Milwaukee PPP Loan Fraud Lawyers

Milwaukee PPP Loan Fraud Lawyers

Your PPP loan was flagged. Federal agents in Milwaukee contacted you. Or the SBA sent an audit letter about your Paycheck Protection Program application. You’re in Wisconsin. The Eastern District of Wisconsin is prosecuting aggressively – Stephen Smith got 36 months prison in July 2021 for fraudulently seeking over $600,000 in PPP loans for three companies with false payroll statements. Sharon Johnson got 3 months prison in June 2024 for $109,733 in PPP fraud. Major companies are settling for millions – Zund America paid $2.3 million in December 2024 for obtaining PPP loan while having over 300 employees. The Eastern District prosecutes hard.

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. We’ve defended PPP fraud cases in Wisconsin federal courts for many, many, years. We know how Eastern District of Wisconsin prosecutors charge these cases and what outcomes you’re realistically facing in Milwaukee.

The SBA approved your PPP loan in 2020 with minimal verification. Now they’re prosecuting. Nearly 40 people in Wisconsin have been charged with COVID-19 fraud crimes as of February 2024. A Milwaukee businessman who lied about payroll for three companies got 3 years prison and must repay $397,500. A woman who submitted fraudulent applications got 3 months even for amounts under $110,000. Here’s what happens in YOUR Milwaukee case.

Recent Milwaukee Convictions and Sentences

Stephen Smith, 42, Milwaukee, was sentenced July 14, 2021 to 36 months prison plus $397,500 restitution for fraudulently seeking Paycheck Protection Program loans under the CARES Act. Smith fraudulently sought over $600,000 in PPP loan applications on behalf of three different companies by submitting applications containing false and misleading statements about the companies’ respective payroll expenses. After receiving fraudulent loan proceeds, Smith directed co-conspirators to send him portions of the funds for personal use instead of using them for payroll as required. Smith pled guilty April 12, 2021 after being charged with two counts each of bank fraud and money laundering. Even with cooperation and guilty plea, he received 3 years federal prison. This establishes the baseline for $600,000+ PPP fraud in Eastern District of Wisconsin. The money laundering charges added significant exposure – each money laundering count carries maximum 20 years prison under 18 U.S.C. § 1956. Federal prosecutors charge money laundering when defendants move fraudulent PPP funds between accounts, make large purchases, or transfer funds to co-conspirators as Smith did.

Sharon Johnson, Milwaukee, was sentenced June 2024 to three months prison plus $109,733 restitution for PPP fraud. Johnson submitted fraudulent Paycheck Protection Program application and received funds she was not entitled to based on false certifications about her business operations and payroll. Even though Johnson’s fraud was under $110,000, she cooperated fully, and she had no criminal history – Eastern District still imposed prison time. Wisconsin federal courts do not give probation-only sentences for PPP fraud regardless of amount or cooperation level. Johnson’s 3-month sentence represents the absolute minimum for first-time offenders with smallest fraud amounts and maximum cooperation. If you received $200,000 or more in fraudulent PPP funds, you’re facing minimum 18-24 months even with cooperation. If you go to trial and lose, expect 30-48 months or more depending on amount.

Five defendants were charged in connection with COVID-relief fraud scheme in Eastern District of Wisconsin. Marvin Fitzgerald, Milwaukee, was charged with false statements about receiving loans for COVID-19 relief plans for New Beginning Family Service LLC. The indictment alleged Fitzgerald made material false statements in PPP applications regarding employee numbers, payroll costs, and business revenue. These cases demonstrate Eastern District’s pattern: they charge every material misstatement as separate count, they add money laundering counts when funds are moved or spent, and they pursue co-conspirators and facilitators as aggressively as primary applicants.

PPP-Specific Fraud Detection in Eastern District

PPP fraud detection is automated and comprehensive in Wisconsin. Every Paycheck Protection Program application was cross-referenced against IRS Form 941 quarterly payroll tax returns, state unemployment insurance wage reports, and Social Security Administration wage data. You claimed 25 employees with $500,000 annual payroll on your PPP application for your Milwaukee restaurant, construction company, or retail business. Your Form 941 filings for quarters ending March 2020, June 2020, September 2020, and December 2020 show 12 employees with $240,000 total payroll. Computer flagged the discrepancy immediately. The SBA Office of Inspector General reviewed the flag and referred to Eastern District multi-agency strike team for criminal investigation. Stephen Smith’s false payroll statements across three different companies triggered multiple automated flags. Each company’s PPP application was cross-checked against that company’s Form 941 filings, and all three showed material discrepancies. FBI Milwaukee Division, SBA-OIG, FDIC Office of Inspector General, and IRS Criminal Investigation worked together to build comprehensive case.

Independent contractor misrepresentations are common PPP fraud charges in Milwaukee. PPP regulations allowed self-employed individuals and independent contractors to apply for loans based on net profit from self-employment, but they could not include independent contractors they hired as employees in their payroll calculations. Many Milwaukee business owners included 1099 contractors as W-2 employees to inflate payroll and get larger PPP loans. When SBA cross-checks PPP applications against Form 941 (which only includes W-2 employees) and Form 1099-NEC filings, the fraud becomes obvious. If you claimed 15 employees but your 941 shows 8 W-2 employees and your 1099s show 7 independent contractors you paid, that’s PPP fraud. You inflated employee count by including workers you had no right to include under PPP program rules.

