False Information on PPP Loan Application: Defenses Available

If you are reading this, something happened. Maybe you got a letter from the SBA. Maybe an FBI agent showed up at your door. Maybe your accountant called with that tone in their voices - the one that means bad news is coming. Maybe you just realized those numbers on your PPP application were not exactly right, and now you are wondering what comes next. At Spodek Law Group, we understand the terror that comes with federal investigations. Todd Spodek and our team have defended clients facing PPP fraud allegations across the country, and we know one thing for certain: the situation is rarely as hopeless as it feels at 2am when you cannot sleep.

Here is the thing nobody tells you. False information on a PPP application does not automatically equal fraud. The government has to prove something far more specific than most people realize. And that distinction - that gap between what prosecutors need and what most defendants assume - is where cases are won or lost. This is not about legal technicalities or loopholes. It is about the fundamental structure of federal fraud law and what the Constitution requires before the government can take away your freedom.

This article explains the defenses that actually work for PPP fraud allegations, based on real cases and real outcomes. Not the theoretical defenses you find on other websites. The ones that matter in federal court. The ones that have actually resulted in acquittals, dismissed charges, and declined prosecutions in 2024 and 2025.

What Prosecutors Need Beyond Your False Statement

And the application itself - lets talk about that. You signed it. The numbers were wrong. Maybe the payroll figures were inflated. Maybe you claimed employes who werent really there at that exact moment. Maybe your accountant used projections instead of actuals. Maybe you counted independent contractors as employees because you genuinely didnt understand the diffrence. Whatever happened, the paperwork exists and the goverment has it.

Heres were most people stop thinking. They assume false statement equals guilty. They assume the FBI has everything they need. They start planning for prison before theyve even talked to a lawyer. They confess to there spouse at 2am. They call there business partner in a panic. They do everything wrong because they think its already over.

But federal fraud charges require more than just a false statement. Way more. The government has to clear multiple hurdles that most defendants dont even know exist. Prosecutors have to prove you made the false statement knowingly and with intent to defruad. Read that last part again. Knowingly. With intent.

Thats not a legal technicality. Thats your lifeline.

The difference between a mistake and a crime isnt the outcome - its what was in your head when you signed that application. Did you genuinely believe the numbers were accurate? Did you misunderstand what the program required? Did you rely on an accountant or lawyer who told you the application was correct? Were you working with confusing information during a literal pandemic when nobody knew what the rules realy were?

More than just the numbers. More than the application. What matters is what you knew. The PPP program was designed to disburse money fast with minimal verification. Congress and the SBA knew fraud would happen - they prioritized speed over accuracy during the crisis. Now the same government that designed a system prone to errors is prosecuting people who got caught in that system. Understanding this context matters for your defense.

The Knowledge Requirement They Hope You Dont Understand

OK so heres were it gets intresting. Federal fraud statutes - wire fraud under 18 USC 1343, bank fraud under 18 USC 1344, false statements under 18 USC 1014 - all have something in common. They all require proof of mens rea. Thats Latin for "guilty mind." And in practical terms, it means prosecutors cant just show that information was false. They have to show you knew it was false when you submitted it.

That word - knowingly - is everthing.

Think about what that means for your case. If you genuinely believed your business had 15 employees because thats what your accountant told you, and it turns out there were only 12, thats not fraud. Its a mistake. Maybe an expensive mistake. Maybe a mistake with conseqences. But not a federal crime. The line between civil liability and criminal prosection runs right through that word: knowingly.

What prosecutors actually need to prove is that at the exact moment you signed that PPP application, you understood the information was false and you submitted it anyway. Not that you were sloppy. Not that you should have checked more carefully. Not that you were desprate and hopeful. They need to prove you knew you were lying. Thats a high bar. Much higher than most people realize when there panicking at 2am.

Its like the difference between running a red light because you didnt see it and running a red light because you decided the rules didnt apply to you. Same outcome. Completely different crime. The first one gets you a ticket. The second one, if it causes an accident, might get you charged with manslaughter. Intent transforms everything.

The government investigated over 669,000 potentialy fraudulent PPP loans. They flagged 3.7 million applications with warning signs according to the GAO. But they cant prosecute everyone - they dont have the resources. They go after cases were they can prove knowlege. Cases with emails admitting the fraud. Cases with witnesses who will testify. Cases were the defendent made statements to investigators that locked them in. Your job is to make sure they cant prove it in your case.

The COVID-19 Fraud Enforcement Task Force has charged more than 3,500 defendants with federal crimes since 2021. That is out of millions of potentially problematic applications. They choose their targets carefully. And the cases they lose? The ones that result in acquittals? Almost always come down to this knowledge requirement.

Why Most Defenses Youve Read About Will Fail

That defense you found online at 3am? The one about how the PPP rules were confusing and the SBA kept changing the guidlines? Let me tell you why its probly not going to work.

