PPP Loan Fraud and the DOJ
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The U.S. Department of Justice (DOJ) is actively pursuing fraud investigations under the Paycheck Protection Program (PPP). It has already filed charges in multiple cases, and the business owners and executives charged in these cases are facing substantial penalties.
While the Paycheck Protection Program (PPP) was intended as a lifeline for struggling businesses that were not able to pay their employees due to the economic impacts of the COVID-19 crisis, it ultimately proved to be a prime target for fraud. Of the hundreds of millions of dollars in forgivable, federally-backed loans issued under the program, it is suspected that a substantial portion went to ineligible companies and individuals. It is also widely suspected that many PPP loan recipients have used their loans for ineligible business and personal expenses.
Due to these concerns, the U.S. Department of Justice (DOJ) is actively pursuing investigations seeking to uncover evidence of PPP loan fraud. When federal agents find evidence of fraud, the DOJ is issuing criminal complaints and pursuing charges for a broad range of federal offenses.
Are You Facing a DOJ Investigation for PPP Loan Fraud? Here’s What You Need to Know
Facing a U.S. Department of Justice investigation for PPP loan fraud is a serious matter that can have serious consequences for companies, their owners and executives, and others. If you or your company is being targeted in a PPP loan fraud investigation, here’s what you need to know:
1. The DOJ is Intent on Prosecuting Individuals and Companies for PPP Loan Fraud
Due to the substantial cost of Paycheck Protection Program loan fraud as well as the widespread publicity of fraud targeting the PPP, the DOJ is aggressively targeting individuals and companies suspected of submitting fraudulent loan applications and making unauthorized use of PPP loan funds. The DOJ is also targeting individuals and companies suspected of submitting fraudulent certifications for PPP loan forgiveness. As quoted in a recent DOJ press release, “The Paycheck Protection Program was designed to help Americans struggling with financial hardship during the pandemic. Our office will be aggressive in targeting anyone who defrauds this critical program”
2. The DOJ is Actively Pursuing Charges in Numerous PPP Loan Fraud Cases
The risk of facing a DOJ PPP loan fraud investigation is not theoretical—the DOJ has already filed charges in numerous cases. It has charged individuals with creating shell companies and falsifying payroll information in order to obtain PPP loans, using PPP loan funds to pay for lavish personal expenses, attempting to obtain multiple PPP loans, and various other forms of PPP loan fraud.
In addition to the cases in which charges have already been filed, the DOJ is continuing to pursue new investigations as well. At present, the DOJ is regularly issuing press releases announcing new criminal complaints for PPP loan fraud, and this means that it is actively conducting covert investigations focused on uncovering evidence of fraud. These efforts are nationwide in scope; and, to date, the DOJ has filed charges against defendants located in states including (but not limited to):
- Rhode Island
3. Allegations of PPP Loan Fraud Can Trigger Various Criminal Charges from the DOJ
If the DOJ uncovers evidence to support allegations of PPP loan fraud, this can lead to a broad range of federal charges. To date, the DOJ has filed criminal complaints including charges for:
- Aggravated Identity Theft (18 U.S.C. § 1028A)’
- Attempt and Conspiracy (18 U.S.C. § 371 and 18 U.S.C. § 1349)
- Bank Fraud (18 U.S.C. § 1344)
- False Claims Act Violations (31 U.S.C. §§ 3729 – 3733)
- Making False Statements to an FDIC-Insured Bank (18 U.S.C. § 1014)
- Making False Statements to Federal Agents (18 U.S.C. § 1001)’
- Making False Statements to the Small Business Administration (SBA) (18 U.S.C. § 1014)
- Tax Evasion (26 U.S.C. § 7201)
- Wire Fraud (18 U.S.C. § 1343)
All of these charges carry substantial fines and terms of imprisonment—in some cases up to $1 million and 30 years for a single offense. Individuals and companies charged with multiple offenses can face enormous risk, and defending against the DOJ’s allegations will require the representation of a group of highly-experienced federal defense lawyers. At Oberheiden P.C., our firm includes career defense lawyers, former federal prosecutors, and former federal agents who collectively offer our clients centuries of combined experience on both sides of high-states federal white-collar fraud investigations.
