What Is the Penalty for Lying on a PPP Loan Application?

The penalty for lying on a PPP loan application is not what most people expect. It is not a fine. It is not paying back the money. It is not probation with community service. For many defendants, the penalty is years - sometimes decades - in federal prison, combined with the complete seizure of their assets and the destruction of everything they have built.

Welcome to Spodek Law Group. We put this information on our website because most people have absolutely no idea how severely the federal government treats PPP loan fraud. They think the loan amount determines the punishment. They think first-time offenders get leniency. They think admitting the mistake and paying the money back will make it all go away. All of these assumptions are dangerously wrong, and understanding reality is the first step toward protecting yourself.

Todd Spodek has represented clients facing PPP fraud charges since the program began. What we have learned is this: the Department of Justice treats PPP fraud as a political priority. They have dedicated entire task forces to prosecution. They are using every tool available to maximize sentences. And they are not going away anytime soon.

Call us at 212-300-5196 if your facing PPP-related investigation or charges. Time matters in these cases.

The Federal Charges That Stack Against You

Heres the thing most people dont understand about PPP fraud prosecution. A single false statement on a loan application can trigger MULTIPLE federal charges, each carrying its own maximum sentence. These charges stack on top of each other, creating potential exposure that shocks most defendants when they first hear it.

Bank fraud under 18 USC 1344 carries a maximum sentence of 30 years. This charge applies when someone makes false statements to obtain money from a financial institution. Every PPP loan went through a bank. Every false application is potential bank fraud.

Wire fraud under 18 USC 1343 carries a maximum of 20 years. This charge applies to any scheme to defraud using electronic communications. Every email you sent about the loan is a separate wire. Every electronic submission of an application is a wire. Every bank transfer of funds is a wire. Prosecutors routinely charge multiple wire fraud counts for a single loan.

Money laundering under 18 USC 1956 carries up to 20 years. If you moved the money after receiving it - deposited it, transferred it, spent it on anything - prosecutors can argue the transaction was money laundering. Each transaction becomes a potential count.

False statements under 18 USC 1014 carries 30 years when made to influence a federally insured financial institution. And 18 USC 1001 carries 5 years for false statements to federal agencies like the SBA.

Add it up. A single fraudulent PPP application can generate charges with a theoretical maximum exposure of over 100 years. Nobody gets that sentence, but prosecutors use these charges to create overwhelming plea leverage.

The Aggravated Identity Theft Hammer

OK so now it gets worse. Much worse.

If you used ANYONE else's identity information in connection with the fraud - Social Security numbers, names, dates of birth, anything - prosecutors can add 18 USC 1028A, aggravated identity theft. This statute carries a 2-year mandatory minimum sentence that MUST be served consecutively to any other sentence.

Mandatory means the judge has no discretion. Consecutive means it gets added on top. If your underlying sentence is 5 years and you have an aggravated identity theft conviction, your serving 7 years. Minimum.

Heres what catches people off guard. Using your own employees' information to inflate payroll counts as identity theft under federal law. Using a business partners name without explicit authorization counts. Even using information that was technically accurate but taken from documents without permission can trigger the statute.

This charge is the prosecutors ace card. When they add 1028A, they get 2 years of guaranteed prison time no matter what else happens. Many defendants plead guilty specifically to get this charge dismissed.

The 10-Year Statute of Limitations

Most federal fraud charges have a 5-year statute of limitations. You might think that means if you commited PPP fraud in 2020 and havent been charged by 2025, your safe.

Your not.

PPP fraud affecting a financial institution has a 10-year statute of limitations under 18 USC 3293. Loans taken in 2020 can be prosecuted until 2030. Loans from 2021 can be prosecuted until 2031. The government has years to build cases, gather evidence, flip co-conspirators, and come after you.

This is were people make catastrophic mistakes. They assume that becuase years have passed without hearing anything, the danger is over. They stop worrying. They keep records carelessly. They talk about the loan with friends or business partners. Then one day federal agents show up with a search warrant.

The reality is that PPP fraud investigations are ongoing. New cases are being opened constantly. The pandemic-era fraud unit at DOJ is still fully operational. If you think time has made you safe, you are wrong.

What Actually Determines Your Sentence

The federal sentencing guidelines calculate PPP fraud sentences based primarily on the loss amount. But "loss amount" dosent mean what most people think.

The loss is the INTENDED loss, not necessarily the actual loss. If you applied for $150,000 but only received $100,000 before forgiveness, the loss calculation may still be $150,000. And the calculation includes the FULL loan amount - not just the portion you used improperly.

