PPP Fraud: Forgiveness Issues Leading to Investigations

Fraudulent PPP Loan Forgiveness Certifications Can Lead to Serious Federal Charges

Loans issued under the federal Paycheck Protection Program (PPP) came with an obligation of repayment. However, PPP loan recipients could avoid repayment liability by using their loan proceeds for authorized business expenses and submitting a loan forgiveness certification.

While many businesses that received PPP loans have been able to have their loans forgiven, some have struggled to avoid repayment liability. This is due, in part, to widespread fraud under the PPP. Federal authorities are now scrutinizing recipients’ loan applications and forgiveness certifications, and, in many cases, this scrutiny is leading not only to denial of forgiveness but also to serious criminal charges.

Issues that Can Lead to PPP Loan Forgiveness Fraud Investigations and Charges

The CARES Act established several eligibility criteria for PPP loan forgiveness. To obtain forgiveness, PPP loan recipients must have satisfied all of these criteria, and they must certify to compliance with the Paycheck Protection Program’s terms. This certification is submitted under penalty of perjury, so business owners and others who sign these certifications must be absolutely certain of their eligibility

Several issues can make PPP loans ineligible for forgiveness. Currently, the U.S. Department of Justice (DOJ) and other federal authorities are scrutinizing PPP loan recipients’ certification requests for issues such as:

  • PPP Loan Ineligibility – Individuals and businesses that received PPP loans despite being ineligible are not eligible for loan forgiveness.
  • Use of PPP Loan Funds for Ineligible Expenses – To qualify for loan forgiveness, PPP recipients must have only used their loan proceeds for eligible business expenses.
  • Knowingly Submitting a False Forgiveness Certification – Knowingly submitting a false forgiveness certification (i.e., with the knowledge that your business used PPP loan funds for ineligible purposes) is a clear form of fraud.
  • Submitting a Forgiveness Certification Without Documentation of Eligibility – Certifying for loan forgiveness requires an affirmative representation that the recipient has complied with all terms of the PPP.

What to Expect During a PPP Loan Forgiveness Fraud Investigation

When investigating cases of possible PPP loan forgiveness fraud, the DOJ and other federal authorities are carefully scrutinizing loan recipients’ application forms, supporting documentation and loan forgiveness certifications. They are also issuing subpoenas, executing search warrants and using other investigative tools and tactics to gather the evidence needed to substantiate criminal charges. These investigations are moving quickly in many cases, and PPP loan recipients targeted in these investigations must be prepared to defend themselves effectively.

While facing serious criminal charges is a very real possibility, PPP loan recipients that engage experienced defense counsel may be able to resolve their cases during the investigative stage without charges being filed. This substantially mitigates the risks involved, and it also avoids the negative publicity of facing a federal criminal trial.

Speak with a DOJ Criminal Tax Lawyer at Thorn Law Group

If you have questions or concerns about facing a PPP loan forgiveness fraud investigation, we encourage you to contact us for more information. To speak with a DOJ criminal tax lawyer in confidence, call Kevin E. Thorn, Managing Partner of Thorn Law Group at 202-349-4033 or contact us confidentially online now. 

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