4. The DOJ is Working with Other Federal Law Enforcement Agencies to Target All Forms of PPP Loan Fraud
The DOJ is not acting alone in its effort to combat fraud under the Paycheck Protection Program. In fact, it is working with multiple other federal agencies that are all equally committed to identifying and prosecuting individuals and companies that have unlawfully taken advantage of the federally-backed, forgivable loans offered under the PPP. The other federal agencies that are working with the DOJ to investigate and prosecute PPP loan fraud include the U.S. Small Business Administration Office of Inspector General (SBA-OIG), Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Federal Bureau of Investigation (FBI), and Internal Revenue Service Criminal Investigations (IRS-CI).
5. There are Many Potential Defenses that Individuals and Companies Can Assert During DOJ PPP Loan Fraud Investigations
While the risks facing individuals and companies accused of PPP loan fraud by the DOJ are significant, there are also many potential defenses to allegations of PPP loan fraud. When representing clients accused of PPP loan fraud by the DOJ, our attorneys are relying on multiple defenses that are both specific to the Paycheck Protection Program and that apply based on the specific charges being put forward under the statutes listed above. For example, some of the types of defenses that individuals and companies can assert during DOJ PPP loan fraud investigations include:
- Paycheck Protection Program Compliance – The first line of defense for many individuals and companies will be to demonstrate compliance with the terms of the PPP. If your company lawfully obtained a PPP loan, established a segregated PPP loan account, and carefully documented the appropriate use of its PPP funds, then providing proof of compliance could lead to a fairly efficient resolution. However, when affirmatively providing information to the DOJ, companies need to be very careful. Once information has been volunteered, it cannot be taken back, and inadvertently disclosing incriminating information could enhance your (and your company’s) risk of prosecution for PPP loan fraud.
- Lack of Intent to Defraud – Generally speaking, criminal culpability at the federal level requires intent to defraud. If you inadvertently obtained a PPP loan despite being ineligible to do so, used PPP funds improperly, or submitted a fraudulent forgiveness certification, then your lack of intend could provide a defense to the charges listed above. However, unintentional fraud can still be prosecuted as a civil offense, and civil violations of the False Claims Act and other statutes can carry enormous fines, treble damages, loss of federal program eligibility, and other penalties.
- Unconstitutional Investigative Procedures – During PPP loan fraud investigations, the DOJ has an obligation to respect targeted individuals’ constitutional rights. While the DOJ has broad authority to conduct law enforcement investigations, and while it has a variety of investigative tools at its disposal, it must conduct its investigations within the constraints of the Fourth Amendment’s probable cause requirements and its prohibition on unreasonable searches and seizures. Our federal defense lawyers and former federal DOJ prosecutors can use their experience to identify any flaws in the DOJ’s investigation and use them to your advantage.
- Lack of Evidence of Fraud – Ultimately, targets’ and defendants’ level of risk in PPP loan fraud investigations comes down to the DOJ’s ability to prove their guilt beyond a reasonable doubt. If the DOJ does not have the evidence it needs to prove guilt (or if its evidence is inadmissible due to Fourth Amendment or other constitutional violations), then federal charges cannot be sustained. At Oberheiden P.C., we have had significant success demonstrating flaws in federal cases during investigations, grand jury proceedings, pre-trial proceedings, and trials, and we can use this experience to fight your PPP loan fraud charges at all stages of the federal criminal justice process.
Regardless of the circumstances involved, allegations of PPP loan fraud cannot be ignored, and PPP loan recipients must proactively assess their risk and take steps to mitigate it accordingly. Our firm’s practice is devoted to federal compliance and defense, and we are actively representing clients nationwide during the COVID-19 crisis. If you are under investigation or facing charges from the DOJ for PPP loan fraud, you do not have time to waste. At Oberheiden P.C., we can protect you, and we encourage you to contact us immediately so that we can start building your defense today.
Oberheiden P.C. | Nationwide Defense for DOJ Investigations and Criminal Complaints
Is the DOJ targeting you or your company with allegations of PPP loan fraud? To find out what defenses you have available, schedule a free case assessment with a federal defense attorney at Oberheiden P.C. Call 888-680-1745 or contact us online now and we will arrange for you to speak with one of our senior defense attorneys in confidence as soon as possible.