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The U.S. Department of Justice (DOJ) is on a mission to investigate and file charges against companies and individuals who have allegedly committed PPP loan fraud. If you or your business is facing a PPP loan fraud investigation, you should understand the gravity of the situation and the possible defenses.
The DOJ is determined to prosecute PPP loan fraud and has initiated numerous cases in partnership with other federal law enforcement agencies to clamp down on this scourge. The potential charges in a PPP loan fraud investigation are grave and include making false statements to the Small Business Administration 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.
Although there are defenses to these charges, such as proving compliance with the terms of the PPP and lack of malicious intent, divulging misleading info to the DOJ could bolster the risk of prosecution. Therefore, your business’s or your defense team’s approach to tackling the charges should be smart, calculated, and effective.
Many businesses and individuals took advantage of the Paycheck Protection Program (PPP) to help during the COVID-19 pandemic, which resulted in billions of dollars in loans disbursed in record time. Some businesses, however, gained PPP funding through deceitful means, including submitting falsified documents or overestimating labor costs.
The PPP was set up to provide businesses with funds to cover eight weeks of payroll, mortgage interest, rent, and utilities. To secure the PPP loan, businesses had to apply to their banks or any other Small Business Administration (SBA) approved lender, self-certify the business was facing a pandemic-related hardship, and provide other documentation.
Unfortunately, many participants have been accused of fraudulently obtaining PPP relief funds, claiming to have numerous employees, misrepresenting their business income, or exaggerating the cost of their payroll. Some companies even submitted multiple fraudulent applications to different lenders to get multiple PPP loans.
The DOJ has announced its intent to investigate and prosecute alleged PPP loan fraud vigorously. It is using all tools at its disposal to catch offenders and bring them to book, including reviewing loan applications and conducting interviews with bank employees and borrowers. The DOJ is also using data analytics to identify fraudulent applications and check PPP loan recipients’ compliance with program rules.
The complex and comprehensive investigations have led to several PPP loan fraud charges filed nationwide. In some instances, the DOJ has partnered with other law enforcement agencies to arrest and prosecute PPP loan fraud offenders.
A PPP loan recipient or borrower facing PPP loan fraud charges, however, still has some potential defenses to the allegations, which include:
PPP Compliance
The DOF’s investigation and potential charges around PPP fraud do not automatically mean you are “guilty.” If your company followed the loan program’s requirements and can prove it, such as providing payroll records to back up the number of employees, it could be a compelling defense.
Lack of Intent
If your business made some mistakes while filing PPP loan applications but had no intent to deceive or defraud, that could be presented as a defense to PPP loan fraud charges. If you and your legal team can present evidence to back up this claim, you could be seen as just an overwhelmed borrower who made honest mistakes while applying for PPP loans.
PPP loan fraud charges are severe, particularly given the DOJ’s aggressive stance on the issue. Anyone accused of such a crime needs legal representation that can help defend their rights and pursue the most beneficial outcomes. A legal team experienced in defending PPP fraud cases should be able to investigate the charges, assess the potential implications for your company, and outline the defense strategy. The US Department of Justice will continue to vigorously prosecute PPP fraud in the months to come, so it is essential to get legal help early on to protect your rights and business interests.
| PPP Loan Fraud Charges | Potential Defenses to PPP Loan Fraud Charges |
|---|---|
| – Making false statements to the SBA | – PPP Compliance |
| – Bank fraud | – Lack of Intent |
| – Wire fraud | |
| – Aggregated identity theft | |
| – Tax Evasion | |
| – False Claims Act |
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