FEDERAL CRIMINAL LAWYERS

San Francisco PPP Loan Fraud Lawyers

San Francisco PPP Loan Fraud Defense Lawyers – Federal Criminal Investigation

If you got a target letter about your PPP loan in San Francisco, it’s important to realize that, you are facing federal criminal charges, and the United States Attorney’s Office for the Northern District of California has already been building their case. This is serious notification that federal prosecutors have your loan application, bank records, tax returns from 2019, they’re comparing everything to find discrepancies. The FBI San Francisco Field Office executes search warrants at businesses, homes, anywhere they believe evidence is located. The United States District Court for the Northern District of California handles these cases, and conviction rate can be overwhelming when cases go to trial.

The letter arrived three years after you got that PPP loan, maybe $150,000, maybe $300,000, you needed it desperately in 2020 when COVID shut everything down. You filled out the application carefully, calculated average monthly payroll from incomplete records, estimated numbers when exact figures weren’t available. SBA sent the money, you spent it on payroll, rent, utilities – exactly what program intended. But now they’re calling it fraud. This is is serious because you never intended to defraud anyone but prosecutors in Northern District don’t care about that.

Understanding PPP Fraud Prosecutions in San Francisco

It’s important to realize that, federal agents already have months of investigation before contacting you. Richard Chen got sentenced January 2024 to 60 months federal prison, ordered to pay $2.1 million restitution, he submitted fraudulent PPP applications for multiple technology consulting firms in San Francisco. Fabricated employee lists and payroll records. Used loan proceeds for luxury real estate in Silicon Valley, expensive vehicles. This can be what prosecutors focus on – but difference between legitimate loan and federal fraud charges often comes down to how aggressively prosecutors interpret discrepancies.

The federal system can be different from state court, and in this situation, you’re facing charges under 18 USC § 1344 (bank fraud), 18 USC § 1343 (wire fraud), 18 USC § 1001 (false statements). Bank fraud carries up to 30 years, wire fraud up to 20 years or 30 if affects financial institution, false statements up to 5 years. This is serious, really serious, and it’s crucial to understand prosecutors use these maximums as leverage.

Northern District prosecutors, they charge PPP fraud aggressively, they don’t distinguish between sophisticated criminals and desperate business owners. Samantha Rodriguez got 44 months prison February 2024 after pleading guilty to $1.2 million PPP fraud. Created shell companies, submitted false applications with inflated payroll for non-existent employees. Diverted funds to cryptocurrency, offshore accounts. Michael Zhang got 32 months April 2024, $625,000 restitution, overstated employee numbers and monthly payroll for Bay Area restaurants. This can be the reality even with cooperation.

How They Build PPP Fraud Cases

Your PPP application asked for average monthly payroll costs using 2019 or 2020 data, and it’s important to note that, Treasury guidance wasn’t clear what that meant. If you operated seasonal business, had high turnover, experienced changes between 2019 and 2020, what was your “average” payroll? Application didn’t specify. Treasury issued multiple revisions – some retroactive – creating confusion about what expenses qualified.

This is crucial element separating fraud from mistakes. You had to certify “current economic uncertainty makes this loan request necessary to support ongoing operations.” What does “necessary” mean? If revenue declined 30% March 2020, was loan necessary? What if revenue recovered April but you didn’t know when applying March? What if you could survive without loan by laying off half workforce – still “necessary”?

In this situation, prosecutors treat any discrepancy between PPP application and tax returns as fraud evidence. But if application stated $15,000 average monthly payroll and 2019 return shows $12,000, that doesn’t prove you lied. Maybe you included owner compensation you believed was permitted, maybe averaged payroll differently than tax forms show, maybe projected increased payroll that didn’t materialize. None of these involve criminal intent prosecutors must prove beyond reasonable doubt.

The Intent Problem They Can’t Always Prove

It’s crucial to understand that, federal fraud statutes require proof of criminal intent – you must have knowingly made false statements with intent to obtain money you weren’t entitled to receive. Good faith mistake calculating average monthly payroll isn’t fraud. Misunderstanding Treasury guidance about qualifying expenses isn’t fraud. Certifying economic necessity based on reasonable belief your business needed funds isn’t fraud.

SBA approved your loan based on information you provided, which suggests it was at least facially reasonable. If stated revenues were obviously fraudulent – claiming $5 million for one-person consulting business – SBA would have flagged for review. The fact loan was approved without additional inquiry undermines government’s claim fraud was obvious.

