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Minneapolis PPP and EIDL Loan Fraud Lawyers

Protecting Your Business from Prosecution Due to PPP Loan Fraud

The COVID-19 pandemic has caused enormous financial hardship to businesses worldwide. In response to this crisis, the United States government instated the Paycheck Protection Program (PPP) to provide businesses with a monetary lifeline. However, PPP has fallen prey to fraudulent activities that have come to the attention of the United States Department of Justice (DOJ). It is imperative for business owners to adhere to the PPP regulations to avoid legal scrutiny and protect themselves from prosecution.

What is the DOJ’s intent regarding PPP Loan Fraud?

According to recent news releases, the DOJ has primed itself to pursue vigorously any individuals or companies that submit false loan applications or misuse PPP loan funds. The DOJ is committed to using every available enforcement measure to aggressively target anyone who defrauds the PPP program. PPP loan fraud cases cost the government significantly, and the DOJ is determined to recover every penny that has been unlawfully obtained.

What charges arise from PPP Loan Fraud?

PPP loan fraud is a serious offense, and the DOJ has already filed charges in many such cases. These charges include submitting fake payroll information to obtain PPP loans for non-existent companies, misuse of PPP funds, attempting to obtain multiple PPP loans, among others. Any missteps by you or your company may lead to legal troubles, which is why compliance with PPP terms is crucial.

What are the potential defenses against PPP Loan Fraud?

If your company or you are being investigated for PPP loan fraud, several defense mechanisms exist. Specific to the PPP program, these defenses depend on the charges, so it is essential to hire an experienced attorney capable of navigating the intricate legal processes. Below are some defenses that you can assert to protect your business, employees, and yourself:

1. PPP Compliance

The defense is to show that your company complied with the PPP program’s terms. You must be prepared to provide evidence of obtaining the PPP lawfully, documentation of appropriateness in the usage of PPP funds, and establishing a segregated account for the PPP funds. Demonstrating compliance helps to mitigate any criminal and civil prosecution, but truthfulness in providing the necessary information is critical.

2. Lack of Intent to Defraud

Another defense mechanism is to prove a lack of intent to defraud. PPP fraud-related offenses require proof of intent to defraud, and if you can prove that the loan was inadvertently obtained, you can avoid the penalties for PPP fraud charges. Note that intending to commit fraud exposes you to criminal prosecution for both civil federal violations and False Claims Act violations.

What charges arise from PPP Loan Fraud investigations?

PPP loan fraud falls under several pre-existing federal statutes that can lead to both criminal and civil penalties. Examples of these charges are as follows:

1. Making False Statements to the Small Business Administration (SBA)

Submitting false information to the SBA with the intention of influencing a loan application’s outcome can lead to prosecution.

2. Making False Statements to an FDIC-Insured Bank

Submitting false information to an FDIC-insured bank can also attract prosecution.

3. Bank Fraud

This charge arises when anyone seeks to defraud a financial institution; obtaining funds or property by fraud or false representation is prosecutable.

4. Wire Fraud

Wire fraud arises from intentionally using wire communication to obtain a loan or other benefits fraudulently.

5. Aggravated Identity Theft

This charge is applicable when an individual knowingly uses another person’s identification to obtain loans or other benefits fraudulently.

6. Tax Evasion

Companies and their executives may evade taxes by failing to report income derived from business activities financed by PPP loans.

7. Making False Statements to Federal Agents

If anyone lies during a PPP loan fraud audit or investigation, the DOJ can prosecute them under 18 U.S.C. § 1001.

8. Conspiracy

If two or more individuals work collectively to defraud federal funds, they both can be prosecuted under federal laws.

9. Attempt

This offense applies to unsuccessful efforts to commit fraud.

10. False Claims Act Violations

The False Claims Act imposes civil and criminal penalties for fraud on government programs.

Conclusion

Adhering to and complying with the rules and regulations governing the Paycheck Protection Program (PPP) is essential. Violating any of these rules may lead to severe prosecution, hefty fines, and even imprisonment. Therefore, any accusations of PPP loan fraud require the services of an experienced attorney capable of identifying a possible defense while protecting the client’s rights adequately. Todd Spodek is an experienced attorney who can help you navigate these legal processes to safeguard your business, your employees, and your future.