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Defending Against DOJ Investigations for PPP Loan Fraud: What You Need to Know
The Paycheck Protection Program (PPP) provided a lifeline to businesses struggling to stay afloat amidst the pandemic. However, as expected, the program became a fertile ground for PPP loan fraud. As a result, the United States Department of Justice (DOJ) is actively pursuing investigations into fraudulent loan applications and unauthorized use of funds. The investigation targets companies, their owners, and executives, and other individuals. If caught, these parties face severe consequences. This article explains what you should know about PPP loan fraud allegations and how experienced attorneys can defend against them using several strategies.
| What You Need to Know About DOJ Investigations for PPP Loan Fraud |
| The DOJ is actively pursuing individuals and companies it suspects of making fraudulent loan applications or unauthorized use of funds. |
| The DOJ works with federal law enforcement agencies, including 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). |
| If you or your company is being investigated by the DOJ for PPP loan fraud, experienced attorneys recommend potential strategies such as Paycheck Protection Program compliance and showing a lack of intent to defraud. |
| Criminal charges under investigation for PPP loan fraud include Making False Statements to SBA or FDIC-Insured Banks, Bank Fraud, Wire Fraud, Aggravated Identity Theft, Tax Evasion, Making False Statements to Federal Agents, Conspiracy, Attempt, and False Claims Act Violations. |
Be Aware: The DOJ Cracks Down on PPP Loan Fraud
PPP loan fraud is a serious issue, and the Department of Justice is taking it seriously. Due to the high occurrence of PPP loan fraud and its severe consequences, the DOJ is aggressively targeting individuals and companies that it suspects of fraudulent loan applications or unauthorized use of funds. Recently, the DOJ alleged fraudulent certifications for PPP loan forgiveness, stating in a press release, “The Paycheck Protection Program was designed to help Americans struggling with financial hardship during the pandemic. Our office will be aggressive in targeting anyone who defrauds this critical program.”
The DOJ is Actively Pursuing PPP Loan Fraud
It is essential to understand that a DOJ investigation for PPP loan fraud is no idle threat. The DOJ has already opened investigations across the country and filed criminal charges in high-profile cases. Individuals have been charged with falsifying payroll information and creating shell companies to obtain PPP loans, while some used money meant for forgivable PPP loans for personal expenses.
Understand: The DOJ Works With Federal Law Enforcement Agencies
To ensure a seamless and thorough investigation, the DOJ collaborates with several federal agencies, including the SBA-OIG, FDIC-OIG, FBI, and IRS-CI. These agencies work together to scrutinize PPP loan applications, their intended purposes, expenditure, and potential misuse.
Know Your Defenses: Potential Strategies for PPP Loan Fraud Investigations
If you or your company is under investigation for PPP loan fraud, you can adopt several defense strategies that an experienced attorney may recommend, including:
Paycheck Protection Program Compliance – This defense strategy may be the first line of defense for organizations and individuals. Demonstrating compliance with the PPP’s terms, such as legitimately obtained PPP loans, a separate PPP loan account, and proper documentation of fund use, could lead to a quicker resolution. Compliance with PPP regulations and reporting information requested by the DOJ is crucial.
Lack of Intent to Defraud – Generally, federal law requires evidence of the intent to prove a criminal offense. If there is evidence that the PPP loan receipt was unintentional, funds were unintentionally misused, or there was an accidental submission of a fraudulent forgiveness certification, this may be a potentially effective defense. However, it is critical to note that unintentional fraud can still lead to civil charges under the False Claims Act and other statutes, which could result in substantial penalties.
Potential Charges for PPP Loan Fraud
One of the critical yet challenging aspects of a DOJ investigation for PPP loan fraud is that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that created the PPP program does not specify penalties for PPP loan fraud. As such, the DOJ is pursuing current federal statutes. Some of the charges include Making False Statements to SBA or FDIC-Insured Banks, Bank Fraud, Wire Fraud, Aggravated Identity Theft, Tax Evasion, Making False Statements to Federal Agents, Conspiracy, Attempt, and False Claims Act Violations.
Table 1: Potential Charges and their Corresponding Statutes in a DOJ PPP Loan Fraud Investigation
| Potential Charges | Statutes |
|---|---|
| Making False Statements to SBA or FDIC-Insured Banks | 18 U.S. Code § 1014 |
| Bank Fraud | 18 U.S. Code § 1344 |
| Wire Fraud | 18 U.S. Code § 1343 |
| Aggravated Identity Theft | 18 U.S. Code § 1028A |
| Tax Evasion | 26 U.S. Code § 7201 |
| Making False Statements to Federal Agents | 18 U.S. Code § 1001 |
| Conspiracy | 18 U.S.C. § 371 and 18 U.S.C. § 1349 |
| Attempt | 18 U.S. Code § 1349 |
| False Claims Act Violations | 31 U.S. Code §§ 3729-3733 |
Conclusion
A DOJ investigation for PPP loan fraud is not an idle threat, given the severe consequences of PPP loan fraud. The DOJ is actively pursuing investigations into fraudulent loan applications and unauthorized use of funds, and those caught may face substantial fines, damages, and penalties. Fortunately, there are defense approaches, such as Paycheck Protection Program compliance and showing a lack of intent to defraud, that experienced attorneys can use to mitigate the risks of potential charges. It is always to seek legal counsel when faced with a DOJ investigation, as they can offer defense strategies to resolve the matter promptly.
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