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Protect Your Business: What You Must Know About DOJ Investigations for PPP Loan Fraud
The COVID-19 pandemic has had a devastating impact on companies of all sizes, leaving most of them financially struggling to pay their employees and keep their business running. To alleviate this, the US Government created the Paycheck Protection Program (PPP), a loan program specially designed to give financial relief to small and medium-scale businesses that are affected by the pandemic. Regrettably, fraudsters saw this as an opportunity to enrich themselves, leading to various investigations by the US Department of Justice (DOJ). This article aims to enlighten you on what you need to know about DOJ investigations for PPP loan fraud to help protect your business.
The DOJ is Aggressively Investigating PPP Loan Fraud
The cost of PPP loan fraud is significant, and this has made the DOJ take this issue very compelling. The DOJ is targeting individuals and businesses suspected of fraudulent PPP loan applications or unauthorized use of the PPP loan funds. They are not only targeting individuals and businesses accused of PPP fraud but also investigating those accused of PPP loan certification fraud. According to a recent press release from the DOJ, the PPP data shows that the offices of the Inspector General started thousands of PPP loan fraud investigations, and the DOJ will be aggressive in targeting anyone who defrauds this critical program.
The DOJ is Actively Pursuing PPP Loan Fraud Investigations
PPP loan fraud investigations by the DOJ are ongoing, and the agency has charged several individuals with a variety of fraudulent activities. The DOJ has filed criminal charges against those who created shell companies and submitted falsified payroll information to obtain PPP loans. Individuals who used PPP loan funds unauthorized, like purchasing luxury cars, Rolex watches, and renting vacation homes, among others. Additionally, they are investigating individuals who tried to illegally obtain multiple PPP loans and other fraudulent PPP loan activities.
The DOJ is Collaborating with Other Federal Law Enforcement Agencies
The DOJ is not working alone in this fight against PPP loan fraud. As a matter of fact, they are collaborating with several other federal agencies that are equally dedicated to identifying and prosecuting fraudsters who exploited PPP’s forgivable loans. The federal agencies that are working with the DOJ include the 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).
PPP Loan Fraud Investigations by the DOJ and Possible Defenses
If you’re a business owner or an individual facing a DOJ PPP loan fraud investigation, this can be overwhelming, and you might be unsure about how to proceed. Facing a PPP loan fraud investigation can be disheartening. However, there are several defenses that you or your business can take. Our attorneys rely on various strategies when defending clients accused of PPP loan fraud by the DOJ. Here are some of the common defenses you can assert during DOJ PPP loan fraud investigations:
Paycheck Protection Program Compliance ‚Äì It’s critical to ensure that you demonstrate PPP compliance. It can be a crucial defense, especially if you can show that your company lawfully obtained the PPP loan, created a PPP loan account, and properly documented the PPP funds’ use. This can lead to a speedy resolution of the DOJ investigation. However, be aware that once you’ve given information to the DOJ voluntarily, you cannot take it back. Accidentally disclosing incriminating information may expose you and your company to prosecution for PPP loan fraud.
Lack of intent to commit fraud – The prosecution must show that the defendant had the intent to defraud. If you can show that you or your company inadvertently obtained a PPP loan despite being ineligible or submitted a fraudulent forgiveness certification without intending to deceive the government or to take advantage of the program, your lack of intent could provide a defense to the charges. Nonetheless, unintentional fraud can still carry severe civil charges under the False Claims Act and other statutes, such as enormous fines, treble damages, and loss of federal program eligibility.
Potential Charges in DOJ PPP Loan Fraud Investigations
PPP Loan fraud may trigger both civil and criminal charges under different federal statutes, even though the CARES Act, which created the PPP, does not define penal provisions for PPP loan fraud. Below are some of the possible charges in Federal investigations into PPP loan fraud, among others:
| Statute | Charge |
|---|---|
| 18 U.S.C. § 1014 | Making False Statements to the Small Business Administration (SBA) |
| 18 U.S.C. § 1014 | Making False Statements to an FDIC-Insured Bank |
| 18 U.S.C. § 1344 | Bank Fraud |
| 18 U.S.C. § 1343 | Wire Fraud |
| 18 U.S.C. § 1028A | Aggravated Identity Theft |
| 26 U.S.C. § 7201 | Tax Evasion |
| 18 U.S.C. § 1001 | Making False Statements to Federal Agents |
| 18 U.S.C. § 371 and 18 U.S.C. § 1349 | Conspiracy |
| 18 U.S.C. § 1349 | Attempt |
| 31 U.S.C. §§ 3729 – 3733 | False Claims Act Violations |
Conclusion
A DOJ investigation for PPP loan fraud is a severe matter with life-altering consequences. The DOJ takes misuse of PPP funds and fraudulent activities very seriously. Whether or not your company obtained a PPP loan lawfully, it’s essential to understand that all accusations will be treated very seriously. For the possible outcome, it’s to seek legal guidance from experienced attorneys in defending PPP loan fraud allegations. We advise being proactive and seeking legal advice before it’s too late.
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