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Defending Against DOJ Investigations for PPP Loan Fraud: Strategies and Penalties
The Paycheck Protection Program (PPP) has been a critical lifeline for business owners struggling to pay their employees amidst the financial hardships caused by the COVID-19 pandemic. However, this program also became a target for fraud, prompting the United States Department of Justice (DOJ) to actively investigate PPP loan fraud cases. Individuals, owners, executives, and companies involved in fraudulent loan applications or unauthorized use of funds face potentially severe consequences if caught by the DOJ. This article provides critical information and defense strategies that experienced attorneys use to defend against PPP loan fraud allegations.
The seriousness of PPP loan fraud led the DOJ to aggressively target individuals and companies suspected of fraudulent activities. The DOJ filed criminal charges in multiple high-profile cases, including falsifying payroll information and creating shell companies to obtain PPP loans, as well as using money meant for forgivable PPP loans for personal expenses. Entities suspected of submitting fraudulent certifications for PPP loan forgiveness are also under DOJ’s radar.
The DOJ works closely with several federal law enforcement agencies, such as the 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). This cooperation improves the effectiveness of PPP loan fraud investigations.
If you or your company is under investigation for PPP loan fraud, you may use several defense strategies. First, demonstrate that you complied with the PPP regulations, obtained PPP loans legitimately, used separate PPP loan accounts, and documented their use. Lack of intent to defraud is another commonly used defense strategy that requires showing evidence that your receipt of the PPP loans was accidental, you unintentionally used funds improperly, or mistakenly submitted a fraudulent forgiveness certification.
PPP loan fraud cases often prompt criminal charges under several federal statutes, as shown below:
| Criminal Charges | Statutes |
|---|---|
| Making False Statements to SBA or FDIC-Insured Banks | 18 U.S. Code § 1014 |
| Bank Fraud | 18 U.S. Code § 1344 |
| Wire Fraud | 18 U.S. Code § 1343 |
| Aggravated Identity Theft | 18 U.S. Code § 1028A |
| Tax Evasion | 26 U.S. Code § 7201 |
| Making False Statements to Federal Agents | 18 U.S. Code § 1001 |
| Conspiracy | 18 U.S.C. § 371 and 18 U.S.C. § 1349 |
| Attempt | 18 U.S. Code § 1349 |
| False Claims Act Violations | 31 U.S. Code §§ 3729-3733 |
Note that the CARES Act, which created the PPP, does not specify penalties for PPP loan fraud. Hence, the DOJ has to pursue existing federal statutes in prosecuting PPP loan fraud cases.
PPP loan fraud cases are serious, and they can lead to severe legal consequences for the accused individuals, owners, executives, or companies. Fortunately, defense strategies and compliance with the PPP regulations can help mitigate the risk of PPP loan fraud allegations. Seeking legal advice from an experienced attorney is also essential in defending against PPP loan fraud charges.
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