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DOJ Investigations and Charges for PPP Loan Fraud: What You Need to Know

The Paycheck Protection Program (PPP) came into existence as a relief measure for small businesses and self-employed individuals affected by COVID-19 pandemic. Despite being a lifeline for many, the program has become a target for fraudsters, including ineligible companies, non-existent entities, and people obtaining multiple loans. The Department of Justice (DOJ) is taking the issue seriously and investigating the fraudsters with great vigor to prevent any further misuse of the funds. Reports suggest that the DOJ has charged many individuals and companies for various fraud charges under various federal offenses. If you are under investigation by the DOJ for PPP loan fraud, it is crucial to understand the potential risks and consequences of the allegations, and we are here to help you with that.

The DOJ’s Initiative to Combat PPP Loan Fraud

With the rising number of PPP loan fraud cases, the DOJ is focusing on individuals and companies suspected of committing PPP loan fraud. The DOJ is also targeting people who provided false PPP loan forgiveness certifications. The department is determined to take strict action against those who exploit the program.

Recent Cases of PPP Loan Fraud

Acquiring a PPP loan through fraudulent means can lead to serious federal offenses. The DOJ has already filed cases against many individuals and companies for various types of PPP loan fraud, including:
– Creating fake companies and falsifying payroll information to obtain PPP loans
– Using PPP loan funds to pay for personal expenses
– Attempting to obtain multiple PPP loans
– Other types of PPP loan fraud.

The DOJ’s Collaboration with Other Federal Law Enforcement Agencies

Apart from the DOJ, numerous federal agencies are working alongside to investigate PPP loan fraud cases. These agencies include 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 the Internal Revenue Service Criminal Investigations (IRS-CI).

Defenses During DOJ PPP Loan Fraud Investigations

Being accused of PPP loan fraud can have severe consequences for both individuals and companies. However, there are several potential defenses available against such allegations. In this section, we will discuss a few potential defenses that individuals or companies can use against PPP loan fraud accusations during DOJ investigations.

Demonstrating Compliance with the PPP

If you have correctly followed the PPP’s terms and conditions by lawfully obtaining a PPP loan, setting up a segregated PPP loan account, and providing proper documentation for PPP fund utilization, your actions will demonstrate PPP compliance. This defense can help resolve the case quickly. Nevertheless, it is essential to remain cautious while providing any information to the DOJ to avoid incriminating oneself or the company inadvertently.

Lack of Intent to Defraud

The essence of federal culpability for PPP loan fraud lies in the accused’s intention to defraud. Thus, if the DOJ accuses you of PPP loan fraud, showing that you did not intend to commit fraud is an effective defense. The DOJ must prove that you intentionally defrauded the program, so unintentional mistakes could provide a defense to the charges listed above. However, unintentional PPP loan fraud can still draw severe civil penalties.

Potential Charges in Federal PPP Loan Fraud Investigations

PPP loan fraud cases can lead to various civil and criminal charges in diverse pre-existing federal statutes, even though the CARES Act does not include penal provisions for PPP loan fraud. These offenses include the following:
– Making False Statements: Submitting false information to the SBA or PPP lenders is a federal crime.
– Bank and Wire Fraud: These federal statutes have defined bank and wire fraud as a criminal offense committed by using false or fraudulent pretenses or scheming to defraud a financial institution or obtain any asset owned or controlled by a financial institution.
– Aggravated Identity Theft: A person is guilty of aggravated identity theft when he or she knowingly transfers, possesses, or uses another person’s identification in connection with specific felony offenses.
– Tax Evasion: PPP loan fraud cases may face allegations of tax evasion, which is a criminal offense for underpaying payroll tax or failing to report income produced by business activities funded by PPP loans.
– Making False Statements to Federal Agents: Individuals or company executives can face prosecution for making false statements to federal agents during a PPP loan fraud audit or investigation.
– Conspiracy and Attempt: Several federal statutes provide for the prosecution of multiple companies and individuals who collectively work on efforts to fraudulently obtain federal funds under the PPP.
– False Claims Act Violations: One can face civil charges for unintentional PPP loan application or forgiveness certification fraud and criminal prosecution for intentional PPP loan fraud.

Conclusion

PPP loan fraud is a serious offense, and if the DOJ accuses an individual or company of fraud, the consequences could be severe. Acting quickly and working with experienced attorneys specialized in investigations and fraud cases is essential. Todd Spodek is an experienced defense attorney who can help by devising strategies to confront the charges head-on and work with federal agencies to secure a favorable outcome. Remember, being accused of PPP loan fraud is just the start; the real game is how one deals with it – be smart and hire an experienced attorney at the earliest.