What to Do If Your Company Is Being Investigated for PPP Loan Fraud

Dr. Nick Oberheiden is a nationally recognized expert on PPP loan laws
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  • Most federal agency and SBA-initiated investigations are based on the company’s PPP loan application, though these authorities have also indicated their willingness to investigate how these funds are being used.
  • An investigation will typically begin with an audit by the SBA or an SEC/DOJ-led investigation.
  • To prepare for an impending investigation, it is critical that companies maintain thorough documentation of all major decisions made regarding the PPP loan process such as documentation on the company’s eligibility, employee count and payroll expenses, and all certifications.
  • Companies should also ensure that they maintain an accurate accounting as to how their PPP loan proceeds are being used.
  • Because of the constant updates, changes, and new guidances released regarding the PPP loan process, consider hiring competent counsel to guide you through these uncertainties and prepare for a federal investigation.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Gamal Abdel-Hafiz
Gamal Abdel-Hafiz

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Experienced PPP Loan Defense Team

If you are being investigated in connection with your PPP loan, it is time to contact an experienced defense attorney today.

Federal agencies and the SBA have announced their priority to open investigations into any company for allegedly engaging in PPP loan fraud. These investigations can damage your business and customer base as well as result in significant reputational harm.

At Oberheiden, P.C., our team of defense attorneys is experienced with the entire PPP loan process. We can begin preparing your defense and take immediate action to eliminate or mitigate various stages in the investigative process.

Our attorneys can advise you on federal charges and are prepared to litigate your case in court.

The stakes are high—PPP loan fraud can result in severe criminal penalties and jail time. Put Oberheiden, P.C. on your side today to fight for your liberty and reputation.

Introduction to Federal Investigations into PPP Loan Fraud

The DOJ and SBA have increased their policing efforts to uncover instances of PPP loan fraud. Such efforts have culminated in federal investigations into companies suspected of misusing their PPP loan proceeds or fraudulently obtaining their loans.

Most investigations are initiated based on information in the companies’ applications such as the number of employees, total monthly payroll costs, and nature of the company’s business.

Thus, while eligibility seems to be a priority for investigations, federal agencies have also expressed interest in investigating companies for misusing their loan proceed or for lying about their necessity for obtaining these SBA-guaranteed loans.

It is critical to understand when and if you are under investigation and then to secure access to competent and experienced counsel as soon as possible.

Initiating a Federal Investigation

An investigation into your company will typically begin by an audit or review by the SBA.

The SBA will generally request certain documents in order to determine whether the loan was proper, whether the company had the necessity for the loan, whether all statements in the loan application and loan forgiveness application were made in good faith, and whether loan forgiveness is appropriate.

The SBA may reach the conclusion that your PPP loan was proper, that you were ineligible to receive it, and/or that you obtained the loan by fraudulent means.

If the SBA concludes that you were ineligible for the loan, it may ask you to repay the entire balance by a specified date. If it determines that you fraudulently obtained the funds, it will generally refer your case to the DOJ for criminal prosecution.

Similarly, an investigation could also begin when a federal agency such as the SEC or DOJ decides to start investigating your company’s PPP loan. They may issue a grand jury subpoena as an initial step.

These agencies will likely request numerous documentation and interviews from your staff and employees. This is why it is critical to maintain proper and thorough documentation of all your decisions regarding eligibility, necessity, and use of your PPP funds.

What You Can Do Now

We understand that being the subject of a federal investigation can be a worrisome time.

We are committed to not only defending and litigating your case in court but also in preparing you for the initial stages of the investigation.

Below we provide a few helpful suggestions of what you can do now in preparation of an investigation:

  • Gather documentation demonstrating your eligibility for a PPP loan in light of all recent guidance from the SBA, including a list that documents the number of employees on your payroll and total monthly payroll expenses.
  • Make sure internal and public documentation is consistent with the certifications you provided in PPP loan application and the PPP loan forgiveness application. This includes making sure you can verify the accuracy of the statements made and that these statements were made in good faith.
  • Ensure that you have proper documentation to support the necessity requirement for the PPP loan and documentation that demonstrates that you were unable to obtain capital from alternative sources.
  • The government is especially scrutinizing companies who retained their PPP funds after the safe harbor deadline. Be sure you can explain why you retained the funds passed the deadline and ensure that there is proper documentation.
  • Make sure that there is an easy-to-follow—preferably in a separate account—accounting of PPP fund allocations. This will make it simpler to demonstrate that the funds are being used for eligible purposes over the covered period. Proper and thorough accounting in this respect will similarly show that you are eligible for loan forgiveness. It will also make a possible audit by the SBA proceed very smoothly and timely.
  • Have and maintain strong internal controls. This includes making sure that management, the Board of Directors (if applicable), and all employees are fully informed that the company received a PPP loan and is actively monitoring compliance and engaged in oversight as to how the funds are used.
  • Hire competent legal counsel as soon as possible. As shown, the SBA is constantly releasing new guidance on the PPP loan process. It is understandably hard to keep up with every new rule or guidance released. Counsel can help you stay abreast of such changes as early as possible and keep you informed of the federal investigative process.

Do not worry if you are unable to find documentation for all the above categories.

We are here to help you. Gather as much information as you can and then contact our office to proceed with the next steps.

Additional Implications of a Federal Investigation

Companies should never forget that any statements they may make to federal agents can be used against them in future enforcement proceedings. Never divulge any information without having your attorney present.

In addition to possible enforcement proceedings by federal agencies and the SBA, it is also possible for private individuals to initiate proceedings as whistleblowers under the False Claims Act—which carries very harsh penalties.

Congress could also be involved in the investigative process and has the subpoena power to investigate companies suspected of engaging in PPP loan fraud.

On March 20, 2020, the Attorney General Barr directed all U.S. Attorneys “to prioritize the investigation and prosecution of Coronavirus-related fraud schemes.”

Therefore, the risk that investigations may transform into criminal prosecutions is increasing, making the need for a PPP loan attorney a critical step in your defense.

Need Advice Regarding What to Do If Your Company Is Being Investigated for PPP Loan Fraud?

The PPP loan process was intended to provide immediate assistance to businesses suffering from the economic uncertainty created by COVID-19. However, the federal government has in recent weeks sought to scare companies into believing that they should not have applied and received these emergency loans.

Agencies such as the DOJ have already prosecuted individuals and companies who have allegedly misused their funds or fraudulently obtained their PPP loan proceeds.

If you are anxious about your PPP loan or are under investigation, it is time to contact a PPP loan defense attorney.

At Oberheiden, P.C., we have an experienced group of PPP loan defense attorneys poised to defend you against an impending investigation.

We can counsel you on evolving questions, prepare a personalized defense strategy, and fight for your freedom and reputation.

Let us help you. Call 888-680-1745 or contact our office for a free consultation with our PPP loan defense team.

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