Look, I hate to be the one to tell you this. But the "I was confused about the rules" defense is basicly dead in 2025. Judges have heard it too many times. Prosecutors have developed techniques to overcome it. The judicial sympathy that existed in 2021 when everyone was figuring out pandemic programs together - thats gone. Courts now view PPP fraud as serious white collar crime, not pandemic era mistakes.

Heres what dosent work in most cases:

• "The SBA guidelines kept changing" - True, but irrelevent if you submitted false numbers. Changing rules dont explain fabricated payroll.
• "My accountant prepared the application" - Only works if you disclosed everything truthfully and they made the actual error. If you gave them bad numbers, you are toast.
• "I planned to use the money correctly" - Intent to misuse funds vs intent to deceive on the application are different issues. Good intentions for spending dont excuse lying to get the money.
• "I paid it back" - Repayment is mitigation for sentancing, not a defense to the original charge. The crime happened when you submitted the false application.
• "Everyone was doing it" - Literally never works. Not once. "Other criminals got away with it" is not a legal defense.
• "It was only a small amount" - Loss amount affects sentancing, not guilt. Fraud is fraud wether its $20,000 or $2,000,000.

And heres were people really mess up. Your accountant might be your biggest threat. Let that sink in for a moment.

If your accountant warned you about the numbers - even casually, even in a text message that says "are you sure about these figures?" - and you told them to submit anyway, that accountant may become the governments star witness. They have their own license to protect. Their own liability to manage. Their own family to provide for. When the FBI comes calling and starts asking questions about their role in preparing fraudulent applications, alot of accountants decide its better to cooperate then to go down with their client.

The relience on profesional advice defense only works when the professional gave actually wrong advice and you disclosed everything truthfully to them. If you fed your accountant bad numbers - if you told them you had 20 employees when you had 10 - that defense collapses completely. Worse, the accountant becomes evidence against you. Evidence that you knew the truth and lied anyway.

97 Percent Conviction Rate - And What the 3 Percent Did Differently

The numbers are brutal. Theres no point pretending otherwise. If your facing federal fraud charges, you need to understand exactly what your up against.

97%. Thats the conviction rate for federal fraud cases.

81% of those convicted go to prison. Not probation. Not house arrest. Federal prison.

The average sentance for PPP fraud is 3-5 years, though cases involving larger amounts or agravating factors can result in much longer terms. 9 out of 10 cases end in plea bargians because fighting all the way to trial is financialy impossible for most defendants. Federal defense costs can run into hundreds of thousands of dollars. Most people run out of money before they run out of legal options.

Take a breath. Becuase heres the kicker though.

That 3% who walk free? The ones who beat federal prosecutors despite all those resources and all that evidence? Nearly all of them won on one issue: the government couldnt prove they KNEW their application was false at the moment they signed it.

Not smarter lawyers necessarily. Not more money. Just one thing. Knowlege.

In the Feeding Our Future case - the largest pandemic relief fraud prosecution in American history - seven defendants went to trial together. Same evidence. Same prosecutors. Same judge. Same courtroom. Five were convicted and sent to prison. But two walked completely free. Said Shafii Farah and Abdiwahab Maalim Aftin were acquitted of all charges against them.

The difference wasnt the paper trail. The documents were the same. It was wether prosecutors could prove what each individual defendant knew at the time of the transactions. For two of them, that proof simply was not there. The jury looked at the evidence and concluded: we cannot say for certain these two people knew what they were doing was wrong.

Stephanie Hockridge, a former Phoenix news anchor caught up in the Blueacorn PPP fraud investagation, was acquitted of four counts of wire fraud. Convicted of one count of conspiricy, yes - she is going to prison for that. But four acquittals on four separate wire fraud charges. Becuase the jury was not convinced she knew about the fraud in those specific instances. Knowlege mattered for each individual count.

These are not legal fairy tales. These are real cases from 2024 and 2025, decided by real juries in federal court. Knowledge defenses work when they are properly built and properly presented.

What Actually Works Building a Knowledge Defense

Building this defense requires specificty. Not vibes. Not "I didnt mean to commit a crime." Actual, documentable evidence that you genuinely believed your application was accurate at the time you submitted it.

The goal isnt to prove you didnt do it. The goal is to prove you didnt KNOW.

Heres what that looks like in practice:

Legitimate business operations before COVID. If you had real employees, real payroll, real revenue - and those numbers just got confused or miscalculated during the chaos of March 2020 - thats powerfull evidence of good faith. You are not some person who invented a fake company to steal relief funds. You are a real business owner who made an error under unprecidented circumstances when everyone was confused and scared and trying to keep their company alive.

Contemporaneous documentation. Emails, texts, notes from 2020 that show what you were thinking at the time. Not what you wish you were thinking. What you actually were. If you wrote your accountant saying "make sure these numbers are right, I dont want any problems" - thats evidence of good faith intent. You were trying to get it right. If you wrote "just submit it and we will figure it out later" or "close enough is good enough" - thats the oposite. Context matters enormously.

