NYC PPP Loan Fraud Lawyers

NYC PPP Loan Fraud Lawyers

You received an SBA Office of Inspector General letter by certified mail. Or FBI agents contacted you about your Paycheck Protection Program loan application. Or you got a civil demand letter from the U.S. Attorney’s Office for the Southern District of New York. You’re terrified – facing potential federal prison time of 20-30 years for bank fraud or wire fraud. Your business is at risk. Your family’s financial future is on the line. Thanks for visiting Spodek Law Group – a second generation law firm with over 50 years of combined experience. Our managing partner, Todd Spodek, has many, many, years of experience defending clients in high-profile federal fraud cases covered by NY Post, Newsweek, and other national outlets – including Anna Delvey and juror misconduct allegations in the Ghislaine Maxwell trial.

Penalties

The Department of Justice isn’t playing games with PPP loan fraud. Bank fraud under 18 U.S.C. § 1344 carries a maximum sentence of 30 years in federal prison and up to $1 million in fines. Wire fraud under 18 U.S.C. § 1343 carries 20 years – or 30 years if the fraud affects a financial institution. Federal prison. Making false statements to the SBA carries up to 5 years in prison. Conspiracy charges under 18 U.S.C. § 371 add another 5 years on top of that.

The federal government also files civil lawsuits under the False Claims Act (31 U.S.C. § 3729). Civil penalties include treble damages – three times the fraudulent PPP loan amount – plus $23,331 per false claim. If you applied for three PPP loans totaling $500,000, you’re looking at $1.5 million in treble damages plus $70,000 in per-claim penalties.

Mandatory restitution means you have to pay back the full amount of the fraudulent loan proceeds. Asset forfeiture means the government can seize your bank accounts, real estate, vehicles, and business assets. Even if you pay back the PPP loan with interest right now, that doesn’t make the criminal charges go away. Restitution alone doesn’t save you.

The SBA Investigation Timeline

Understanding how you ended up in federal crosshairs reveals potential defenses and weaknesses in the government’s case. The SBA used data analytics to flag potentially fraudulent PPP loans. According to a U.S. Government Accountability Office report (GAO-23-105331), the SBA referred over 669,000 potentially fraudulent PPP and EIDL loans to the SBA Office of Inspector General for investigation. The SBA-OIG is auditing all companies that received PPP loans of $2 million or greater. What triggers an investigation: data mismatches between your PPP application and your 2019 tax returns, anonymous tips from disgruntled employees or business partners, lender referrals when banks spot inconsistencies, and discrepancies between your initial PPP application and your forgiveness application. The SBA runs your business name, EIN, and Social Security number through federal databases looking for red flags – incorrect employee counts, inflated payroll numbers, businesses that didn’t exist in 2019, applicants using stolen identities.

The investigation moves through predictable stages. SBA data review – automated systems flag your loan within 30-60 days of forgiveness application. SBA-OIG referral – if the data flags can’t be explained away, your case gets referred to the Office of Inspector General. FBI and DOJ criminal investigation – SBA-OIG coordinates with the FBI’s White Collar Crime division and the U.S. Attorney’s Office. Then you receive contact from investigators – either a civil demand letter, a visit from FBI agents, or a grand jury subpoena. If you don’t resolve the matter civilly, the government files criminal charges in U.S. District Court for the Southern District of New York at 500 Pearl Street. The critical window is 60-90 days from the time you receive that first contact from investigators to when the government files a criminal indictment. Sixty days. Maybe ninety. This is when civil settlement is still possible. Once you’re indicted, your leverage evaporates – now you’re facing a 97% federal conviction rate and those 20-30 year maximum sentences become very real.

Congress extended the statute of limitations for PPP fraud to 10 years. Applications submitted in 2020 can be prosecuted until 2030. Ten years to prosecute. There’s no “safe harbor” period. No statute protection. The GAO found that the SBA-OIG was unable to fully investigate nearly 2 million of the 3 million fraud referrals because the SBA didn’t provide enough information or provided incorrect information in its referrals. This is a viable defense angle – if the SBA’s referral is based on faulty data or incomplete information, your criminal defense attorney can attack the quality of the investigation itself.

