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What You Need to Know About DOJ Investigation into PPP Loan Fraud
The COVID-19 pandemic has caused financial hardship for many people and businesses. In response, the federal government created the Paycheck Protection Program (PPP) to help companies and their employees weather the crisis. However, some individuals and businesses have misused the program, resulting in fraudulent activities. This article focuses on what you should know if you or your company is facing a DOJ investigation for PPP loan fraud.
DOJ Means Business When It Comes to Prosecuting PPP Loan Fraud
The Department of Justice (DOJ) is taking PPP loan fraud very seriously due to its significant impact on federal funds and the nation’s economy. The agency is aggressively pursuing individuals and companies that submit fraudulent loan applications or certifications for PPP loan forgiveness. A recent press release from DOJ emphasizes its commitment to be aggressive in targeting anyone who defrauds the program.
PPP Frauds Cases Filed by the DOJ
Several cases of PPP loan fraud exist where DOJ has filed charges. These cases include operating shell companies to obtain access to PPP loans, using PPP funds for personal luxury expenses, and submitting multiple fraudulent PPP loans.
DOJ Collaborates with Other Federal Law Enforcement Agencies
The Department of Justice collaborates with various federal agencies such as U.S. Small Business Administration Office of Inspector General (SBA-OIG), Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Federal Bureau of Investigation (FBI), and Internal Revenue Service Criminal Investigations (IRS-CI). These agencies are mandated to identify and prosecute individuals and companies who unlawfully obtained federally backed forgivable loans offered under the PPP.
Potential Defenses against Accusations of DOJ Investigation into PPP Loan Fraud
Facing criminal charges due to PPP loan fraud can be devastating for individuals and businesses alike. However, there are potential defenses against these accusations that an experienced attorney can use during investigations:
Compliance with Terms: Showing proof of compliance with the terms of the PPP is an essential defense for many individuals and companies. Those who carefully documented the appropriate use of PPP funds, established a segregated PPP loan account, and lawfully took out a PPP loan could provide evidence of PPP compliance that could lead to an efficient resolution.
Lack of Intention: Generally, criminal culpability at the federal level requires an intention to defraud. If individuals unintentionally obtained a PPP loan, used PPP funds inappropriately, or submitted a wrong forgiveness application, they could be using as a defense against charges brought forward.
Potential Charges Individuals and Companies Can Face Under Federal PPP Loan Fraud Investigations
Individuals and businesses facing DOJ investigation on allegations of PPP loan fraud could face different criminal and civil charges from various pre-existing federal statutes:
Table 1: Federal Statutes for Charges Against Individuals/Corporations
| Statute | Charge |
| — | — |
| 18 U.S.C. § 1014 | Making False Statements to SBA |
| 18 U.S.C. § 1014 | Making False Statements to FDIC-Insured Bank |
| 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 USC.§1001 | Making False statement/Federal Agents |
|18 U.S.C.§371 and §1349 |Conspiracy|
|18U.S.C.§1349 |Attempt|
|31U.S.C.§§3729 -3733 | False Claims Act Violations |
Conclusion
The allegations of PPP loan fraud can result in serious consequences such as criminal or civil prosecution, imprisonment, exorbitant fines, and reputational damage. If you are facing DOJ investigation for PPP loan fraud, it is essential to consult with an experienced attorney who understands the PPP and has the knowledge and experience of representing clients in federal enforcement agencies.
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