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What You Must Do When Facing DOJ Investigation for PPP Loan Fraud

The COVID-19 pandemic came with a sharp economic downturn and businesses seeking refuge, hope, and support. It was to this end that the Paycheck Protection Program (PPP) was established in 2020, to help distressed companies stay afloat. However, the program attracted fraudsters who hijacked it and used it as an opportunity to swindle unsuspecting Americans. The impact of PPP loan fraud was massive and eye-opening, requiring the attention of the Department of Justice (DOJ) to take immediate legal action against the perpetrators.

If you are facing a DOJ investigation for PPP loan fraud, it is important to know what to do. The DOJ has taken an aggressive stand against PPP loan fraud and would not hesitate to prosecute businesses and individuals who engage in fraudulent activities associated with the PPP program. However, there are several defenses that you can leverage under the guidance of an experienced PPP loan fraud attorney.

The DOJ’s Aggressive Stand Against PPP Loan Fraud

The DOJ is fully invested in prosecuting PPP loan fraud. They are committed to tracking down companies and individuals who have wrongfully utilized PPP funds or submitted fraudulent loan applications or forgiveness certifications. The DOJ recognizes that the Pandemic was a critical period in American history, and the PPP program designed to help distressed businesses was a vital part of the recovery process. It is thus not surprising that they have pledged to be aggressive in their pursuit of those who defraud such a crucial program.

According to a recent DOJ press release, “our office will be aggressive in targeting anyone who defrauds this critical program.” The DOJ has already commenced charges in several PPP-related fraud cases, where individuals have been indicted for establishing shell corporations and submitting fake payroll information to obtain PPP loans. Others have also used their PPP funds for unauthorized purposes. The DOJ has also flagged several entities that attempted to acquire multiple PPP loans or engaged in other forms of PPP loan fraud. In this pursuit, the DOJ partners with other federal enforcement agencies, including the U.S. Small Business Administration Office of Inspector General (SBA-OIG), the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), the Federal Bureau of Investigation (FBI), and the Internal Revenue Service Criminal Investigations (IRS-CI). This collaboration has ensured that fraudulent practices are detected and prosecuted under the law.

Defenses Against the DOJ Investigation of PPP Loan Fraud

Although the DOJ is invested in prosecuting PPP loan fraud, several defenses could mitigate the impact of an incriminating investigation. Consulting with experienced PPP loan fraud attorneys will help you evaluate the evidence presented, analyze the situation, and present the legal defense strategies to manage your PPP loan fraud investigations. The possible defenses include:

PPP Loan Compliance: Demonstrating compliance with PPP terms and conditions is one of the initial lines of defense against PPP loan fraud accusations. Keeping evidence of lawful PPP loan acquisition, appropriate segregation of PPP loan accounts, and documentation of suitable PPP loan fund applications could help establish an organization’s legitimacy for PPP loan forgiveness certification. It is critical to work with legal professionals during federal investigations to avoid providing inadvertent or seemingly unnecessary information, which could escalate the risk of prosecution.

Lack of Intent: Fraud, under federal law, requires intentional planning to defraud. An individual or business that inadvertantly procured a PPP loan without eligibility, misused PPP funds, or submitted a fraudulent certification for loan forgiveness, could mount a defense based on the lack of intent. However, it is important to note that unintentional fraud can be prosecuted as a civil offense under the law, leading to significant penalties capable of causing severe damage.

Potential Criminal Charges for PPP Loan Fraud Investigations

PPP loan fraud is a severe criminal offense, and the DOJ could invoke several federal statutes under which offenses would be charged. Some of the possible criminal charges include:

False Statements to the Small Business Administration (SBA) (18 U.S.C. ¬ß 1014) ‚Äì involves punishment for anyone who “knowingly makes any false statement or report . . . for the purpose of influencing in any way the action of the . . . Small Business Administration.” This statute can cover falsehoods on PPP loan applications and loan forgiveness certifications.

False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014) – prohibits presenting false information to key financial institutions insured by the Federal Deposit Insurance Corporation (FDIC) and other banks.

Bank Fraud (18 U.S.C. § 1344) – illegal for anyone who knowingly executes or attempts to execute a scheme or artifice to defraud a financial institution.

Wire Fraud (18 U.S.C. § 1343) – prohibits the use of the internet for receiving money or property by fraudulent means.

Aggravated Identity Theft (18 U.S.C. ¬ß 1028A) ‚Äì involves knowingly transferring, possessing, or using an identification belonging to another person without authority or validity. Some PPP loan fraud cases have been linked to situations where PPP loan applications or forgiveness certifications were submitted using another individual’s identification.

Tax Evasion (26 U.S.C. § 7201) – typically arises when business activities funded by PPP loans result in payroll or income tax income, which is not reported, leading to tax evasion charges.

False Statements to Federal Agents (18 U.S.C. § 1001) – could lead to fraud charges against anyone who provides false information during a federal inquiry or prosecution.

Conspiracy (18 U.S.C. § 371, and 18 U.S.C. § 1349) – two or more individuals or organizations can face criminal conspiracy charges while colluding to defraud any federal government programs, including the PPP.

Attempt (18 U.S.C. § 1349) – irrespective of the success rate, an unsuccessful attempt to commit any offense established under section 1349 of the statute could be prosecuted.

False Claims Act Violations (31 U.S.C. §§ 3729 – 3733) – The federal False Claims Act imposes civil and criminal penalties for fraud targeting federal government programs. The DOJ can pursue civil charges in unintentional PPP loan application fraud and criminal charges for intentional PPP loan fraud.

Conclusion

PPP loan fraud is a heinous crime that could significantly damage a business’s reputation, cause hefty fines or lead to incarceration. In the face of such dire consequences, immediate actions must be taken to tackle the issue head-on. If you or your company are facing accusations of PPP loan fraud, the legal representation of Todd Spodek is invaluable. Our experienced PPP loan fraud attorneys will evaluate the evidence presented, analyze your situation, and guide you on the legal defense strategies to manage your PPP loan fraud investigation. Don’t delay in seeking legal help, as doing so could lead to an irreversible domino effect.