Your Defenses

Negotiate a civil settlement before criminal charges are filed. The U.S. Attorney’s Office for the Southern District of New York has been settling PPP cases civilly throughout 2024. In December 2024, U.S. District Judge Jennifer H. Rearden approved a $1,470,085 civil settlement for a footwear business owner who included false information in PPP applications. U.S. District Judge Mary Kay Vyskocil approved a $360,000 settlement for a members-only social club that falsely certified eligibility for PPP loans. These defendants avoided criminal prosecution by admitting to the false statements, paying restitution, and paying penalties. No criminal record. No federal prison time. No felony conviction that destroys your future.

Civil settlement requires your attorney to approach the U.S. Attorney’s Office before the case is referred for criminal prosecution. This is a narrow window – typically after you receive the SBA-OIG investigation letter but before a grand jury is convened. Your attorney negotiates the terms: full repayment of the fraudulent loan amount, civil penalties under the False Claims Act, and a settlement agreement that resolves the government’s claims.

If civil settlement isn’t possible, your defense attorney must challenge the prosecution’s evidence. Federal prosecutors have to prove you knowingly and willfully submitted false information with intent to defraud the SBA or a financial institution. Attack the evidence – look for discrepancies in government documents, inconsistent witness testimonies, data errors in the SBA’s fraud detection systems. Demonstrate compliance with PPP terms – if you received the loan lawfully, created a segregated account, and used the funds for authorized purposes, this undermines the fraud allegation.

Argue lack of criminal intent. Many business owners applied for PPP loans in March-April 2020 when the world was shutting down, regulations were confusing, and the SBA was changing guidance daily. If you relied on an accountant or attorney to prepare your application, if you made good faith efforts to comply with the rules, or if you misunderstood the eligibility requirements, this negates the “knowingly and willfully” element of fraud.

Invoke your Fifth Amendment right against self-incrimination. When FBI agents or SBA-OIG investigators contact you, they will try to interview you. They’ll say “we just want to clear this up” or “if you cooperate now, it will go better for you later.” This is a trap. Talking to federal investigators without an attorney present can lead to additional charges under 18 U.S.C. § 1001 for making false statements to federal agents. Your Fifth Amendment right against self-incrimination exists for this moment – when federal pressure is at its highest. Invoke. Stay silent.

Unlike other law firms who maintain relationships with prosecutors and encourage clients to accept plea deals immediately, Spodek Law Group fights aggressively for civil resolution before criminal exposure. We’ve defended clients in high-profile federal fraud cases – and we know that early intervention with the U.S. Attorney’s Office can make the difference between a civil settlement and a 54-month prison sentence.

Do not talk to federal agents. Do not respond to their questions. Do not provide documents or statements without consulting a federal defense attorney. SBA-OIG investigators and FBI agents are skilled interrogators – they will use your statements against you. Don’t talk. Don’t answer. Don’t.

Invoke your Fifth Amendment right against self-incrimination immediately. Tell the investigators: “I am invoking my Fifth Amendment right to remain silent. I am invoking my Sixth Amendment right to counsel. I will not answer any questions without my attorney present.” Then stop talking.

Gather all records related to your PPP loan immediately. Your original PPP application, your PPP forgiveness application, bank statements showing how you used the PPP funds, payroll records, tax returns, employee documentation, communications with your lender, communications with your accountant or attorney about PPP eligibility, and any SBA guidance documents you relied on. Make digital copies of everything – federal investigators may seize the originals during a search warrant execution.

Contact a federal criminal defense attorney within 24-48 hours. The window for civil settlement is narrow. Sixty days. Maybe less. Once a grand jury is convened and an indictment is filed, your leverage is gone. An experienced attorney can immediately contact the U.S. Attorney’s Office, assess whether civil settlement is possible, and begin building your defense.

Do not destroy any documents. Do not delete emails. Do not alter records. Federal prosecutors will charge you with obstruction of justice if they can prove you destroyed evidence after learning about the investigation.

Don’t talk to SBA-OIG without an attorney. Don’t provide statements to the FBI. Don’t wait for the criminal indictment. Don’t wait for the criminal indictment. Unlike other law firms who push clients to cooperate with the DOJ immediately, Spodek Law Group negotiates civil settlements before criminal exposure. We are available 24/7 for a risk-free consultation. Call now. 212-300-5196.