Washington DC PPP Fraud
Under Investigation for Paycheck Protection Program (PPP) Fraud? You Need an Experienced Washington DC PPP Fraud Lawyer
The federal government is targeting individuals and businesses that fraudulently obtained Paycheck Protection Program (PPP) loans during the COVID-19 pandemic. Fraud investigations are leading to serious federal charges, and many business owners and others are finding themselves facing steep penalties. If you or your business is under investigation—or if you have concerns about facing an investigation—you should speak with a Washington DC PPP fraud lawyer promptly.
Our lawyers are representing individuals and businesses in PPP loan fraud investigations and prosecutions. We are also helping clients address PPP-related errors before they face federal scrutiny. Each Washington DC PPP fraud lawyer at Thorn Law Group has extensive experience representing clients in high-stakes federal matters, and if you or your business is at risk, we can use this experience to your advantage.
What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP) was a pandemic relief program that Congress established to help qualifying businesses manage the economic impacts of COVID-19. Established by the CARES Act, the PPP provided qualifying businesses with access to low-interest, government-backed loans that were eligible for forgiveness if the loan proceeds were used for certain designated business expenses.
In total, the federal government awarded approximately $800 billion in PPP loans between 2020 and 2021. By conservative estimates, at least $80 billion of the funds issued under the PPP went to individuals and businesses that didn’t qualify.
While the PPP served as an essential lifeline for many small businesses that were negatively impacted by the COVID-19 pandemic, it also proved to be a prime target for fraud. While the PPP was structured to allow qualifying businesses to obtain necessary loans as quickly as possible, this same structure also facilitated an extraordinarily high volume of fraudulent applications. Eventually, fraudulent loan forgiveness certifications became a problem as well, and, today, federal authorities are working to claw back as much fraudulently obtained PPP money as possible.
What Types of Conduct is the Government Investigating?
In its efforts to uncover fraud under the Paycheck Protection Program, the federal government is investigating all types of fraud related to the PPP. The U.S. Department of Justice (DOJ) is also using a broad range of charges to prosecute individuals and businesses that are suspected of committing fraud under the program.
Examples of Conduct that Constitutes PPP Fraud
Federal authorities have identified several forms of fraud under the PPP. Investigators and prosecutors are targeting fraud at all stages of the PPP loan process, from the initial application through loan forgiveness certification. Along with scrutinizing loan applicants’ forms and supporting documentation, investigators and prosecutors are also examining loan recipients’ use of their PPP funds—as recipients were only eligible to use these funds for limited business-related purposes.
Crucially, federal authorities are targeting not only individuals and businesses that fraudulently obtained PPP loans but also those that tried to fraudulently obtain PPP loans and had their applications denied. Additionally, even if a business obtained a PPP loan in good faith, if it used its PPP funds for unauthorized expenses and/or submitted a fraudulent loan forgiveness certification, this can trigger federal charges as well. In short, federal authorities are targeting all forms of PPP fraud, and all forms present similar risks for criminal prosecution.
Some examples of conduct that constitutes PPP fraud (and that have the potential to lead to serious federal charges) include:
- Submitting false information on a PPP loan application (i.e., falsely representing that a business qualifies as a “small business concern” or that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient”);
- Submitting falsified payroll records, tax returns or other documents in support of a PPP loan application;
- Submitting multiple applications to different lenders, submitting applications for newly-formed businesses, using non-employees’ information to falsify payroll and other forms of fraud;
- Using PPP loan funds for unauthorized purposes (i.e., any personal expenses or business expenses other than payroll, interest and rent payments under pre-existing obligations, insurance premiums, and utilities);
- Falsely certifying that a business is eligible for PPP loan forgiveness (i.e., that the business used the entirety of the loan proceeds for authorized business expenses).
Again, these are just examples. Due to the volume of fraud under the PPP, federal authorities are closely scrutinizing all aspects of PPP loan applicants’ conduct. Authorities such as the IRS Criminal Investigation (IRS CI) are examining applicants’ filings and expenses for evidence of other forms of fraud as well. Individuals and businesses targeted for all forms of fraud need a highly experienced Washington DC PPP fraud lawyer, and engaging counsel promptly affords the greatest opportunity to avoid unnecessary consequences.
