What You Need To Know About PPP Loan Fraud

What is PPP Loan Fraud?

^{Excerpts from Pate, Johnson & Church Article}

PPP loan fraud is when an individual or business submits false information in an application or certification for a loan under the federal Paycheck Protection Program (PPP). for eligibility.

The focus of a PPP loan fraud investigation is to determine whether charges should be brought against someone for violating one or more of the strict requirements of the PPP loan program. Generally, federal prosecutors have been targeting businesses and individuals who may have violated the PPP loan program by:

Making a false statement on the PPP loan application
Applying for PPP loans from multiple lenders (“loan stacking”)
Using PPP loan money for an improper or unapproved purpose
Submitting a false certification for PPP loan forgiveness
Not being truthful to agents during a PPP loan audit or investigation

The Myth Around PPP Loan Investigation

^{Excerpts from A National Law Review Article}

There is a myth surrounding the idea that only businesses receiving $2 million loans or more are being targeted for investigation. This is not the case.

The DOJ is hiring a team of Special Staff Trial Attorneys to Prosecute PPP Loan Fraud Cases

The Trial Attorneys will join the DOJ’s Market Integrity and Major Frauds (MIMF) Unit for a minimum commitment of two years. The MIMF Unit prosecutes cases involving, “government procurement fraud, bank fraud, mortgage fraud, and . . . disaster-relief related fraud targeting SBA programs,” among other white-collar offenses. Also looking for offenders, U.S. SBA has established a hotline for those who have witnessed PPP Fraud and wish to report it.

How serious is a PPP loan fraud investigation? Excerpts Taken from Oberheiden, PC

A person charged with PPP loan fraud may face serious criminal and civil penalties. The penalties for various violations are listed below:

Making False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014) – Up to a $1 million fine and 30 years of federal imprisonment.
Making False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014) – Up to a $1 million fine and 30 years of federal imprisonment.
Bank Fraud (18 U.S.C. § 1344) – Up to a $1 million fine and 30 years of federal imprisonment.
Wire Fraud (18 U.S.C. § 1343) – Statutory fines (under 18 U.S.C. § 3571) and up to 20 years of federal imprisonment.
Aggravated Identity Theft (18 U.S.C. § 1028A) – Up to two years of additional imprisonment, served consecutively.
Tax Evasion (26 U.S.C. § 7201) – A fine of up to $100,000 (for individuals) or $500,000 (for corporations) and up to five years of federal imprisonment.
Making False Statements to Federal Agents (18 U.S.C. § 1001) – Statutory fines and up to five years of federal imprisonment.
Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349) – Statutory fines and up to five years of federal imprisonment under 18 U.S.C. § 371, and the same penalties prescribed for the underlying offense under 18 U.S.C. § 1349.
Attempt (18 U.S.C. § 1349) – The same penalties prescribed for the underlying offense.
False Claims Act Violations (31 U.S.C. §§ 3729 – 3733) – Monetary penalties in civil cases, and statutory fines and up to five years of federal imprisonment in criminal cases.

What Should I Do If Suspected on PPP Loan Fraud

If a federal agent contacts you regarding the investigation of a suspected fraudulent PPP Loan, first and foremost, verify that you are dealing with a government agency. There are many people using scams to obtain your personal information.

Before turning over any documents, or providing information regarding your personal info or financial activity, contact your CPA and most important, your legal counsel immediately. They will assist you on how to proceed with answering questions and advise you on the documents you will be required to provide.

All PPP Loan Recipients should hold on to all documentation related to the entire loan process. PPP Loan fraud can be intention or unintentional, so be prepared to provide documentation if you need to.

You will want to respond quickly to federal agents as your assets and accounts can be seized or frozen during a federal investigation, before you are actually accused of any criminal activity.