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Protecting Your Business: What You Must Know About DOJ Investigations for PPP Loan Fraud
The COVID-19 pandemic left many businesses struggling to keep afloat. In response, Congress created the Paycheck Protection Program (PPP), offering forgivable loans to those affected. Unfortunately, this well-intentioned program also attracted fraudsters seeking financial gain. As a result, the U.S. Department of Justice (DOJ) commenced various investigations into PPP loan fraud with the aim of bringing perpetrators to justice.
If your company or you personally is being targeted in an investigation of PPP loan fraud, it is critical that you have a comprehensive understanding of what it entails.
The DOJ is Actively Pursuing Suspected Individuals and Companies in PPP Loan Fraud Cases
The DOJ is actively investigating individuals and businesses suspected of committing fraudulent activities associated with the PPP. The government takes these crimes seriously and holds anyone attempting to defraud accountable for their actions by charging them with federal offenses associated with the program.
Numerous Charges Have Been Filed in Relation to PPP Loan Fraud Cases
The DOJ has filed charges against multiple individuals they suspect were involved in PPP loan fraud. These accused persons falsified payroll information, established fake shell companies illegally obtaining loans, misused PPP funds for extravagant personal expenses, and attempted to receive loans several times through fraudulent practices. Consequently, these fraudulent activities have significantly reduced monies meant for small businesses intended to benefit during the pandemic.
The DOJ Collaborates with Other Federal Agencies to Combat PPP Loan Fraud
Several federal agencies are working jointly with DOJ investigators towards investigating and prosecuting persons suspected of involvement in illegal activities concerning PPP loans. The collaborating agencies include the Federal Bureau of Investigation (FBI), Internal Revenue Service Criminal Investigations (IRS-CI), Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), and U.S Small Business Administration Office of Inspector General (SBA-OIG). They are committed to exposing and punishing offenders who divert funds, undermining the central objective of the PPP, which is assisting those struggling amidst the pandemic.
Defense Strategies in PPP Loan Fraud Allegations
PPP loan fraud allegations can carry severe consequences for individuals and companies alike. However, with sufficient evidence of Paycheck Protection Program compliance that adheres to standardized formats, your defense in the DOJ investigation will be strengthened. Adequate documentation of fundings and maintaining differentiated accounts specifically for PPP loans emphasizes meticulous record-keeping surrounding all transactions.
Without intent to defraud the program, one can find a defense against charges presented under various statutory provisions. These defenses could rely on providing evidence of unintentional criminal actions although keep in mind that unintentional fraud may still fall under civil offenses. Such a violation may result in having to pay enormous fines or treble damages while risking losing federal program eligibility.
Potential Charges During Federal Investigations for PPP Loan Fraud
DOJ investigations are carried out under various pre-existing federal statutes, despite penal provisions not existing within the Coronavirus Aid Relief and Economic Security (CARES) Act which created it. These statutes have various potential penalties like fines, imprisonment, and other consequences. The table below represents possible statutory charges associated with reported instances of PPP loan fraud:
| Statutes | Potential Charges |
|—————|———————————————-|
| 18 U.S.C. § 1014 | Making False Statement |
| | to SBA |
| 18 U.S.C. § 1344 | Bank Fraud |
| 18 U.S.C. § 1343 | Wire Fraud |
| 18 U.S.C. § 1028A | Aggravated Identity Theft |
| 26 U.S.C. § 7201 | Tax Evasion |
| 18 U.S.C. § 1001 | Making False Statements |
| | to Federal Agents |
| | |
| 18 U.S.C. § 371 | Conspiracy |
| & | Section |
| 18 U.S.C. § 1349 | Attempt |
| | |
|31 U.S.C. §§ 3729 – | False Claims Act Violations |
|3733 | |
Protect Your Business Today
DOJ investigators are actively pursuing cases related to PPP loan fraud, and for your business to avoid facing severe consequences, it is crucial to adhere to the guidelines of the Paycheck Protection Program Compliance. Implementing proper accounting procedures for PPP funds, accurate payroll records, and proper documentation for fund use are important in avoiding legal involvement.
In case of DOJ investigations or accusations, companies should retain experienced attorneys who will defend their rights during prosecution. In summary, be compliant with the program guidelines and obtain legal representation that guides you through compliance with DOJ regulations effectively.
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