San Diego PPP Loan Fraud Lawyers
You applied for a PPP loan in 2020. Maybe 2021. The government was practically begging businesses to take the money - forms were simple, approvals were fast, and everyone seemed to be doing it. You got the funds, used them however you used them, maybe got forgiveness. Years passed. San Diego kept being San Diego. You figured the government had moved on to bigger problems.
That assumption is wrong.
The Southern District of California has been prosecuting PPP fraud cases aggressively - and the range of outcomes should get your attention. A Chula Vista city councilwoman got probation for $176,000. A San Diego man got 235 months - nearly twenty years - for a scheme that included PPP fraud. The 10-year statute of limitations means your 2020 loan is prosecutable until 2030.
Welcome to Spodek Law Group. We handle federal PPP loan fraud defense in San Diego and throughout the Southern District of California. If you're under investigation, if you've received contact from the SBA Office of Inspector General, or if federal agents have knocked on your door - this article explains what you're facing and what your options look like.
San Diego Isn't Flying Under the Radar
Three thousand miles from Washington DC headquarters. Sunny beaches. Laid-back lifestyle. Most people assume San Diego is somehow outside the federal enforcement spotlight.
The government didnt forget.
In September 2022, the Attorney General designated the Central and Eastern Districts of California to jointly head one of three national COVID-19 Fraud Strike Forces. These aren't just task forces - they're prosecutor-led, data-analyst-driven teams that coordinate across all four California federal districts. Including San Diego.
Most people miss this: the 10-year statute was retroactive. Congress extended the statute of limitations from 5 years to 10 years in August 2022 - and it applied to loans that were already issued. A PPP loan from 2020 is prosecutable until 2030. A loan from 2021 until 2031. The government gave itself a full decade to work through the cases. And there using it.
As of December 2024, according to Pandemic Oversight, 3,096 defendants have been charged with pandemic relief fraud nationwide. Of those convicted, 81% received prison time - not probation. IRS Criminal Investigation has launched over 2,039 COVID fraud investigations totaling $10 billion in attempted fraud. The median time from investigation to indictment has decreased by 45%. What used to take 8-12 months now takes 4-6 months.
The enforcement machine is faster, more coordinated, and more aggressive then it was in 2021.
San Diego is part of that machine.
Real San Diego Cases - From Probation to 20 Years
The sentencing range in San Diego PPP fraud cases is dramatic. Understanding where you might fall requires looking at actual cases.
Denny Thakorbhai Bhakta - 235 months. Nearly twenty years in federal prison. Bhakta was convicted by a federal jury in October 2024 of securities fraud, bank fraud, and money laundering in a $35 million scheme. Part of that scheme involved PPP fraud. He created fake W-2 and IRS documents. He used his own investors' identities to claim them as employees on PPP applications. He obtained more then $4.4 million in PPP loans. He used the money to keep a Ponzi scheme running and to gamble at casinos. Convicted on all 25 charges after a two-week trial.
Does that sound familiar? Fake employees. Inflated payroll. Fabricated tax documents. Thats exactly what many PPP applicants did. The scale was different, but the conduct was the same.
Thomas Zolezzi - San Diego businessman who pleaded guilty to federal fraud charges in connection with nearly $3 million in fraudulent PPP and EIDL loans. He submitted five loan applications with false statements about employees, payroll, and revenue. Restitution: $700,884 to SBA plus $2,238,910 to the lender. Sentencing pending.
Duraid Zaia and Kusay Karana - San Diego County brothers facing a civil False Claims Act suit for allegedly obtaining $8.3 million in PPP loans for businesses that were fake or grossly exaggerated. Four loans between March and April 2021. This is the civil track - repayment plus penalties rather than criminal prosecution. But the government is still coming for the money.
Andrea Cardenas - Former Chula Vista city councilwoman. $176,227 PPP loan for her political consulting business. Used the funds for campaign expenses. Felony grand theft conviction. Sentenced to probation and 100 hours community service. But also: full restitution of $176K to SBA plus $28K to EDD, career destroyed, public humiliation, resignation from office.
