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DOJ Investigations for PPP Loan Fraud: How to Protect Yourself

The COVID-19 pandemic has impacted businesses worldwide, with many requiring financial aid to remain afloat. One of the initiatives implemented by the government was the Paycheck Protection Program (PPP), which provided monetary assistance to businesses affected by the economic downturn. Regrettably, some individuals resorted to fraudulent means to secure PPP funds, leading the U.S. Department of Justice (DOJ) to launch investigations into practices that violated the program’s regulations. The DOJ has filed criminal charges against many individuals and entities over fraudulent activities on PPP loans. Here are some crucial points to keep in mind to protect yourself during a DOJ investigation.

The DOJ Means Business

The DOJ is dedicating considerable efforts to investigate any entity suspected of defrauding the PPP program. The agency is committed to prosecuting any person or group found guilty of such acts.

The DOJ Is Pursuing PPP Loan Fraud Cases

The DOJ has already launched investigations and filed charges against several PPP loan fraud offenders. The agency takes activities such as inflating payroll figures, falsifying information, creating shell companies, or obtaining funds for personal expenses with utmost seriousness.

A Joint Collaborative Effort

The DOJ is not alone in the fight against PPP fraud; the agency is collaborating with other 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) to combat fraudulent activities.

Defending Against DOJ PPP Loan Fraud Investigations

When facing a DOJ PPP loan fraud investigation, you need to know your rights and the most common defenses available. Here are some defenses that you could apply to resolve the issue.

Demonstrate PPP Compliance

Your primary defense is to prove that you complied with the PPP’s terms and conditions. You can demonstrate that your business lawfully applied for and received the funds, established segregated accounts, and showed appropriate documentation of the funds’ usage. It’s critical not to disclose any incriminating information unintentionally during the process.

Lack of Intent to Defraud

Prosecutions for PPP loan fraud require proof of intent to defraud. If you can show that you obtained the loan without knowledge of ineligibility, unknowingly improperly used the PPP funds, or mistakenly submitted a fraudulent forgiveness certification, then lack of intent could be used as a defense. However, it’s important to note that this defense could lead to civil prosecution, fines, treble damages, loss of federal program eligibility, and other penalties.

Federal PPP Loan Fraud Investigations and Potential Charges

PPP loan fraud can trigger civil and criminal charges under several pre-existing federal statues, including:

Making False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014)

According to this statute, any individual who submits false statements or reports to the SBA concerning PPP loans for the purpose of influencing its actions is guilty of fraud.

Making False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014)

It is a criminal offense to make false statements to financial institutions insured by the Federal Deposit Insurance Corporation (FDIC).

Bank Fraud (18 U.S.C. § 1344)

Any person who executes or attempts to execute schemes or artifices to defraud a financial institution violates this federal statute.

Wire Fraud (18 U.S.C. § 1343)

Individuals who use the internet to carry out fraudulent activities to obtain PPP loan proceeds are guilty of wire fraud.

Aggravated Identity Theft (18 U.S.C. § 1028A)

Using someone else’s means of identification in connection with specific felony offenses is a severe crime.

Tax Evasion (26 U.S.C. § 7201)

Willfully trying to evade or defraud any tax under the Internal Revenue Code levies fines and penalties on individuals.

Making False Statements to Federal Agents (18 U.S.C. § 1001)

This federal statute prosecutes anyone who makes false statements to federal agents during a PPP audit or investigation.

Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349)

Multiple parties involved in efforts to fraudulently obtain federal funds under the PPP scheme can face criminal charges for conspiracy.

Attempt (18 U.S.C. § 1349)

Even unsuccessful attempts to defraud PPP loans under false pretenses have criminal consequences.

False Claims Act Violations (31 U.S.C. §§ 3729 – 3733)

The False Claims Act becomes a basis for federal civil and criminal penalties for fraud targeting federal government programs.

Get Expert Legal Help Today!

Facing a DOJ investigation for PPP loan fraud can be worrying and complex. The right defense lawyer can help reduce the stress and provide tailored services to your unique case. Todd Spodek at Spodek Law Group has experience in defending individuals and organizations accused of criminal activities, including PPP loan fraud. Our team will fight for your rights and work to minimize damage to your reputation and business. Contact us today for a free consultation.

Table of Potential Charges in Federal PPP Loan Fraud Investigations:
| **Charge (Code)** | **Description** |
| — | — |
| Making False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014) | This charge applies to an individual who submits false statements or reports to the SBA regarding PPP loans to influence their actions. |
| Making False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014) | This offense applies to providing false information by companies and individuals to financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). |
| Bank Fraud (18 U.S.C. § 1344) | This statute targets individuals who execute or attempt to execute schemes or artifices to defraud a financial institution. |
| Wire Fraud (18 U.S.C. § 1343) | Anyone who utilizes the internet for fraudulent activities in obtaining proceeds from PPP loans violates this statute. |
| Aggravated Identity Theft (18 U.S.C. ¬ß 1028A) |¬†This federal law prosecutes anyone who uses someone else’s means of identification in specific felony offenses. |
| Tax Evasion (26 U.S.C. § 7201) | This offense is for individuals who intentionally try to evade or defraud any tax under the Internal Revenue Code. |
| Making False Statements to Federal Agents (18 U.S.C. § 1001) | Anyone who makes false statements or representations to federal agents during a PPP loan fraud audit or investigation can face prosecution under this statute. |
| Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349) | Multiple individuals or businesses who conspire to fraudulently obtain federal funds under the PPP can face criminal charges. |
| Attempt (18 U.S.C. § 1349) | Even unsuccessful attempts to commit PPP loan fraud under false pretenses can face criminal charges under this statute. |
| False Claims Act Violations (31 U.S.C. §§ 3729 – 3733) | The False Claims Act imposes civil and criminal penalties for fraud targeting federal government programs. |