Nashville EIDL Loan Fraud Lawyers

Nashville EIDL Loan Fraud Lawyers

Your EIDL loan was flagged. Federal agents in Nashville contacted you. Or the SBA sent an audit letter about your Economic Injury Disaster Loan application. You’re in Tennessee. The Middle District of Tennessee is prosecuting aggressively – ten individuals were charged for $950,000 in COVID-19 relief fraud schemes in October 2023. A Shelbyville woman pled guilty and agreed to $223,800 restitution for fraudulent PPP and EIDL loans, with sentencing scheduled July 2025. The U.S. Attorney’s Office for Middle District collected over $137 million in Fiscal Year 2024, primarily through False Claims Act enforcement. The Middle District prosecutes hard.

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

The SBA approved your EIDL loan in 2020 with minimal verification. Now they’re prosecuting. Congress extended the statute of limitations from 5 to 10 years in 2022 – meaning prosecutions continue through 2031 for loans disbursed in 2021. A woman in Bedford County who fraudulently obtained $223,800 in PPP and EIDL loans faces prison at her July 2025 sentencing. Here’s what happens in YOUR Nashville case.

Recent Middle District Tennessee Convictions and Sentences

Ten individuals in Tennessee were charged by federal grand jury in October 2023 for schemes to defraud the Economic Injury Disaster Loan program and Paycheck Protection Program. According to court documents filed in Middle District of Tennessee, the defendants allegedly obtained funds under the EIDL program by submitting false and fraudulent loan applications that collectively sought over $950,000. The indictments alleged defendants made material misrepresentations about business operations, revenue, number of employees, and economic injury calculations required for EIDL eligibility. This multi-defendant case demonstrates Middle District’s aggressive approach – they identify fraud rings and conspiracies, then indict everyone involved simultaneously. Ten defendants facing federal charges together creates pressure to cooperate. First defendants to plead guilty get best deals. Last defendants to hold out get charged with additional conspiracy counts and face enhanced sentences. If you were involved with others in obtaining EIDL loans – if you shared information about how to apply, if you used same accountant or facilitator, if you discussed applications with business associates – Middle District will investigate conspiracy charges that carry same penalties as if you defrauded the entire group amount.

A Shelbyville woman in Bedford County, Tennessee, pled guilty in Eastern District of Tennessee to employment tax fraud and wire fraud charges related to COVID-19 relief programs. She fraudulently obtained $105,800 in PPP loan proceeds in April 2020, then submitted additional fraudulent application and received $118,000 in February 2021. Total restitution owed to Small Business Administration: $223,800. Sentencing is scheduled for July 11, 2025. This case illustrates common EIDL fraud pattern – defendants get initial loan in 2020, then apply for increase or additional loan in 2021 when SBA raised caps and expanded eligibility. Each application is separate wire fraud count. Each false statement is separate felony. By submitting two fraudulent applications six months apart, she faces multiple counts with consecutive sentencing exposure. Even though she pled guilty and is cooperating, she will receive federal prison time. Middle District and Eastern District judges do not give probation for COVID relief fraud regardless of cooperation level or amount.

Mount Zion Baptist Church in Middle District of Tennessee agreed to pay $70,464.39 in June 2024 to settle civil False Claims Act allegations for misusing PPP loan funds. While this was PPP-related rather than EIDL-specific, it demonstrates Middle District’s aggressive civil enforcement approach. The church made mortgage principal payments with PPP funds – a prohibited use – then applied for and received full loan forgiveness in May 2021 by certifying funds were used properly. The case was brought by whistleblower Kiara Moore, a former church employee, who received $10,569.66 of the settlement under qui tam provisions. This highlights critical risk: your employees, accountants, bookkeepers, and business associates can file whistleblower lawsuits under 31 U.S.C. § 3730 if they have knowledge of false claims. Whistleblowers receive 15-30% of government recovery. If you misused EIDL funds and anyone with knowledge of the misuse files qui tam complaint, you face civil liability with treble damages plus criminal investigation.