Oh, I should mention the investigation timeline again. They’re reviewing documents months before contacting you – comparing PPP application to actual business records. Did business exist before February 2020? Were employee numbers accurate? Did you actually suffer economic injury? If 2020 revenue increased, that’s problem for prosecutors.

Bank Fraud and Wire Fraud Charges Stack Up

Bank fraud under § 1344 applies when you execute scheme to defraud financial institution. For PPP loans, prosecutors argue “financial institution” is bank that processed application, even though SBA guaranteed loan and provided funds. If you submitted PPP application with inflated payroll, that’s bank fraud under government’s theory. Maximum 30 years gives prosecutors enormous leverage to pressure guilty pleas.

Wire fraud under § 1343 carries up to 20 years (30 if affects financial institution). Every electronic communication can be separate wire fraud count. Submitted application online – wire fraud. Emailed supporting documents – wire fraud. Loan proceeds deposited electronically – wire fraud. Prosecutors stack these counts, indictment might list 10-15 wire fraud counts for single PPP loan, threatening 200+ years cumulative. This is designed to force guilty pleas.

False statements under § 1001 criminalize knowingly making false statements to federal agencies. Each misrepresentation on PPP application is potentially separate count carrying five years. Overstated monthly payroll by $10,000 – false statement. Certified economic necessity when uncertain – prosecutors argue false statement. Money laundering under § 1956 transforms PPP fraud from few years to decade or more. Once you obtained loan through fraud (government’s theory), proceeds became “proceeds of unlawful activity.” Every transaction – paying employees, rent, supplies – potentially separate money laundering carrying 20 years.

Sentencing Reality in Northern District

Your sentence gets calculated under U.S. Sentencing Guidelines based primarily on loss amount – typically full PPP loan amount. $200,000 loan produces base offense level translating to 24-30 months before adjustments. Add enhancements for sophisticated means, money laundering charges change calculation dramatically.

The Trial Penalty and Restitution Forever

It’s important to realize that, trial penalty is difference between sentence if you plead guilty versus if you go to trial and lose. Federal court that difference typically 50-100%. Defendants who plead guilty get three-level reduction for acceptance of responsibility, can reduce 30-month sentence to 18 months. Go to trial, forfeit that reduction plus prosecutors recommend high-end sentences.

Restitution is mandatory. You’ll be ordered repay full loan amount regardless whether you spent on legitimate payroll or personal expenses, whether business survived or failed. This obligation doesn’t disappear, survives bankruptcy, government enforces through wage garnishments, tax refund seizures, property liens for decades. Period.

In this situation, 90% of federal defendants plead guilty because trial penalty so severe. First offer might be plead to three counts, stipulate $500,000 loss, guidelines call for four years. As trial approaches and attorney identifies weaknesses, offer improves to one count, lower loss calculation, two years guidelines.

Constitutional Protections You Have

Fifth Amendment guarantees due process including principle criminal statutes must provide fair notice of prohibited conduct. When PPP application and Treasury guidance were ambiguous – as they were during rapid 2020 rollout – ambiguity must be construed in your favor. If reasonable business owners could interpret payroll calculation differently, prosecuting you for choosing one interpretation violates due process.

Your Sixth Amendment right to counsel means you’re entitled to effective assistance from lawyer who understands federal fraud defense. If attorney doesn’t know sentencing guidelines, doesn’t understand differences between bank fraud, wire fraud, false statements – that’s ineffective assistance. But you can’t fix ineffective assistance at trial, have to raise on appeal years later after conviction.

We take comprehensive approach challenging every aspect of government’s case. Fourth Amendment challenges if FBI searched without warrant or exceeded scope. Fifth Amendment if interrogated without Miranda warnings. Insufficient evidence defense if government can’t prove intent beyond reasonable doubt. Todd Spodek has over 40 years combined experience defending federal fraud nationwide andcontext understands how different districts prosecute differently.

Recent Cases Show the Pattern

The Northern District has been prosecuting PPP cases aggressively since 2023, treating pandemic relief applications like organized fraud schemes. Richard Chen case – 60 months for $2.1 million. Samantha Rodriguez – 44 months for $1.2 million. Michael Zhang – 32 months for $625,000. All had defense lawyers, all pleaded guilty hoping for leniency.

It’s crucial to act immediately if you’re under investigation. Don’t talk to federal investigators without lawyer present. If FBI agent, IRS investigator, SBA inspector contacts you, say only: “I need to speak with attorney before discussing this.” End conversation immediately.

