My Application was Unsuccessful—Can I Still Be Prosecuted for PPP Fraud?

Posted in Offshore Account Update on July 31, 2023 | Share

The Paycheck Protection Program (PPP) officially ended on May 31, 2021. But, while it has now been more than two years since lenders stopped accepting applications, fighting PPP loan fraud still remains a top federal law enforcement priority.

This is due in large part to the fact that lenders issued an estimated $80 billion in forgivable, government-backed loans to applicants who didn’t qualify. Of the approximately 11.5 million loans issued under the program, it is estimated that “at least” 70,000 were fraudulent. While this is a relatively small percentage, it is still a large number, and it accounts for about 10 percent of the total loan value issued.

But, federal authorities are not targeting successful PPP loan applicants exclusively. They are also targeting individuals who unsuccessfully applied for PPP loans during the pandemic. They are targeting individuals who assisted with the submission of fraudulent applications as well. Since conspiracy and attempt charges can carry the same penalties as wire fraud, government fraud and other federal crimes,  the individuals targeted in these cases are also at risk for substantial fines and prison time.

Evidence of Fraud in Unsuccessful PPP Loan Application Cases

In cases targeting unsuccessful PPP loan applicants, federal authorities have focused on various forms of evidence of fraud. For example, recent IRS Criminal Investigation (IRS CI) press releases discussing these cases have highlighted evidence such as:

  • Falsified payroll records and other financial documents
  • Falsified tax returns
  • Corporate documents showing that entities are newly formed rather than established businesses with employees and revenue
  • Evidence of the same individuals filing multiple individuals on behalf of different companies
  • Evidence of companies applying for PPP loans with multiple lenders

The eligibility criteria for PPP loans significantly limited the companies that qualified to apply for loans under the program. However, these criteria were neither well-defined nor widely distributed. As a result, many business owners were unclear as to whether their businesses qualified, and, in need of a cash infusion, many went ahead and applied.

To date, IRS CI does not appear to be focusing on these applicants—although this may change. Instead, IRS CI’s recent press releases suggest that the division is focused primarily on targeting individuals who engaged in intentional fraud. Given the widespread fraud perpetrated under the Paycheck Protection Program, the federal government most likely wants to send a message that similar conduct will not be tolerated in the future—and this means that it is investigating and prosecuting both successful and unsuccessful attempts to fraudulently obtain loans under the PPP.  

Speak with Attorney Kevin E. Thorn About Your PPP Loan Application in Washington D.C.

If you have concerns about facing a federal investigation related to an unsuccessful PPP loan application or if you applied for a PPP loan and have been contacted by IRS CI or any other federal authority, we encourage you to contact us promptly for more information. To request a consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group in Washington D.C., call 202-349-4033 or tell us how we can reach you online now

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