NEW JERSEY CRIMINAL LAWYERS

Charlotte PPP and EIDL Loan Fraud Lawyers

Facing a DOJ Investigation for PPP Loan Fraud: What You Need to Know

The COVID-19 pandemic has resulted in the announcement of several governmental programs designed to assist small businesses in navigating the economic consequences of the global health crisis. One such initiative is the Paycheck Protection Program (PPP), which provides federal funds in the form of forgivable loans to aid small businesses, especially those that struggled financially during the pandemic.

However, as with any government-funded scheme, there are people who see an opportunity for fraudulent activities. The United States Department of Justice (DOJ) has announced several investigations into firms and individuals suspected of fraudulent activities regarding PPP loans. If you find yourself facing an investigation from DOJ for PPP loan fraud, it is essential to keep these critical points in mind:

The DOJ is Actively Prosecuting PPP Loan Fraud

The DOJ is taking allegations of PPP loan fraud very seriously and has already begun prosecuting persons and companies related to this program. Individuals have been charged with falsifying payroll information, keeping sham accounts, attempting to secure multiple PPP loans by using fake entities or bank accounts, and misusing or misspending PPP loan proceeds. The DOJ is also targeting individuals or firms involved in submitting false certification applications for loan forgiveness under the PPL.

“The Paycheck Protection Program was designed to aid Americans struggling financially during the pandemic”, says Brian Benczkowski, Deputy Assistant Attorney General for the Criminal Division. “Our office will aggressively pursue anyone who defrauds this critical program.”

Therefore, you must understand that any alleged fraud related to PP loans may have severe consequences.

The DOJ is Collaborating with Other Federal Law Enforcement Agencies

To prevent fraudulent activities concerning federally backed forgivable loans offered under the PPL, other federal law enforcement agencies such as U.S Small Business Administration Office Inspector General (SBA-OIG), Federal Deposit Insurance Corporation Office Inspector General (FDIC-OIG), Internal Revenue Service Criminal Investigations Agency (IRS-CI), and Federal Bureau of Investigation (FBI) collaborate with DOJ.

These agencies work together to identify individuals or organizations unlawfully profiting from the PPL for investigation and prosecution under the several federal statutes. Therefore, you need to be aware that if you are involved in any fraudulent activities regarding PPP loans, including but not limited to falsifying loan applications, misusing PPP loan funds, or submitting fraudulent forgiveness certifications, you may find yourself being investigated and prosecuted by one or more of these federal agencies.

Possible Defenses to PPP Loan Fraud Allegations

You can defend against PPP loan fraud allegations leveled against your business by employing certain strategies based on specific allegations put forward under diverse federal laws as follows:

– PPP Loan Compliance – If you can provide proof that your firm lawfully obtained a PPP loan, created a segregated account for the proceeds and appropriate documentation of the use of fund, you stand a chance to resolve claims.
– Lack of Intent To Defraud – Successful prosecution usually demands showing an intent to defraud. If it can be established that an individual or company unwittingly acquired a PPP loan wrongly or used it improperly without deliberately intending fraud, they can use lack of intent as their defense strategy. However, although non-intentional fraud may be exempted from criminal charges, such an offense is still liable to civil sanctions under the False Claims Act.

Possible Charges in Federal PPP Loan Investigations

If your business is relatively small and unclear about maintaining legal compliance with regulations surrounding government-funded programs like the PPL from previous years’ experiences with such programs, below are some violations within various laws currently charged in PPP investigations:

Making False Statements

Using false information for SBA loan applications and/or requests for forgivable loans could result in criminal charges under 18 U.S.C. §1014 or fines and other penalties for Fraud in Connection with Major Disaster Loans pursuant to 18 U.S.C. §1040(c)(2).

Bank Fraud

Submitting falsified PPP loan applications or arranging payment for bogus expenses with PPP funds constitute bank fraud and might lead to criminal charges under 18 U.S.C. § 1344.

Tax Evasion

Failing to adhere to tax obligations, including payroll taxes, even when done inadvertently can attract prosecution under 26 U.S.C. § 7201 and carry significant penalties such as expensive restitution orders and hefty fines.

Making False Statements to Federal Agents

Misrepresenting facts or withholding inputs during an investigation into the fraudulent use of PPP loans could result in facing criminal charges under 18 U.S.C. §1001.

Conspiracy Charges and Attempted Fraud

Attempting to collaborate in defrauding a government-funded federal program like the PPL to perpetuate attempts of obtaining loan funds could also amount to conspiracy charges under 18 U.S.C. §371 or attempted fraud under 18 U.S.C. §1349.

Conclusion

It is essential for businesses to comprehend that the DOJ’s investigation concerning PPP loan fraud represents a matter of severe importance that they need to be cautious about not only from their perspective but for all parties involved in the allegations. The claims against them – from submitting false information on their applications or fraudulent activity regarding the use of RPP funds – could come with severe consequences ranging from hefty fines, treble damages, loss of SBA and other federal programs eligibility, among others mentioned earlier. Nevertheless, with competent attorneys experienced in defending against PPP loan fraud accusations’ legal complexity by your side, you increase your chances of satisfactory resolutions.