Austin EIDL Loan Fraud Lawyers

Austin EIDL Loan Fraud Lawyers

The SBA Office of Inspector General sent you a letter about your EIDL loan. Or federal agents contacted you in Austin asking about your Economic Injury Disaster Loan application. You’re in Texas. The Western District of Texas just sentenced a Georgetown couple to a combined 32 years in federal prison for pandemic loan fraud in October 2024. That’s 16 years each. Here’s what happens when the U.S. Attorney’s Office for the Western District of Texas prosecutes EIDL fraud cases.

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. We’ve defended clients facing federal EIDL investigations in Texas for over 40 years of combined experience. We know how Western District of Texas prosecutors build these cases and what sentences judges actually impose in Austin federal court in 2025.

The federal government distributed EIDL loans with minimal verification in 2020. Now they’re prosecuting Austin-area business owners for applications they approved. A former FBI employee in Schertz was just sentenced in January 2025 for pandemic loan fraud. If federal prosecutors will charge their own FBI agents, they will prosecute anyone. Here’s what actually happens in YOUR situation.

Georgetown Couple Received 32 Years Combined

Michael and Tiffany Fullerton of Georgetown – just 30 miles north of Austin – were sentenced in October 2024 to a combined 32 years in federal prison for Paycheck Protection Program fraud. They used one existing and three dormant business names to submit six fraudulent PPP loan applications totaling over $3.5 million. They received approximately $3 million in PPP funds. The funds were used to attempt starting a marijuana grow and dispensary in Oklahoma, plus a bar and grill and auto/boat repair shop. They also purchased a motor home, luxury watches, and a boat.

Sixteen years each in federal prison for a $3 million fraud. That’s at the high end of federal sentencing guidelines for that loss amount – the judge sentenced them at the statutory maximum range. Western District of Texas judges are not lenient on pandemic loan fraud. The Georgetown case demonstrates what happens when you use loan proceeds for personal luxury purchases instead of business expenses as certified on the application.

Compare that to Christopher James Phillips, a former FBI employee from Schertz, who was sentenced in January 2025. Phillips formed Phillips Global Realty LLC and submitted a PPP application using his FBI-issued credentials to confirm his identity. He received $37,500 in PPP funds, then wired $25,000 to a personal trading account and lost it all on stock trades. He made a $5,117 payment toward his personal auto loan and paid approximately $8,500 toward his home mortgage. Phillips was sentenced to 3 months of home confinement and 5 years of probation, ordered to pay $39,771 in restitution.

Why the sentencing disparity? Phillips obtained $37,500 compared to the Fullertons’ $3 million. The loss amount drives sentencing more than any other factor. Additionally, Phillips was a first-time offender who pled guilty and cooperated. The Fullertons likely went to trial or had aggravating factors. But both cases show the same principle: Western District of Texas prosecutes pandemic loan fraud aggressively, whether you’re an FBI employee or a business owner.

How EIDL Fraud Investigations Start in Austin

EIDL fraud investigations begin when the SBA Office of Inspector General flags your loan application. The OIG uses automated systems that cross-reference applications against IRS records – your business tax returns, your personal tax returns if it’s a sole proprietorship, and your quarterly payroll filings. Discrepancies trigger investigation. Common red flags: business revenue on EIDL application doesn’t match Schedule C business income on tax returns, business formed shortly before or during pandemic, identical applications filed for multiple related businesses.

Stage one: SBA OIG administrative review. They send a letter requesting documentation – your 2019 and 2020 tax returns, bank statements showing how EIDL funds were used, business formation documents. This is still civil at this point, though it can escalate. Stage two: If fraud is suspected, referral to federal law enforcement. In Austin, the FBI typically handles EIDL fraud investigations, working with IRS Criminal Investigation when tax fraud is also involved. Stage three: Federal agents subpoena bank records, interview business partners and employees, and build the case for wire fraud and false statements to SBA charges.

The timeline from initial SBA contact to indictment typically runs 6-18 months in Western District of Texas cases. Prosecutors move deliberately – they build overwhelming documentary cases before filing charges. By the time you’re indicted, they have your bank records, your application, your IRS filings, and witness statements. The conviction rate in federal pandemic fraud cases exceeds 95%.

What Sentences You’re Actually Facing

EIDL fraud sentencing follows federal guidelines based on loss amount. Under $100,000 with cooperation: 6-18 months typical. $100,000-$500,000: 2-4 years. $500,000-$1 million: 4-7 years. Over $1 million: 5-10 years with plea, 10-20 years if convicted at trial. The Fullertons’ 16-year sentences show what happens at trial with a $3 million loss – judges can go above guidelines when the fraud was particularly egregious.

Restitution is mandatory in every case. You must repay the full EIDL loan amount plus interest and penalties. This is a federal debt that survives bankruptcy. Phillips owes $39,771 – he’ll be paying that for years. The Fullertons owe over $3 million – that debt follows them for life.

Probation terms after prison are severe. Supervised release lasts 3-5 years. You cannot start or manage a business without permission from your probation officer. Your finances are continuously monitored – bank accounts, income, expenses. Violations of supervised release conditions send you back to prison. Phillips received 5 years of probation – for five years, his life is under federal supervision.

The critical decision point: accepting a plea deal versus going to trial. Federal EIDL fraud cases have documentary evidence – your EIDL application, your bank records, your tax returns, all contradicting each other. The government doesn’t bring weak cases. Going to trial means risking statutory maximum sentences. The “trial penalty” is real – defendants convicted at trial receive sentences 40-60% longer than those who plead guilty for the same conduct.

The Mistake Austin Business Owners Make

Austin business owners facing EIDL investigations make the same critical mistake: responding to initial SBA inquiries without legal representation. They think cooperation will resolve it administratively. They explain that their accountant made mistakes, or they misunderstood the application questions, or they estimated their business revenue. Those statements become evidence of criminal intent when the case escalates to prosecution.

Federal prosecutors use your own words against you. “I may have overestimated my revenue to qualify for the loan” = admission you knowingly submitted false information. “I wasn’t sure exactly how many employees I had” = admission you didn’t verify the accuracy of your application. By the time you realize you’re under criminal investigation, you’ve already confessed.

The smarter approach: consult federal criminal defense counsel immediately upon receiving any communication from SBA OIG. An attorney can determine whether this is an administrative audit or a criminal investigation. If it’s administrative, your attorney can negotiate a civil resolution – you pay back the overpayment plus penalties, no criminal record. If it’s already criminal, your attorney can coordinate document production without providing incriminating statements and potentially negotiate a pre-indictment resolution.

At Spodek Law Group – we’ve defended federal fraud cases in Texas for many, many, years. Todd Spodek is a seasoned criminal defense attorney who understands how Western District of Texas prosecutors charge these cases and what strategies work in Austin federal court. If the SBA contacted you about your EIDL loan – if federal agents asked to interview you – time matters. The Western District hands down serious prison sentences for pandemic fraud. Call 212-300-5196.