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The Seriousness of DOJ Investigation for PPP Loan Fraud
The COVID-19 pandemic necessitated the establishment of the Paycheck Protection Program (PPP). This program offered federally-backed, forgivable loans to businesses struggling to keep afloat during the pandemic. Unfortunately, the program has become a magnet for fraud, with news of ineligible individuals and businesses receiving PPP funds and misusing loans. As a result, the US Department of Justice (DOJ) has commenced a probe into PPP loan fraud cases and is actively suing entities and individuals suspected of filing fraudulent PPP loan applications or misusing PPP funds. Facing a DOJ probe for PPP loan fraud is a grave matter with potentially far-reaching consequences for you, your enterprise, and its management. Read on to learn more about the DOJ investigation and what you can do if you’re under investigation.
DOJ’s Aggressive Response to PPP Loan Fraud
The DOJ is resolute in prosecuting all corporations and individuals discovered to have unlawfully taken advantage of PPP loans. The DOJ considers the PPP program a “critical” aid structure for individuals struggling economically through the pandemic. The DOJ has issued a stern warning to those taking advantage of the program illegally and is taking extensive measures to ensure compliance.
DAJ’s Active Actions to Prosecute PPP Loan Fraud Cases
The DOJ has not issued mere threats because it has already filed charges in multiple PPP loan fraud cases. These charges include the usage of PPP loan funds to purchase luxuries, obtain multiple loans, falsify payroll, and create shell companies to procure PPP loans. The DOJ’s willingness to take action highlights the severe risks inherent in facing a DOJ investigation for PPP loan fraud.
DOJ’s Collaboration with Other Federal Law Enforcement Agencies
The DOJ is not alone in its commitment to exposing fraudulent activity within the PPP. It has teamed up with other federal agencies that focus on identifying and prosecuting individuals and entities found to breach laws related to the PPP. These agencies include the Federal Bureau of Investigation (FBI), the Internal Revenue Services (IRS-CI), the US Small Business Administration Office of Inspector General (SBA-OIG), and the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG).
What to Do When Facing DOJ PPP Loan Fraud Investigations
Facing DOJ PPP loan fraud charges is a severe matter. Yet, it’s essential to remember that defending yourself against the charges is a legal right. Here are some of the potential defenses individuals and enterprises can use in the fight against DOJ PPP loan fraud investigations:
Paycheck Protection Program Compliance
Demonstrating PPP compliance is a common defense for individuals and entities accused of forgery. If all legal requirements were met while submitting the PPP loan application, the use of PPP funds was documented appropriately, and a separate account was created for the funds, an entity may find itself in a more favorable position during these trying times. However, it’s essential to be vigilant about any voluntary and involuntary information shared with the DOJ that could result in higher risks of prosecution.
Lack of Intent to Defraud
Intentional fraud is a prerequisite to criminal responsibility under federal law. Thus it is a compelling defense strategy for guiltless individuals and entities accused of PPP loan fraud. If you had no intent to defraud and were unaware of ineligibility, you would stand a better chance of proving your innocence. Nonetheless, unintentional fraud still warrants civil charges under the False Claims Act, resulting in hefty fines, ineligibility for future programs, and other penalties.
Potential Charges in Federal PPP Loan Fraud Cases
Although there are no stipulated penal provisions regarding PPP fraud in the CARES Act, which created the PPP program, fraud under the program can attract civil and criminal charges under several existing federal laws. These include, but are not limited to the following:
РMaking False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014)
РMaking False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014)
РBank Fraud (18 U.S.C. § 1344)
РWire Fraud (18 U.S.C. § 1343)
РAggravated Identity Theft (18 U.S.C. § 1028A)
РTax Evasion (26 U.S.C. § 7201)
РMaking False Statements to Federal Agents (18 U.S.C. § 1001)
РConspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349)
РAttempt (18 U.S.C. § 1349)
РFalse Claims Act Violations (31 U.S.C. §§ 3729 – 3733)
In conclusion, if facing legal PPP loan fraud allegations, it’s imperative to have legal representation immediately. Todd Spodek and his team can assist in building a legal defense, protecting your legal rights, and identifying a constructive way forward. By scrutinizing the charges and gathering relevant evidence, our experienced attorneys can assess the case’s strengths and weaknesses, identify flaws or inaccuracies, and create a competent legal strategy that helps you achieve favorable outcomes in your federal PPP loan fraud case. Contact Todd Spodek for a consultation or use our online booking to schedule an appointment today.
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