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Protecting Your Business: Understanding PPP Loan Fraud and DOJ Investigations
The COVID-19 pandemic has wreaked havoc on small businesses, causing severe economic setbacks. To help struggling businesses, the US government launched the Paycheck Protection Program (PPP), which offers federally supported forgivable loans for small enterprises. However, fraudsters have found ways to exploit the program by submitting fraudulent loan applications and misusing PPP funds. As a result, the Department of Justice (DOJ) is currently conducting investigations into PPP loan fraud.
If you or your business is under investigation for PPP loan fraud, it could have serious consequences. Therefore, it is crucial to understand some key points about DOJ investigations.
The DOJ Is Serious About Prosecuting Individuals and Companies for PPP Loan Fraud
PPP loan fraud is a heinous crime that has drawn significant media attention due to its far-reaching effects. The DOJ has pledged to go after anyone involved in submitting fictitious loan applications or exploiting their PPP loans fully.
PPP Loan Fraud Cases Result in Criminal Charges
Several PPP loan fraud investigations led to criminal charges filed by the DOJ. Some offenders faced charges of creating shell firms, falsifying payroll information, or using PPP funds for personal expenses. Others were charged with submitting bogus certifications for PPP loan forgiveness.
The DOJ Works Closely with Other Federal Law Enforcement Agencies
Although the DOJ spearheads the investigation into PPP loan fraud cases, it partners with several federal agencies to ensure that people and companies that receive fraudulent loans are held accountable. The SBA-OIG, FDIC-OIG, FBI, and IRS-CI are among other agencies partnering with the Department of Justice.
Potential Defenses During a DOJ Investigation on PPP Loan Fraud
While PPP loan fraud is a severe offense carrying harsh penalties, there are various defense options you can use against accusations from the DOJ:
1) Demonstrating Paycheck Protection Program Compliance: This entails securing a valid PPP loan legally maintaining an exclusive account for PPP loan proceeds, and documenting the appropriate use of PPP funds. However, it is crucial to be wary when providing information to the DOJ as this data cannot be reversed. It’s to hire an experienced attorney who can navigate the legal process while safeguarding your interests.
2) Lack of Intent to Defraud: In most cases, criminal liability requires intent to defraud. For individuals or companies that unintentionally obtained a PPP loan while not eligible or unintentionally misused PPP funds could argue lack of intent defense while presenting their case.
Potential Charges in a Federal Investigation on PPP Loan Fraud
PPP fraud attracts both civil and criminal charges under various pre-existing federal laws. Below are some possible charges that may arise from federal investigations on PPP loan fraud:
| Charges | Underlying Statute |
| — | — |
| Submitting false statements to SBA | 18 U.S.C. § 1014 |
| Submitting false statements to FDIC-insured bank | 18 U.S.C.§ 1014 |
| Bank Fraud | 18 U.S.C.§1344|
| Wire Fraud | 18 U.S.C§1343|
| Aggravated Identity Theft | 18 U.S.C.§1028A|
| Tax Evasion | 26 U.S.C.§7201|
| Making False Statements to Federal Agents | 18 U.S.C.§1001|
| Conspiracy | §§371 and1349 |
| Attempted Fraudulent Activity(s)| §1349 |
| False Claims Act Violations|string>31 U.S.C.</strong> §§3729-3733|
It is important to note that the PPP program does not impose penalties for PPP loan fraud. However, various pre-existing federal regulations carry severe punishments for fraudulent activities.
In Conclusion
The DOJ continues its aggressive investigation into PPP loan fraud cases at present. Therefore, as an individual or business facing allegations of PPP loan fraud, it’s essential to understand the potential consequences and defenses available. Todd Spodek and his team of experienced attorneys can provide you with adequate legal representation to ensure the possible outcome. Protect your business by scheduling a consultation with Todd Spodek today!
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