S.C. § 1349): The federal attempt statute allows for the prosecution of unsuccessful efforts to commit PPP loan fraud.
False Claims Act Violations (31 U.S.C. §§ 3729 – 3733): An intentional or unintentional false claim for PPP loan forgiveness can lead to prosecution under this statute.
It is vital to know about these charges and understand the corresponding defense strategies. Suppose an individual or company is facing a DOJ investigation due to allegations of PPP loan fraud. In that case, engaging competent legal counsel to navigate these complex issues will increase the chances of securing satisfactory outcomes.
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