Understanding PPP Loans & What Constitutes Fraud
The Paycheck Protection Program (PPP) was a lifeline for many businesses during the uncertainty of the COVID-19 pandemic (this program ended on May 31, 2021). However, with this new program came the potential for misuse and fraud.
PPP loan fraud occurs when false information is presented to gain access to these government-backed funds.
Examples of PPP fraud:
- Falsifying or misrepresenting employee numbers
- Inflating payroll expenses
- Using loan proceeds for unauthorized personal expenses
- Applying for multiple loans for the same business under different names
- Fabricating a business altogether
Four different government agencies investigate PPP fraud: the US Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), and the Small Business Administration's Office of Inspector General (SBA-OIG).
Penalties of Conviction
Those convicted of PPP fraud may face serious consequences, including charges of bank fraud, wire fraud, tax fraud, and conspiracy charges, leading to prison time and significant fines. The penalties are as severe as the fraud is harmful.
Recent examples of sentencing in PPP fraud cases include:
- Three individuals were sentenced to prison after fraudulently obtaining approximately $3.5 million in PPP loans for fictitious businesses. Sentences ranged from three (3) years and ten (10) months to two (2) years in prison.
- Several individuals were sentenced to prison after conspiring to fraudulently obtain more than $20 million in PPP loans. Sentences ranged from three (3) years and eight (8) months to one (1) year in prison.
Meanwhile, in February of this year, over 20 Long Island residents were arrested in connection with a PPP fraud investigation, allegedly stealing close to $50M in COVID relief funds.
PPP Fraud Investigation Triggers
Red flags that could trigger an investigation include inconsistencies in loan applications, multiple applications for the same business, reports from whistleblowers, and irregular banking activity post-funding. Additionally, drastic changes in employee numbers or wages before and after a loan application is submitted may also be seen as a red flag worthy of investigation.
Guidelines if You're Under Investigation for PPP Fraud
If you believe you are being investigated for PPP loan fraud, it is crucial to understand the steps you should and should not take. Taking the proper steps and avoiding critical mistakes can significantly influence the outcome if you're under investigation for PPP fraud.
Do:
- Consult with an attorney immediately: A lawyer specialized in federal defense can provide crucial advice and representation.
- Review your loan application and related documents: Be familiar with the information you submitted.
- Maintain privacy: Avoid discussing the case with anyone besides your attorney to prevent misunderstandings or misinterpretations.
Don't:
- Do not tamper with evidence: Altering, destroying, or fabricating information can lead to additional charges.
- Do not contact the investigating agencies directly: All communication should go through your attorney to prevent potential self-incrimination.
- Avoid discussing the case on social media or any public forums: Public statements can be used against you.
Why Seek Legal Advice?
In the face of PPP loan fraud allegations, one's freedom and financial stability hang in the balance. If you suspect you're being investigated, you are strongly encouraged to consult with experienced counsel immediately.
A seasoned attorney can guide you in all aspects of your case, including:
- Assessing the evidence against you to strategize the best defense
- Negotiating with prosecutors to potentially reduce charges
- Navigating the complexities of federal fraud laws and proceedings
- Representing you in court hearings and should your case go to trial
- Communicating with investigating agencies on your behalf
- Seeking dismissal or reduction of charges when appropriate
- Preparing for trial, if necessary, including gathering evidence, interviewing witnesses, and developing a compelling case
Facing PPP fraud charges alone is a risk you cannot afford to take. Get in touch with Foley Griffin today for a consultation.