In the wake of the covid-19 pandemic, many businesses were hit hard with financial burdens and ran off employees’ risks. For this reason, the government provided vast sums of money to small companies and individuals to help ease up the situation. The Small business administration, mainly administered the paycheck protecting program (SBA), was initiated during this period by the Coronavirus Aid, Recovery, and Economic Security Act (CARES Act).However, the program has become quite problematic because the funds’ providers received an unending application for needy businesses and individuals. They ran out of funds after a short period. The problem is that some of the applicants who were eligible for the loans did not receive any.
In this regard, critical measures have been taken to get the fraudsters, the business that received the funds some have hard their count frozen. Once the audit and investigation have been conducted, and the company is clear of any loan fraud allegations, their funds will be released.
Instances that are required as PPP loan fraud
1. Loan piling
When a business or an individual makes multiple applications from different lenders, which is loan fraud viable for prosecution, this is one of the main reasons for the PPP fund depletion. With the help of the funds’ distribution records, the government is tracing the perpetrators who will later be prosecuted. With the continued investigation, over $650 million has been recorded from fraudsters.
2. Illegal Use Of The Funds
Some borrowers’ received the funds, but the latter use them on other means rather than intended. While there was no personal requirement for the PPP loan, the secret services track individuals and even businesses that used the loans for illegal and criminal activity. Those guilty can expect prosecution with hefty fines and up to 5 years jail term. The investigations are targeting the business of all sizes.
3. False Documentation
The application for the PPP funds required one to do verification with the proper documents. Some of the needed certifications include;
- Evidence of bad business status necessitating the need for the PPP loan.
- An agreement not to apply for another loan once you have received one.
- The funds were intended to pay workers and settling bills such as mortgages.
- All the provided documents and certificates should be 100% accurate.
Wrong documentation for any of the requirements is required as fraud and will be investigated.
4. False Application
For the PPP loans to be disbursed, the applicant had to qualify and prove their eligibility. Applicants that gave wrong information such as;
- It was required that companies applying for the loan must have an employee capacity below 500. However, forging the under 500 employees’ level to receive the funds. Companies did this with a high employee capacity by disregarding some employees.
- Falsely Certifiably employee is qualified for the small business administration (SBA) standards to receive the loans.
- Another requirement was the company would receive a loan nearly equivalent to 2-month payroll for the previous year and an added 25% of the total, which meant that a company could receive up to $ 10 million worth of PPP loan.
5. Wrongful Loan Forgiveness Documentation
The PPP has an interest rate of about 1.00, and at the same time, it entitled companies as eligible for loan forgiveness. For the forgiveness to be awarded, the companies that received the loan had to prove they used for funds for their intended purposes. They were also required to certify that all the information they gave was genuine and credible. However, companies that misrepresenting certification for the use of the PPP loan to acquire the forgiveness are to be charged with fraud.
6. Deviating From the Intended Loan Use
As mentioned above, the loan applicants were required to use the funds to;
- Pay employees.
- Settle mortgages bills current plus those outstanding from 12 February 2020.
- Settle rent areas
- Settle utilities.
In this regard, any use outside the four is taken as a fraud. In the case of an audit investigation, the companies must provide records of how the funds were used.
7. Covering Up Information for the Audit and Investigation
It is no secret that most applicants will receive audit and investigation warrants from the Federal Bureau of Investigation (FBI); in this period, they must provide all the necessary information that backs up their application and use the loans the certification of the loan forgiveness. Hiding information from the federal agencies will be costly, and one could face prosecution.
If your company or business is targeted for PPP loan fraud, it would be best to seek a fraud defense lawyer to represent you in such a case to help you with the legal paperwork and the whole proceeding. Fraud is a critical topic that requires the precision of an experienced fraud attorney.
With the ongoing audits, to be on the safer side, prepare all the necessary documents such as payrolls and bills payment receipts. Once filed for audit and investigation, it would help avoid concealing any information from the secret service and, simultaneously, be cautious not to give information that may be harmful and implicating. Ensure there are proper and correct documents and records to support each loan application stage and use. Consider hiring a fraud defense attorney to represent you and clear you of any charges if you are not guilty.