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DOJ Investigation for PPP Loan Fraud: What You Should Know

The COVID-19 pandemic has brought unimaginable economic challenges to businesses of all sizes across the United States. To help struggling American businesses, the Paycheck Protection Program (PPP) was established as a source of hope. However, the program was soon infiltrated by fraudulent individuals and companies, leading to numerous PPP loan fraud cases.

The Department of Justice (DOJ), together with other federal enforcement agencies, is on a mission to prosecute individuals and organizations involved in PPP loan fraud. If you are facing a DOJ investigation for PPP loan fraud, here are some valuable insights.

The DOJ is Aiming to Prosecute PPP Loan Fraud Cases

The severity of PPP loan fraud has driven the DOJ into action. The DOJ is committed to punishing individuals and companies that misused PPP funds, submitted fraudulent loan applications, or fraudulent loan forgiveness certifications. This comes from the realization that the Paycheck Protection Program’s primary goal was to relieve the economic pressure brought upon businesses by the COVID-19 pandemic. In a recent DOJ press release, the DOJ asserts that “our office will be aggressive in targeting anyone who defrauds this critical program.” This indicates that the DOJ will not hesitate to prosecute individuals and organizations engaging in unauthorized or fraudulent PPP fund utilization.

The DOJ is Actively Pursuing PPP Loan Fraud Cases

PPP loan fraud is not theoretical, and the DOJ has already filed charges in multiple PPP-related fraud cases. The DOJ has indicted some people for establishing shell corporations and submitting false payroll information to acquire PPP loans. Also, some individuals have spent their PPP loan funds on personal luxuries. The DOJ is also investigating organizations that tried to obtain multiple PPP loans and other PPP loan fraud-related activities.

The DOJ Works with Several Federal Law Enforcement Agencies

The DOJ partners with other federal law enforcement agencies to combat PPP loan fraud. The SBA-OIG, FDIC-OIG, FBI, IRS-CI, and other governmental organizations collaborate to identify and prosecute individuals and companies that abused federal resources. The combined efforts of these agencies ensure the detection of fraudulent practices and their punishment under the law.

PPP Loan Fraud Investigations’ Potential Charges

PPP loan fraud charges vary based on the offense, but there are several federal statutes capable of covering PPP loan fraud charges. Some of these statutes include:

False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014) РThis statute outlawed anyone who knowingly makes false statements or reports to the SBA, including falsehoods on PPP loan applications and loan forgiveness certifications.

False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014) РThis statute forbids providing a financial institution insured by the Federal Deposit Insurance Corporation or any other bank false information.

Bank Fraud (18 U.S.C. § 1344) РThis statute makes it a crime for anyone who executes or attempts to execute a scheme to defraud a financial institution knowingly.

Wire Fraud (18 U.S.C. § 1343)- Anyone who has fraudulently obtained money or property through the internet is guilty of violating this statute.

Aggravated Identity Theft (18 U.S.C. ¬ß 1028A)- Using another person‚Äôs identification to apply for PPP loans falls within this statute’s purview.

Tax Evasion (26 U.S.C. § 7201) РPPP loan recipients who do not report income from payroll tax or income tax to defraud the government is chargeable under this statute.

False Statements to Federal Agents (18 U.S.C. § 1001)- Individuals who present false information during a federal inquiry or prosecution commit fraud under this statute.

Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349) РTwo or more people or companies can face federal conspiracy charges for collusion to defraud government programs, including the PPP.

Attempt (18 U.S.C. § 1349) РAny unsuccessful attempt to commit offenses established under section 1349 can be prosecuted under this statute.

False Claims Act Violations (31 U.S.C. §§ 3729 – 3733) РUnder this statute, the government can penalize individuals and companies that committed PPP loan fraud.

Defenses Against the DOJ Investigation of PPP Loan Fraud

Although the DOJ has the authority to prosecute individuals involved in PPP loan fraud, several defenses can be leveraged depending on the case’s circumstances. Working with experienced PPP loan fraud attorneys can help individuals and firms take the necessary steps to analyze their cases and defend themselves adequately. These defenses include:

Paycheck Protection Program Compliance – Demonstrating compliance with PPP loan terms, evidence of lawfulness in PPP loan acquisition, documentation of segregated PPP loan accounts, and appropriate PPP funds application qualify as an initial line of defense against PPP loan fraud allegations. However, disclosing inadvertent or seemingly essential information increases the risk of prosecution during federal investigations.

Lack of Intent to Defraud – Fraud allegations under federal law indicate an intentional desire to defraud. Individuals and companies that received PPP loans without eligibility, misused PPP funds, or sent fraudulent loan forgiveness certifications without purposefully planning to defraud can defend the charges based on lack of intent. Intentional fraud can also result in a civil offense that carries severe penalties, capable of detrimental impacts on the accused.

Conclusion

PPP loan fraud is a massive problem capable of causing significant damage to a company’s reputation and bottom line when highlighted publicly during a DOJ investigation. Therefore, when accused of PPP loan fraud, individuals and companies need to obtain legal representation immediately. Failure to act fast and handle the case appropriately could lead to an irreversible domino effect. At Todd Spodek, we have a team of experienced PPP loan fraud lawyers who conduct thorough evaluations of presented evidence, provide reliable analysis of the situation, and present the legal defense strategies to manage your PPP loan fraud investigations.