Nasser Salman - Former San Diego resident now living in Morocco. Indicted for fraudulently obtaining $400,000 in COVID relief funds. International wire transfers to a Morocco-based bank account. Money laundering charges added because of the attempt to hide funds overseas.
Notice what seperates these outcomes. Bhakta got 235 months. Cardenas got probation. The difference isn't just the dollar amount - its the additional charges, the pattern of conduct, the identity theft, the obstruction.
The Window That Closes Forever
Heres what practitioners know about PPP fraud investigations.
Theres a window - typically six to twelve months - between when the SBA OIG flags a loan and when the case gets referred to the FBI for criminal investigation. During this window, there is leverage that completley disappears once criminal charges are filed.
During the OIG review stage, a skilled defense attorney may be able to negotiate a civil disposition. Repayment plus a fine. Maybe a False Claims Act settlement like the Zaia brothers are facing. Not pleasant - but not a federal felony conviction either. The civil track keeps you out of prison.
But wait - theres a trap most people fall into.
Some people, panicking, decide to voluntarily repay the loan thinking it will make the problem disappear. The DOJ has explicitly stated that voluntary repayment can be used as evidence of consciousness of guilt. Returning the money without counsel doesn't make it go away - it can actualy strengthen the government's case against you.
Thomas Zolezzi agreed to pay $700K to SBA and $2.2M to the lender. But that came as part of a negotiated plea agreement, with counsel, after charges were filed. Its very different from panicking and sending a check to the SBA hoping they'll leave you alone.
This is complicated. The timing matters enormously. Whether to engage the government, how to structure any resolution, whether civil or criminal exposure is more likely - these decisions require counsel who understands how federal prosecutors in San Diego actualy operate.
Once criminal charges are filed, that window closes forever.
What Separates Probation from Prison
The factors that seperated Cardenas (probation) from Bhakta (235 months) aren't random. Federal judges look at specific elements.
Identity theft charges. If you used someone else's name, Social Security number, or identity on PPP applications - even if you "borrowed" it from an employee who wasn't actually working - aggravated identity theft (18 U.S.C. § 1028A) carries a mandatory 2-year consecutive sentence. Bhakta used his investors' identities. That added years.
Number of applications. One questionable application is different from five fraudulent applications (Zolezzi) or 25 fraudulent acts (Bhakta). Pattern evidence matters.
Additional crimes. Bhakta's PPP fraud was part of a larger securities fraud and Ponzi scheme. The PPP fraud alone wouldn't have resulted in 235 months. But when combined with investor fraud, money laundering, and the casino gambling, the sentence escalated dramatically.
Cooperation timing. Defendants who cooperate early - before indictment, with counsel, providing useful information - often receive sentencing credit. Defendants who cooperate late or not at all don't get that benefit.
Prior record. First-time offenders generally receive lighter sentences than repeat offenders. Though "lighter" in federal court still often means prison time.
The difference between probation and prison often comes down to factors you may not fully understand - and some of those factors can still be influenced if you act early with proper counsel.
Todd Spodek has handled PPP fraud cases in federal court. He understands the difference between cases that might resolve civilly during the OIG stage and cases where criminal defense is the priority. He can evaluate where your situation falls and what realistic options exist.
When You Need to Talk
If you're in San Diego - or anywhere in San Diego or Imperial County covered by the Southern District of California - and you're worried about a PPP loan investigation, Spodek Law Group can help you understand where you stand.
The consultation is free. Theres no obligation.
What you'll get is an honest assessment. Is this still at the OIG stage where civil resolution might be possible? Has it been referred to the FBI? What does the evidence look like? What factors are working for you and against you? What are realistic outcomes - not best-case fantasies, but actual possibilities based on how these cases have played out in SDCA?
Call us at 212-300-5196. The statute of limitations runs until 2030 or 2031 depending on when you got the loan. The government has time. But once they move, things happen fast - investigations that used to take a year now take four to six months.
The earlier you have counsel, the more options exist.
We're here when your ready.