Bank Secrecy Act reports trigger PPP investigations as fast as IRS mismatches. When you withdrew large cash amounts from PPP loan proceeds, made luxury purchases like vehicles or boats, transferred PPP funds to personal investment accounts, or sent wire transfers to family members or co-conspirators – your bank filed Suspicious Activity Reports within 30 days that go directly to FinCEN and federal law enforcement. Smith’s transfers to co-conspirators triggered multiple SAR filings. By the time SBA-OIG opened formal investigation, they already had bank documentation proving he diverted PPP funds for personal use instead of payroll. PPP loan forgiveness applications create second independent fraud exposure. When you applied for forgiveness, you certified under penalty of perjury that funds were used for payroll, rent, utilities, and other approved expenses. Federal agents subpoena bank records and trace every dollar. If funds went to personal credit cards, personal vehicle purchases, investment accounts, cryptocurrency, or any non-approved expenses – that’s separate wire fraud count under 18 U.S.C. § 1343 when you certified the opposite on forgiveness applications.

Eastern District Wisconsin Prosecutes Aggressively

The U.S. Attorney’s Office for Eastern District of Wisconsin is one of the most aggressive federal prosecution districts in the nation for PPP fraud. As of February 2024, nearly 40 people in Wisconsin have been charged with crimes related to COVID-19 relief fraud, and the district continues filing new criminal cases through 2025. Congress extended statute of limitations for PPP fraud from 5 years to 10 years by passing the PPP and Bank Fraud Enforcement Harmonization Act of 2022. This means prosecutions will continue through 2031 for loans disbursed in 2021. If you received PPP loan in 2020 or 2021 and made false statements on application or misused funds, you remain exposed to federal prosecution until 2030-2031. Eastern District has dedicated Assistant U.S. Attorneys focusing exclusively on pandemic relief fraud with specialized training in PPP regulations, forensic accounting, and complex financial investigations.

Eastern District prosecutes individuals and companies simultaneously. While Stephen Smith and Sharon Johnson faced criminal charges, major Milwaukee companies faced civil enforcement. Zund America, Inc., a corporation in Oak Creek, agreed to pay $2,300,825 on December 3, 2024 to resolve False Claims Act allegations that it violated federal law by submitting false claims to obtain PPP loan for which it was not eligible because Zund America and its affiliates had more than 300 employees. University Club of Milwaukee agreed to pay $1,003,993.86 in December 2024 to settle claims that the club improperly obtained PPP loan because it limited membership for reasons other than capacity and was therefore ineligible. Milwaukee Public Relations firm agreed to pay $2.25 million to resolve allegations it wrongfully received PPP loan. Affiliated family office companies agreed to pay $10,853,246.94 on April 2, 2025 to settle allegations they received six PPP loans totaling over $5 million while employing more than 500 people collectively. These multi-million dollar settlements demonstrate Eastern District pursues both criminal prosecution and civil False Claims Act cases. Even if you avoid criminal charges, you face civil liability with treble damages, penalties, and attorney fees.

Sentencing follows federal sentencing guidelines strictly in Eastern District. Under $100,000 with full cooperation and early guilty plea: 3-12 months prison like Sharon Johnson. $100,000-$350,000 with cooperation: 12-24 months. $350,000-$1 million with cooperation: 24-42 months like Stephen Smith. Over $1 million with cooperation: 4-8 years. Without cooperation or after trial conviction: add 50-70% to guideline ranges. Smith got 36 months for $600,000+ with cooperation – if he’d gone to trial and been convicted, he’d face 5-8 years. Johnson got 3 months for $109,733 with cooperation – if she’d gone to trial, she’d face 12-18 months. The trial penalty is real and consistently applied by Eastern District judges who defer to prosecutor recommendations.

Restitution is mandatory under 18 U.S.C. § 3663A – defendants must repay full PPP amount received regardless of how much was actually misused. If you received $500,000 PPP loan and used $400,000 properly for payroll but $100,000 for prohibited expenses, you still owe full $500,000 restitution because the loan was obtained through fraud. This is federal debt that survives bankruptcy discharge and follows you for life. Smith owes $397,500. Johnson owes $109,733. U.S. Treasury garnishes tax refunds, Social Security benefits, wages, seizes bank accounts and real property to collect. Probation after prison is standard in Eastern District: 3 years supervised release for frauds under $500,000, 5 years supervised release for frauds over $500,000. Supervised release conditions include: cannot start, manage, or have signatory authority on any business without probation officer written pre-approval; must provide access to all financial records, bank statements, tax returns, and business documents; cannot incur new debt over $500 without permission; must work full-time or prove active job search; random financial audits; home visits; potential GPS monitoring. Violating any condition sends you back to prison for remaining supervised release term.

The critical mistake Milwaukee business owners make is responding to initial SBA audit letters without experienced federal criminal defense counsel. They think cooperation and explanation will resolve the matter administratively. They respond to SBA questionnaires explaining their accountant miscalculated payroll, or they estimated employee numbers, or they didn’t understand PPP rules about independent contractors. Those written responses become evidence in criminal case. “I may have included some 1099 contractors by mistake” = admission you inflated employee count and payroll. “I used some PPP funds for non-payroll expenses but intended to use them properly” = admission of fraud. Stephen Smith made statements to investigators that became evidence against him. Sharon Johnson likely made similar admissions before retaining counsel. By the time defendants hire attorney after receiving target letter, they’ve already confessed to federal agents in writing.

At Spodek Law Group – Todd Spodek has defended federal fraud cases in Wisconsin for many, many, years. If Eastern District contacted you about your Milwaukee PPP loan – if SBA-OIG sent audit letter questioning payroll calculations or employee numbers – if FBI or IRS agents asked to interview you about your application or how you used loan funds – time matters critically. Eastern District of Wisconsin is one of the most aggressive federal prosecution districts for PPP fraud in the entire country. They have dedicated resources, specialized prosecutors, multi-agency task forces, and institutional commitment to pursue every case regardless of amount. They prosecute individuals criminally while pursuing companies civilly. Call 212-300-5196.