Potential Charges in Federal PPP Fraud Cases
Allegations of Paycheck Protection Program fraud can lead to a variety of federal charges. The DOJ has already successfully pursued numerous cases against PPP loan applicants and recipients. In these cases, the DOJ has filed charges for federal crimes including (but not limited to):
- Bank Fraud – The federal bank fraud statute, 18 U.S.C. Section 1344, makes it a federal offense to “knowingly execute, or attempt to execute, a scheme or artifice—(1) to defraud a financial institution; or (2) to obtain any of the moneys . . . under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.” Since the U.S. Small Business Administration (SBA) worked with private lenders to distribute funds under the PPP, fraud under the PPP implicates Section 1344. Violations of Section 1344 carry up to a $1 million fine and 30 years of federal imprisonment.
- Government Fraud – Committing fraud against the federal government is a criminal offense under 18 U.S.C. Section 1031. Convictions under Section 1031 carry up to a $1 million fine and 10 years of imprisonment in most cases, though the maximum fine can increase to $5 million in cases involving “gross loss to the Government or the gross gain to a defendant [of] $500,000 or greater.” Additionally, 18 U.S.C. Section 1014 imposes up to a $1 million fine and 30 years of imprisonment for knowingly making a false statement or report to the SBA.
- Wire Fraud – The federal wire fraud statute, 18 U.S.C. Section 1343, makes it a federal offense to use the Internet to execute “any scheme or artifice to defraud, or . . . obtain money or property by means of false or fraudulent pretenses, representations, or promises.” This includes submitting a fraudulent PPP loan application or forgiveness certification online. Federal wire fraud charges carry up to a $500,000 fine and 20 years of federal imprisonment.
- Tax Fraud and Tax Evasion – Many individuals and businesses that fraudulently obtained or used PPP loan funds will also be at risk for prosecution under federal tax fraud and tax evasion statutes. Submitting falsified returns in support of a PPP loan application, improperly claiming business deductions for expenses paid with PPP loan funds, and various other forms of fraud can lead to federal tax-related charges carrying up to a $100,000 fine ($500,000 for corporations) and five years of federal imprisonment.
- Attempt and Conspiracy – The federal attempt and conspiracy statutes allow for criminal prosecution in cases involving unsuccessful attempts to fraudulently obtain funds under the Paycheck Protection Program. They also allow federal prosecutors to cast a wide net—targeting accountants, business associates and others who are implicated in attempts to fraudulently obtain PPP loan funds. Under 18 U.S.C. Section 1349, attempt and conspiracy charges carry the same penalties as the underlying substantive offense.
Here, too, these are just examples. There are numerous federal criminal statutes that can potentially be implicated in federal PPP loan fraud cases. When DOJ prosecutors pursue multiple charges—and multiple counts of each charge—individuals and businesses targeted for PPP fraud can face multi-million-dollar liability and the potential for decades of federal prison time.
Which Federal Agencies Are Involved in Investigating and Prosecuting PPP Fraud?
Several federal agencies are targeting PPP loan applicants and recipients. If your business received a PPP loan, or if you personally applied for a PPP loan, a review of your (or your business’s) PPP loan file could result in further scrutiny from federal agencies including:
- Federal Bureau of Investigation (FBI)
- IRS Criminal Investigation (IRS CI)
- Small Business Administration Office of Inspector General (SBA OIG)
- U.S. Department of Justice (DOJ)
If you have received a target letter, subpoena or search warrant from any of these agencies, or if you are concerned about the government scrutinizing your (or your business’s) PPP loan file, you should speak with a Washington DC PPP fraud lawyer as soon as possible.
Speak with a Washington DC PPP Fraud Lawyer at Thorn Law Group
Our lawyers are available to speak with you if you have questions or concerns about facing federal PPP loan fraud allegations. To schedule a confidential initial consultation with a Washington DC PPP fraud lawyer, call Kevin E. Thorn, Managing Partner of Thorn Law Group at 202-349-4033 or contact us online today.