Third party reliance. Did you hire an accountant? A lawyer? A bookkeeper? A payroll company? Did they prepare the application or provide the numbers you used? If you relied on professionals and they got it wrong through their own error, that cuts against the idea that you knowingly submitted false information. You trusted experts. Experts made a mistake. Thats not fraud. But be careful - this only works if you gave them accurate underlying data and disclosed everything relevant.

Thompson v. United States. Heres a legal precident your defense lawyer absolutely needs to know. The Supreme Court held that literally true but misleading statements dont violate 18 USC 1014. If your PPP statements were technicaly accurate but incomplete or presented in a confusing way, this might be your lifeline. Not a garuntee of aquital. But a lifeline that a skilled attorney can use to build reasonable doubt.

Chaos of the moment. March and April 2020 were unprecedented. Banks were closing. Employees were scared. Supply chains were colapsing. Everyone was working from home for the first time. Information was incomplete and changing daily. Decisions were made in hours that normally take weeks. This context matters for understanding why mistakes happened and why those mistakes were not necessarily criminal.

This is where cases are won. In the details of what you knew and when you knew it. In the documentation that shows your state of mind. In the witnesses who can testify about your genuine confusion and good faith efforts to comply.

Evidence That Can Save You Or Destroy You

The evidence question cuts both ways. The same documents that could prove you knew can also prove you did not. It is all about context and presentation.

Evidence that helps your defense:

• Emails showing genuine confusion about PPP requirements
• Communications with accountants or lawyers asking for guidance and clarification
• Bank records showing legitimate payroll before and during COVID
• Documentation of business disruption that explains why numbers might be confusing
• Evidence you intended to rehire employees or restore operations
• Notes or records showing you were trying to get the application right
• Third party prepared documents you relied on in good faith

Evidence that hurts your defense:

• Texts or emails acknowledging the numbers are wrong or inflated
• Metadata showing you personaly edited financial documents to increase amounts
• Communications were someone warned you about problems and you proceeded anyway
• Bank records showing you paid yourself extravagently before making payroll
• Evidence of lavish spending imediatly after recieving funds - luxury cars, jewelry, vacations
• Prior fraud convictions or similar misconduct
• Lies told to investigators after the fact

And here is where people really mess up badly. Deleting emails after recieving a subpoena or learning about an investigation isnt cleaning up. Its a new federal crime called obstruction of justice.

Obstruction carries its own sentance. Separate from the fraud charges. And worse - it proves consciousness of guilt. It tells the jury "this person knew they did something wrong, and they tried to hide the evidence." A defensable fraud case can become unwinable when you add obstruction charges on top. Prosecutors love obstruction charges because they show exactly the kind of guilty knowledge that fraud requires.

That fear you feel right now? Its the right response. But fear paralyzes when you need to act. Do not let the panic make you do something stupid that turns a potentialy defensable case into an unwinable one. The worst thing you can do right now is start destroying evidence or lying to investigators.

Why the Next 72 Hours Matter More Than the Next 2 Years

Everything changes in the first 72 hours after federal contact. Not 72 days. Not 72 weeks. Hours.

What you do right now - today, tonight, tomorrow morning - matters more than what happens at trial two years from now. The pre-indictment phase is were the real work happens. Once charges are filed, your options narrow dramatically. Before charges, everything is still possible.

Here is what you do. Right now.

First, do not talk to investigators without a lawyer present. They will seem friendly. Professional. Reasonable. They will tell you this is just routine, just a few questions, you can clear this whole thing up quickly if you just cooperate. Thats how they get confessions from people who think they are explaining their innocence. Every word you say can and will be used against you. Politely decline to answer. Say you want to speak with an attorney first. That is your constitutional right and exercising it cannot be held against you.

Second, preserve everything. Do not delete emails. Do not "clean up" files. Do not organize or sort or throw anything away. If it exists, it stays exactly where it is. Your lawyer needs to see what is actually there - not what you think looks better. Let them decide what is helpful and what is harmful. Destroying evidence is how defendable cases become prison sentences.

Third, call a federal criminal defense attorney. Not tomorrow. Not next week. Not after you think about it for a while. Now. Tonight. The pre-indictment phase is where cases are won or lost. An experienced attorney can sometimes convince prosecutors not to file charges at all. They can negotiate civil resolutions instead of criminal ones. They can present your side of the story before the government commits to a theory of the case. Once you are indicted, your options shrink dramaticaly and the costs multiply.

At Spodek Law Group, we take calls from people exactly where you are right now. Scared. Confused. Not sure if its as bad as it seems or maybe worse than you imagined. Todd Spodek has handled federal cases where the government thought they had an open-and-shut conviction - and they did not. Because the knowledge element was not there. Because the evidence told a different story when someone looked at it carefully. Because an experienced attorney knew how to present the facts in a way that created reasonable doubt.

Not every case is winable. We will not promise you outcomes we cannot deliver. That is not how we operate. But we will tell you the truth about where you stand and what your options actually are. We will look at your evidence, understand your situation, and give you honest advice about the best path forward.

72 hours. Thats your window.

Call now. 212-300-5196.