EIDL-Specific Fraud Detection in Middle District

EIDL fraud detection is automated and comprehensive throughout Tennessee. Every Economic Injury Disaster Loan application was cross-referenced against IRS business tax returns including Schedule C for sole proprietors, Form 1120 for C corporations, Form 1120-S for S corporations, and Form 1065 for partnerships. You claimed $600,000 in gross revenue and $450,000 in cost of goods sold on your EIDL application for your Nashville restaurant, retail business, or professional services firm. Your IRS tax return for 2019 shows $350,000 gross revenue and $220,000 COGS. Computer flagged the material discrepancy immediately. The SBA Office of Inspector General reviewed the flag and referred to Middle District multi-agency task force for criminal investigation. The ten-defendant Tennessee case started with automated flags on multiple applications that showed similar patterns of inflated revenue and economic injury calculations.

EIDL applications required certification of “economic injury” caused by COVID-19 pandemic. You had to demonstrate your business suffered substantial economic injury and needed loan proceeds to meet financial obligations that could have been met but for the disaster. Many Nashville business owners inflated pre-pandemic revenue to show larger economic injury and qualify for bigger loans. SBA cross-checks claimed revenue against IRS records, state sales tax filings, bank deposits, and credit card processing statements. If you claimed $800,000 annual revenue but your bank deposits for 2019 show $400,000 and your Tennessee sales tax returns show $420,000 in gross receipts, the fraud is obvious. The Shelbyville woman’s employment tax fraud charges indicate she also failed to report and pay payroll taxes while fraudulently claiming business operations that qualified for EIDL. Underreporting employment taxes while simultaneously claiming large payroll expenses for EIDL triggers criminal referral.

EIDL increase applications create massive additional fraud exposure. Initial EIDL loans in spring 2020 were capped at $150,000 and processed with minimal verification. In 2021, SBA raised cap to $500,000 and eventually $2 million for most businesses. Thousands of Nashville business owners who received initial $10,000-$150,000 EIDL loans applied for increases to $500,000 or more. Increase applications required updated financial information, tax transcripts, and detailed economic injury calculations. If you inflated revenue, overstated economic injury, or made false certifications on increase application, that’s separate wire fraud count under 18 U.S.C. § 1343. The Shelbyville woman received $105,800 initially, then got $118,000 additional – likely through increase request or second application. Federal agents subpoena bank records for entire loan period and trace every dollar from initial disbursement through increase funds. If initial funds were misused and you still applied for increase with false certifications, prosecutors charge both frauds with consecutive sentencing.

Bank Secrecy Act reports trigger EIDL investigations as quickly as IRS mismatches. When you withdrew large cash amounts from EIDL loan proceeds, made luxury purchases, transferred EIDL funds to personal investment accounts, paid personal credit cards or personal mortgage, or sent wire transfers to family members – your bank filed Suspicious Activity Reports within 30 days that go directly to FinCEN and federal law enforcement. SAR filings for COVID relief funds are prioritized. Treasury Department established Pandemic Response Accountability Committee that reviews every SAR related to EIDL, PPP, and other pandemic programs. By the time SBA-OIG opens formal investigation, they already have bank documentation of misuse. Middle District prosecutors use SAR evidence to prove you knew EIDL funds were restricted but deliberately spent them on prohibited purposes.

Middle District Tennessee Prosecutes Aggressively

The U.S. Attorney’s Office for Middle District of Tennessee established institutional priority for COVID fraud enforcement. In Fiscal Year 2024, the office collected $137,054,515 for American taxpayers and crime victims. Of the money collected, $135,738,858 came from civil cases, primarily through False Claims Act enforcement like the Mount Zion Baptist Church settlement. This demonstrates Middle District’s dual-track approach: criminal prosecution for individuals who submitted fraudulent applications, and civil False Claims Act litigation against businesses and organizations that misused funds. You face exposure on both tracks simultaneously. Even if you’re never criminally charged, Middle District can pursue civil case with treble damages under 31 U.S.C. § 3729. Civil False Claims Act penalties are $13,946 to $27,894 per false claim, plus three times the government’s damages. If you received $300,000 EIDL loan through fraud, civil liability is $900,000 in treble damages plus $27,894 penalty – over $927,000 total.