Every increase in loss amount pushes you into higher guideline ranges. The jumps are dramatic:

• Loss over $6,500 adds 2 offense levels
• Loss over $15,000 adds 4 levels
• Loss over $40,000 adds 6 levels
• Loss over $95,000 adds 8 levels
• Loss over $150,000 adds 10 levels

For a first-time offender with no prior criminal history, a $50,000 PPP fraud typically results in a guideline range of 21-27 months. A $150,000 fraud jumps to 33-41 months. A $500,000 fraud reaches 57-71 months. These are the GUIDELINES - judges can sentence above or below, but most sentences cluster around these ranges.

The Forfeiture Nightmare

Prison time is only part of the punishment. Federal forfeiture provisions allow the government to seize everything connected to the fraud.

The proceeds of PPP fraud are subject to forfeiture. This includes the loan funds themselves, obviously. But it also includes anything purchased with those funds, any assets those funds were commingled with, and potentially much more.

Prosecutors interpret "proceeds" broadly. If PPP money went into a bank account that you used for legitimate business expenses, the entire account may be subject to forfeiture. If you used PPP funds to make a payment on your house, the house may be subject to forfeiture. If you purchased equipment, vehicles, inventory - all forfeitable.

And heres the thing that really hurts. Forfeiture happens BEFORE you go to prison. The government can freeze your accounts while the case is pending. They can seize your house. They can take your cars. By the time your convicted, you may have nothing left.

This is why early legal intervention matters so much. Challenging forfeitures, protecting assets, and negotiating the scope of seizures requires immediate action from experienced counsel.

The Cooperation Decision

Here is the uncomfortable truth that nobody wants to talk about. In PPP fraud cases, early cooperation often produces dramatically better outcomes than fighting charges.

Federal prosecutors value cooperation highly. A defendant who comes forward BEFORE being contacted, admits wrongdoing, provides complete information, and assists in investigating others can often negotiate for probation or significantly reduced prison time.

But cooperation comes at a cost. You must admit guilt. You must waive your trial rights. You usually must implicate others. And you must be completely truthful - any lie discovered later destroys your cooperation agreement and exposes you to enhanced prosecution.

The timing matters enormously. Cooperation offered before arrest is worth more than cooperation offered after. Cooperation at arrest is worth more than cooperation after indictment. Cooperation after indictment is worth more than cooperation on the eve of trial. Every day of delay reduces the value of what you have to offer.

At Spodek Law Group, we evaluate cooperation strategically. For some clients, its the clear best option. For others, fighting the charges makes more sense. But every client needs to understand these dynamics EARLY - not when its too late to maximize the value of cooperation.

Defense Strategies That Actually Work

So what can actualy be done if your facing PPP fraud charges? More than you might think.

Challenge willfulness. The government must prove you INTENDED to defraud. If you genuinely believed your application was accurate - even if it wasn't - that good faith belief can be a defense. We investigate the circumstances of your application to identify evidence of honest intent.

Attack the loss calculation. The loss amount drives guideline sentencing. But loss calculations can be challenged. If you used funds for legitimate payroll purposes, that arguably isnt "loss." If forgiveness was denied and you repaid the loan, the loss may be zero. We scrutinize every dollar claimed.

Negotiate early. As discussed, cooperation value diminishes over time. If the facts are bad, sometimes the best strategy is early engagement with prosecutors to negotiate the best possible deal before indictment.

Challenge specific counts. Each wire fraud count requires proof of a specific fraudulent wire transmission. Each bank fraud count requires proof of a specific false statement to the bank. Prosecutors sometimes overcharge, and attacking weak counts can dramatically reduce exposure.

Present compelling mitigation. Even when conviction is unavoidable, sentencing outcomes vary enormously. The pandemic context matters. Financial desperation matters. Reliance on professionals matters. Family circumstances matter. We build comprehensive mitigation presentations that give judges reasons to go below the guidelines.

Why Spodek Law Group

We put this information on our website because we believe informed clients make better decisions. We believe you deserve to understand exactly what your facing before you make any choices about your case.

Todd Spodek and the Spodek Law Group team have handled PPP fraud cases since the program's inception. We understand how prosecutors think. We know which arguments work and which dont. We know when to negotiate and when to fight.

Our mission is simple: we treat every client like family. We dont judge you for the situation your in. We roll up our sleeves and figure out how to get you the best possible outcome.

If your facing PPP fraud allegations - or if you think you might be - call us at 212-300-5196. The consultation is confidential. We can assess your situation, explain your options, and help you develop a strategy.

The penalties for lying on a PPP application are severe. The investigations are ongoing. The statute of limitations extends until 2030 and beyond. But with the right legal representation, outcomes can be dramatically better than what prosecutors initially threaten.

Dont wait until federal agents are at your door. The decisions you make NOW will shape everything that happens later. Call us today. Lets talk about your situation.