Don’t create new documents or destroy existing ones. Creating false documents after investigation begins is obstruction of justice, separate federal felony carrying 20 years. Destroying documents also obstruction, prosecutors use it argue consciousness of guilt. Preserve everything – emails, bank statements, tax returns, PPP applications, correspondence with lenders.

What Investigation Phase Looks Like

Phase one is document review and comparison. SBA audits flag inconsistencies between application and tax returns. FBI opens investigation, subpoenas documents from bank and accountant, interviews employees. This lasts months, sometimes over year. You might not know you’re under investigation until agents contact you or receive target letter.

It’s important to note that, not every investigation becomes criminal case. Civil cases involve repayment demands but no criminal charges – for smaller discrepancies, honest errors, confusion about “economic necessity” during unprecedented pandemic. If miscalculated revenue, weren’t sure about employee counts, used funds for expenses you thought were business-related, that can argue for civil resolution.

Criminal cases involve intentional fraud – claiming business that didn’t exist, fabricating tax returns, listing fake employees, using funds for obviously personal expenses. But prosecutors in San Francisco been charging cases that fall between extremes, treating honest mistakes as criminal fraud.

Frequently Asked Questions

How to prove PPP loan fraud?

To prove PPP loan fraud, prosecutors must demonstrate you knowingly made false statements on application with intent to obtain funds you weren’t entitled to receive. They compare your PPP application to 2019 tax returns, bank records, payroll documents looking for discrepancies. It’s important to realize that, discrepancy alone doesn’t prove fraud – could be honest mistake, different calculation method, reasonable interpretation of ambiguous guidance. Prosecutors look for fabricated documents, businesses that didn’t exist before February 2020, inflated employee numbers, personal use of funds. But burden is on government to prove criminal intent beyond reasonable doubt. If you made good faith errors during pandemic chaos, that’s not fraud even if application had mistakes.

How much jail time for PPP loan fraud?

Jail time for PPP loan fraud can be severe with bank fraud carrying up to 30 years theoretically, but actual sentences in San Francisco federal court are much lower based on loan amount. Richard Chen got 60 months for $2.1 million fraud January 2024. Samantha Rodriguez got 44 months for $1.2 million February 2024. Michael Zhang got 32 months for $625,000 April 2024. First-time offenders with loans under $200,000 might get 18-24 months or probation with cooperation. It’s crucial to understand that, sentencing guidelines base punishment primarily on loss amount – the PPP loan you received. Trial penalty means going to trial can double your sentence versus pleading guilty. Restitution is always mandatory requiring full repayment regardless how funds were used.

Will PPP loans under $150,000 be audited?

Yes, PPP loans under $150,000 can be audited despite initial SBA statements suggesting otherwise. While loans over $2 million face automatic review, smaller loans get flagged through data analytics looking for red flags – businesses created after February 2020, residential addresses for supposed commercial operations, suspicious bank activity. The 10-year statute of limitations for COVID fraud means audits can happen years later. We’re seeing investigations in 2025 for loans from 2020, including many under $150,000. Don’t assume small loan amount protects you from scrutiny. Northern District prosecutors have charged cases involving loans as small as $50,000 when they find evidence of false statements or misuse of funds. This can be concerning if you have discrepancies between application and tax returns.

Why You Need Federal Defense Attorney Now

The earlier attorney gets involved, more options you have. If you’re in investigation phase – received target letter, grand jury subpoena, agent phone call – we may respond in way that avoids criminal charges entirely. If prosecutors determined to charge, we negotiate for reduced charges, cap loss amount to reduce sentencing exposure.

Todd Spodek and Spodek Law Group have over 40 years combined experience defending federal fraud cases nationwide. We’ve handled high-profile cases where media attention ran against clients – from Anna Delvey to Ghislaine Maxwell juror misconduct case – but constitutional principles required vigorous defense. We understand PPP regulations, know how prosecutors calculate loss amounts, can identify weaknesses in government’s case.

This is too important to handle alone. Northern District prosecutors have unlimited resources, treat PPP applications like criminal schemes, seek prison sentences for first-time offenders. You need someone who knows this system, these prosecutors, can protect your rights infront of federal judge.

It’s important to realize that, decisions you make today determine your future. Early intervention can mean difference between civil resolution and criminal prosecution, between probation and prison, between manageable restitution and lifetime debt. The government is building case against you right now. Don’t wait, don’t hope it goes away.

Call 212-300-5196 immediately if you’re under PPP investigation in San Francisco. We’re available 24/7 because federal investigations don’t wait for business hours. Your freedom, finances, and future are at stake. This is your chance to take control before it’s too late.