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The Paycheck Protection Program (PPP) was established to support the companies hardest hit by the economic impact of the pandemic. Still, it has resulted in substantial financial losses due to fraudulent activity. An enormous amount of PPP loans, equating to hundreds of millions of dollars, were given to ineligible companies and individuals. Many employees of these businesses suffered significant financial losses due to the misuse of funds received under the PPP. The U.S Department of Justice (DOJ) is investigating these cases of fraud surrounding PPP loan funds, putting business owners and executives at risk. Facing investigations by the DOJ for PPP loan fraud is a severe matter and can result in significant penalties. If you find yourself in this situation, several things warrant your attention.
The DOJ is actively investigating individuals and companies suspected of committing fraud under the PPP. Due to the high cost of PPP loan fraud and the rapid increase of fraud targeting this program, the DOJ is determined to hold those responsible accountable for their crimes. It has filed criminal charges against many for submitting fraudulent PPP loan applications and making inappropriate use of PPP loan funds. The DOJ recently stated that it is incredibly aggressive in its pursuit of those who defraud the PPP loan program.
The DOJ is not working alone in investigating PPP loan fraud – it’s collaborating with other law enforcement agencies. These include the U.S. 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). Their unified approach highlights the level of concern and seriousness of the matter. It serves as a warning to anyone with PPP loan fraud in mind.
The DOJ can charge several crimes against your company if found guilty of PPP loan fraud. These charges include making false claims or reports, wire fraud, bank fraud, tax evasion, and false statements to federal agents, among others. As an individual or company, PPP loan fraud can lead to significant financial and legal consequences, including imprisonment and steep fines.
Although the penalties for violating PPP loan fraud are severe, there are still several defenses that individuals and companies can employ when facing allegations of PPP loan fraud made by the DOJ. While the defense strategies may vary, there are some crucial facts you should keep in mind.
Maintaining proof of PPP loan compliance is vital in defense against allegations of fraud. Having credible evidence of obtaining a PPP loan legally, separating PPP funds from other company funds, and maintaining accurate records of the appropriate utilization of PPP funds are essential in building a strong defense. If your organization took steps to comply with PPP regulations, it could lead to a quick resolution of the investigation. However, caution should be exercised when providing information to the DOJ, as revealing incriminating information could increase your and your company’s risk of prosecution.
For criminal culpability, intent to defraud is required under federal law. This means that if you or your company unintentionally received a PPP loan, misused PPP funds, or filed a fraudulent forgiveness certification without intending to defraud the government, it could serve as a defense against PPP loan fraud allegations. However, even an unintentional violation can lead to civil prosecution, with False Claims Act violations and other statutes’ civil wrongdoing leading to significant fines, treble damages, and other penalties.
If you’re under investigation or facing charges concerning PPP loan fraud, you need the possible legal representation. The Spodek Law Group, led by Todd Spodek, has extensive experience representing clients facing a wide range of criminal accusations, including fraud. Our lawyers utilize decades of experience, legal knowledge, and unwavering dedication to our clients to help navigate the complexities of PPP loan fraud investigations.
| Potential Charges in Federal PPP Loan Fraud Investigations | Corresponding Statute |
| Making False Statements to the Small Business Administration (SBA) | 18 U.S.C. § 1014 |
| Making False Statements to a Federal Deposit Insurance Corporation ( FDIC)-Insured Bank | 18 U.S.C. § 1014 |
| Bank Fraud | 18 U.S.C. § 1344 |
| Wire Fraud | 18 U.S.C. § 1343 |
| Aggravated Identity Theft | 18 U.S.C. § 1028A |
| Tax Evasion | 26 U.S.C. § 7201 |
| Making False Statements to Federal Agents | 18 U.S.C. § 1001 |
| Conspiracy | 18 U.S.C. § 371 and 18 U.S.C. § 1349 |
| Attempt | 18 U.S.C. § 1349 |
| False Claims Act Violations | 31 U.S.C. §§ 3729-3733 |
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