Paycheck Protection Program Fraud

The COVID-19 pandemic left a trail of economic devastation over the last two years. Paycheck Protection Program (PPP) loans have been a significant factor in helping businesses get back on track. These federal loans are meant as an emergency stopgap to stimulate businesses after the pandemic slowed the economy down. PPP Fraud has been a top priority for the federal government, which is not bound to change any time soon. 

Much like other types of federal aid, however, PPP loans have stringent requirements that a business must adhere to utilize appropriately. If these conditions are not followed, your business could end up on the wrong side of a federal fraud investigation. Over the last two years, the Department of Justice has worked with other federal agencies to crack down on hundreds of PPP violations.

If your business is facing a PPP fraud investigation over the use of federal funds, do not waste any time; call an attorney at once. At Norman Spencer Law Group, our attorneys are well-versed in handling all types of fraud defense, including PPP fraud.

On March 27, 2020, Congress signed the Coronavirus Aid, Recovery, and Economic Security (CARES) Act. As a part of the CARES Act, $2 trillion was made available to help businesses and workers bearing the brunt of the pandemic. PPP loans were a portion of that aid, which kept businesses operational and ensured workers received payment as the pandemic worsened. The program officially ended on August 8, 2020.

The loans have a one percent interest rate, a maturity date of two years, require a loan to be under $2 million, and require that the business seeking the loan has faced some harm. An essential aspect of PPP loans is that there are provisions for loan forgiveness if specific criteria are met. If a business keeps or rehires employees, there will be no penalties for closing out the loan.

The federal government broadly defines fraud as any action a person or organization takes that utilizes deceit for personal or financial gain. PPP fraud occurs when a person or business submits false information when applying for a PPP loan. Common causes of PPP fraud include:

• Submitting false information on a PPP loan
• Applying for PPP loans from several lenders (loan stacking)
• Fraudulent loan certification
• Unauthorized use of PPP loans
• Deceiving the federal government during a PPP audit

On top of lying or misusing funds, misrepresenting information on a loan application can also count as fraud. Loan misrepresentation can occur as the following examples:

• Saying that you have 500 or fewer employees when you do not
• Classifying employees as independent contractors when they are not
• Misrepresenting that a business has met the small business eligibility standard
• Misrepresenting the company’s payroll to receive more on a loan

Another element of PPP fraud is that there is no specific statute that the Justice Department investigates cases under. Nevertheless, plenty of existing statutes allow the federal government to tackle any allegations of PPP fraud. These statutes are:

• Wire Fraud: Involves the use of electronic sources to gain money off of false statements  
• Bank Fraud: Involves the use of false statements to obtain money from a bank or similar financial institution
• False Statements: Lying on a loan or other documents that are required to qualify for a loan
• Conspiracy to Commit Fraud: Formal agreement with a person or organization explicitly forbidden by fraud statutes

Finally, much like healthcare fraud, PPP fraud cases can also be subject to Qui tam or whistleblower lawsuits where a private individual or employee brings a case to the federal government’s attention.

If you are contacted by a federal agent about potential PPP fraud in your business, it can be a jarring experience. You need to be very careful about what you discuss with others. The agent may request details about your loan or ask to see the relevant documentation related to the loan. Do not try to do any of this on your own. Your first order of business should be to have a lawyer represent you in any proceedings with a federal agent.

There are cases where people have talked to agents without a lawyer and have faced obstruction or false statement charges on top of the alleged PPP fraud. There are also instances where the government has frozen bank accounts while investigating potential fraud. 

Another critical step is to ensure that you have all the loan documents surrounding your PPP application on hand in case they are needed. Never dispose of any such documents, as this can also open you up to obstruction charges. Also, ensure you discuss the case with your employees in some capacity since federal agents could also contact them.

Having a qualified PPP fraud defense attorney is not just helpful in dealing with federal agents but at every step of a potential investigation. Not only will an attorney deal with the prosecutor involved in the case, but having a lawyer on hand will also make it easier to gather documentation and keep up with important dates. Defending your business and prepping employees to deal with federal agents is smoother with a capable attorney on your side. If your case goes to court, an attorney is indispensable. A lawyer can work to reduce the penalties you face and try to come to a resolution that does not involve any criminal charges.

If you are facing a PPP loan fraud investigation, you should not be lax about reaching out to an attorney. At Norman Spencer Law Group, our lawyers can represent you in every capacity, even defending you in court. Call us for a free consultation about your case. We are open to talking over the phone, via Zoom, email, or even in person.