Sacramento PPP Loan Fraud Lawyers

Sacramento PPP Loan Fraud Lawyers

You got contacted about your PPP loan forgiveness application. Not fraud on your original PPP application from 2020 – fraud on the forgiveness application you submitted months or years later, when you documented your payroll expenses and requested SBA forgive the debt. You’re in Sacramento, California’s capital city, which means you’re prosecuted in Eastern District of California federal court – covering Sacramento, Fresno, Bakersfield, Redding, Stockton, Modesto, the entire Central Valley where small businesses and government contractors scrambled for pandemic relief without always understanding the forgiveness requirements SBA kept changing. FBI Sacramento field office or SBA Office of Inspector General contacts you two or three years after you received forgiveness, asking about payroll figures that don’t match your tax returns, owner compensation calculations that appear inflated, independent contractors you included in payroll totals when they weren’t eligible. Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. We’ve represented clients in federal fraud prosecutions for over 40 years, many, many, PPP forgiveness fraud cases across California including Eastern District prosecutions in Sacramento federal court.

The Forgiveness Trap

Most Sacramento small businesses understand this sequence, particularly those in the capital region where government contractors and service businesses dominate the commercial landscape and small business owners often operate without sophisticated accounting infrastructure. They received PPP funds in 2020, during peak pandemic uncertainty when businesses were closed or operating at reduced capacity and needed emergency relief Congress authorized. They deposited the PPP loan into their business account. Months or sometimes a full year later, when SBA announced forgiveness applications were available, they gathered documentation – payroll records, 1099 forms for contractors, rent payments, utility bills – everything SBA said qualified for forgiveness during the covered period. They submitted the forgiveness application through their lender’s portal, documenting their expenses and requesting SBA forgive the debt. Many Sacramento business owners included every possible expense, stretched payroll calculations to include owner compensation that wasn’t precisely documented, added independent contractors to payroll totals because they performed essential business functions during the covered period. Weeks or months later, SBA approved forgiveness. The debt disappeared. They reasonably believed the matter was closed, the forgiveness was final, they could move forward without federal scrutiny. That assumption, though seemingly logical to defendants who received official SBA forgiveness approval, doesn’t protect them from wire fraud prosecution. If your forgiveness application contained false information at the time you submitted it – payroll you claimed didn’t match your quarterly tax filings with IRS, owner compensation you calculated exceeded what your 2019 tax returns documented, independent contractors you included weren’t employees eligible for payroll protection calculations – that forgiven PPP amount counts as fraud loss for sentencing purposes under federal sentencing Guidelines that federal judges in Eastern District must follow. Federal prosecutors throughout Eastern District of California don’t distinguish between original application fraud and forgiveness application fraud. What matters under 18 USC Section 1343 wire fraud statutes is that you obtained debt forgiveness from the federal government based on false statements transmitted electronically through your lender’s system to SBA across state lines. Each Sacramento forgiveness fraud case prosecuted under identical wire fraud statutes as original application fraud cases, with identical maximum penalties and identical Guidelines calculations.

PPP Fraud

You calculated your owner compensation based on what seemed reasonable during pandemic chaos. Your Sacramento business had irregular income in 2019, or you operated as sole proprietor with draws instead of formal salary, or your payroll infrastructure wasn’t sophisticated enough to generate precise quarterly calculations. You included independent contractors in your payroll protection calculations because they performed essential functions for your business. You rounded up employee counts or salary figures to reach the forgiveness threshold. Sacramento business owners ask the same question – when does estimate become fraud? That’s the constitutional question at the center of every PPP prosecution. Federal prosecutors must prove criminal intent under federal sentencing Guidelines. They must demonstrate you knew the information was false when you submitted it. Wire fraud carries 20 years maximum. False statements to SBA under 18 USC Section 1014 carry 30 years maximum. Those statutory maximums are meaningless – federal sentencing operates through mandatory Guidelines based on loss amount, not statutory maximums. But the constitutional burden remains.

FBI Sacramento agent calls or shows up at your business in Sacramento. “We’re reviewing your PPP forgiveness documentation and need to verify some information.” That sounds routine. It’s federal criminal investigation designed to obtain statements proving criminal intent. When Sacramento business owners respond without federal defense counsel, investigators already possess their complete financial history. They subpoenaed bank records months earlier, pulled tax returns through IRS summons, obtained the original forgiveness application from SBA’s database, examined quarterly 941 filings with IRS.

They know the discrepancies.

You received $150,000 PPP loan and got it fully forgiven. Your forgiveness application claimed payroll expenses that were off by $40,000 from what your tax returns documented. How much prison time are you facing in Eastern District? Federal sentencing operates through mandatory Guidelines based on loss amount. Loss amount in PPP forgiveness cases equals the forgiven amount you obtained through fraudulent application. Small PPP fraud, $20,000 to $150,000, typically produces probation to 18 months imprisonment for first-time offenders. Your $150,000 falls at the top of this bracket. Medium PPP fraud, $150,000 to $550,000, results in 18 to 36 month sentences. Three factors determine where you land within your Guidelines bracket. Loss amount matters most. Criminal history matters second. Acceptance of responsibility matters third. 81% of pandemic fraud defendants sentenced as of December 2024 received prison time, not probation, according to Department of Justice data. Todd Spodek has defended federal fraud prosecutions for over 40 years. Call 212-300-5196.