Middle District prosecutes individuals and pursues civil recoveries from organizations with equal aggression. They have dedicated Assistant U.S. Attorneys with specialized training in pandemic relief fraud, forensic accounting, and EIDL program regulations. Tennessee is one of the most aggressive states for COVID fraud prosecution – both Middle District and Western District continue filing new cases through 2025. Congress extended statute of limitations from 5 to 10 years by passing PPP and Bank Fraud Enforcement Harmonization Act of 2022. For EIDL loans disbursed in 2021, statute doesn’t expire until 2031. If you received EIDL loan or increase in 2020 or 2021, you remain exposed to federal prosecution for 5-9 more years.

Sentencing in Middle District follows federal sentencing guidelines strictly. Under $100,000 with full cooperation and early guilty plea: 6-18 months prison. $100,000-$350,000 with cooperation: 18-30 months. $350,000-$1 million with cooperation: 30-48 months. Over $1 million with cooperation: 4-8 years. The Shelbyville woman’s $223,800 fraud with guilty plea will likely result in 18-30 month sentence at her July 2025 hearing. If she had gone to trial and been convicted, she’d face 36-48 months. The ten defendants charged for $950,000 total fraud face widely varying sentences depending on their individual roles, amounts, and cooperation levels. Primary organizers face 3-5 years even with cooperation. Participants who merely submitted false applications face 2-3 years with cooperation.

Restitution is mandatory under 18 U.S.C. § 3663A for all EIDL fraud convictions. Defendants must repay full loan amount received regardless of how much was actually misused. If you received $400,000 EIDL loan and used $300,000 for legitimate business expenses but $100,000 for prohibited personal expenses, you still owe $400,000 restitution because the loan was obtained through fraud. This is federal debt that survives bankruptcy discharge and follows you for life. U.S. Treasury garnishes tax refunds, Social Security benefits, wages, seizes bank accounts and property to collect. The Shelbyville woman owes $223,800. Collection continues for 20 years or until paid in full, whichever comes first.

Supervised release after prison is standard: 3 years for frauds under $500,000, 5 years for frauds over $500,000. Middle District 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 accounts, tax returns, and business documents upon request; cannot incur new debt over $500 without permission; must maintain full-time employment or prove active job search; submit to random financial audits; allow home and business visits without warrant; potential electronic monitoring. Violating any supervised release condition sends you back to prison for the remaining term plus additional time.

The critical mistake Nashville business owners make is responding to initial SBA audit letters or Office of Inspector General questionnaires without experienced federal criminal defense counsel. They think cooperation and explanation will resolve the matter administratively with loan repayment and no criminal charges. They respond to SBA questionnaires explaining their accountant miscalculated revenue, or they estimated economic injury, or they didn’t understand EIDL rules about allowable uses. Those written responses become evidence. “I may have overstated revenue to qualify for larger loan” = admission you lied on federal loan application under penalty of perjury. “I used some EIDL funds for purposes I later learned were prohibited” = admission of fraud. The Shelbyville woman likely made statements during investigation that were used to build the criminal case against her. By the time defendants hire attorney after receiving target letter or grand jury subpoena, they’ve already confessed to federal investigators in writing.

At Spodek Law Group – Todd Spodek has defended federal fraud cases in Tennessee for many, many, years. If Middle District contacted you about your Nashville EIDL loan – if SBA Office of Inspector General sent audit letter questioning revenue or economic injury calculations – if FBI, IRS Criminal Investigation, or SBA-OIG agents asked to interview you about your application or how you used loan funds – time matters critically. Middle District of Tennessee collected over $137 million in FY 2024 and has institutional commitment to pursue every COVID relief fraud case. They prosecute criminally while simultaneously pursuing civil False Claims Act recovery. You face dual exposure. Call 212-300-5196.