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PPP LOAN FRAUD LAWYERS & SBA FRAUD DEFENSE LAWYERS

PPP LOAN FRAUD & SBA FRAUD DEFENSE LAWYERS 

Did You Receive Loans Under the Paycheck Protection Program (PPP)?    

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to extend benefits to companies and individuals directly hit and affected by COVID-19 pandemic. Funded with over $300 billion in federal funds, the Paycheck Protection Program (PPP) plays a HUGE and important part in the CARES act. The sole purpose of the fund was to offer financial assistance to small and medium-sized businesses impacted by Coronavirus. However, even with over $300 billion in funds, PPP still ran out of funds in a short time. In addition to the PPP, the US government created the EIDL program – which is another source of funding. Thousands of applications were received every minute, which made it impossible for PPP leaders to grant loans to all applicants.

It is quite typical that every time a federal program launches financial relief to small and big businesses, it also welcomes adverse opinion from the public. People start scrutinizing it for fraud possibilities. In the case of PPP, where billions of funds disappeared within minutes, it is expected that most of the loan recipients will be investigated by federal authorities for potential fraud.

With the objective to fix these issues for future programs, the U.S. Treasury Department’s Office of the Comptroller of the Currency (OCC) has been contacting and seeking lenders’ opinion about the possibilities of fraud and to identify various flaws in the PPP system.

Although the U.S. Treasury Department is working diligently, several agencies are extending assistance to help identify companies that received fraudulent PPP loans. Any business granted with unlawful funds will undergo investigations and have a high risk of prosecution. Hence, the involved companies must consider hiring an experienced and skilled federal counsel who can minimize the risk of the company facing significant penalties.

 


Examples of PPP Loan Fraud Currently Being Prosecuted

  • Two people in Rhode Island were charged with fraudulent seeking PPP loans. The individuals were charged with conspiring to seek forgivable loans, guaranteed by the SBA — by claiming to have dozens of employees earning wages at different business entities. In reality, there were no employees working at all. They were charged with conspiracy to make false statement to influence the SBA, and conspiracy to commit bank fraud.
  • Reality TV Star(owner of a trucking company), charged with bank fraud and money laundering, he misused funds meant to help the business stay afloat during COVID-19. The borrower applied for $3.7 in PPP funds, for his trucking company. Instead, he spent the money on jewelry, child support, and a Rolls-Royce.

 

What Falls Under the Paycheck Protection Program (PPP) Loan Fraud?

Each federal program contains various acts and omissions that set as base in identifying potential federal fraud situations. In this regard, the Paycheck Protection Program (PPP) is no exception. PPP has two major omissions that can result to criminal fraud charges: deliberate misinterpretations and unintentional mistakes leading to the wrong receipt of federal funds.

The following cases or errors can be construed as PPP loan fraud:

Loan Stacking

Loan Stacking is a specific type of potential fraud that caught the eye of OCC and on which the bureau plans to focus its attention in the coming months. Loan Stacking allows an applicant to receive loans from multiple lenders. Since the federal government can easily track the distribution of funds among recipients, OCC can also effortlessly trace any business that committed Loan Stacking fraud and prosecute it.

PPP Loan Application Fraud

The Paycheck Protection Program (PPP) specified eligibility criteria for businesses applying for loans under the program. Any business that presented false information on loan applications just to be fraudulently eligible is more likely to face prosecution. Outlined below are a few examples of information falsifications that can unquestionably lead companies into crisis.

  • For PPP loan eligibility, companies must have less than 500 employees. Falsification on the total number of employees would be counted as a base for prosecution.
  • Misclassification of employees as independent contractors just to be within the 500-employee threshold will be sanctioned consequently.
  • Businesses with more than 500 employees wrongfully claiming the Small Business Administration (SBA) status would fall under the category of loan default.
  • With PPP, companies can claim up to two months of their average monthly payroll amount along with an additional 25% of this amount. Therefore, companies that falsified information regarding their payroll costs to enhance the value of the loan amount will face strict action from the government.

Fraudulent Loan Certification

Aside from the eligibility criteria mentioned above, companies applying for financial assistance under PPP are also required to certify certain facts. Any information falsification about these facts would be measured as evidence for prosecution. Below are some of the mandatory certifications for companies to be eligible for PPP loans:

  • Companies must certify that the PPP loans they applied for were mandatorily required to support ongoing operations.
  • Companies must state in writing that the allocated PPP funds would only be used to retain workers and sustain lease, mortgage, and utility payments.
  • Companies must vouch that they were receiving only one loan under PPP.
  • Companies must certify that the supplied information is true and accurate.

Using PPP Funds for Wrong Purposes

As clearly stipulated in the Paycheck Protection Program (PPP), companies that received loans under this program can allocate the funds merely on specific purposes, including covering payroll costs and benefits, utilities, and paying mortgages and leases. In case of utilities, mortgage, and rent, companies can use the allocated funds to cover obligation, pre-existing as of February 15, 2020. If the allocated funds are used for any purpose other than the ones mentioned under the PPP, the company will draw allegations of potential fraud.

While there is no clear information on what businesses can do to prove compliance on the requirements and stipulates, businesses should maintain a record of all eligible and non-eligible expenses. In case of an audit, records can be presented to the federal authority for investigation.

Using PPP Funds for Fraudulent Purposes

Although companies are not required to provide any personal guarantee, the PPP information sheet states that criminal charges can be applied to any business whose allocated PPP funds were proven to have been used for fraudulent purposes. As the most important tenet under the program, this authorizes the government to prosecute businesses that obtained loans fraudulently as well as the individuals found to be intricated in deceitful activities related to PPP. Above all, people found guilty under the False Claims Act can face charges extending to tens of thousands of dollars and up to five years in federal prison. As for company owners and executives proven guilty of multiple statutory offenses, prosecutors can seek millions of dollars in fines and decades in prison.

Fraudulent Loan Forgiveness Certification

The Paycheck Protection Program has an exceptionally low interest rate of 1%. Nevertheless, businesses can still request for loan forgiveness particularly if they can provide proof that they meet the eligibility criteria and have used the allocated funds exclusively for expenses stated under PPP. To be considered for loan forgiveness, the U.S. Treasury Department specifies that companies are required to present proper documents and must certify that all documents presented are authentic and correct. Businesses or individuals proven to be forging the certificate will be sanctioned accordingly by the federal authorities.

Misrepresenting or Concealing Information During a PPP Audit or Investigation

Due to the increasing cases of PPP loan fraud, several businesses will be investigated by Federal Bureau of Investigation (FBI) along with the U.S. Department of Justice (DOJ). The government may also form special task forces to specifically conduct thorough investigations on the PPP loan fraud cases. During investigations, the involved party must not withhold information nor make false statements. Hiding relevant information, misrepresentations, or falsification are measured as fraud and can lead to prosecution.

What Should You Do if Federal Authorities Decide to Investigate Your Company for PPP Loan Fraud?

The PPP loan fraud is crucial and must be taken seriously. If you or your company are being investigated for potential fraud under PPP, you must hire a knowledgeable, skilled, and accomplished federal defense counsel. At Spodek Law Group, we work with experienced federal defense attorneys who specialize in different areas of law. Currently, many of our attorneys are handling and representing clients caught in Covid-19 pandemic-related issues. If you are dealing with PPP loan fraud allegations, get in touch with us and we will help you find the attorneys to protect your interests and fight possible lawsuits and charges.

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