PPP Loan Fraud & Whistleblower Defense
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With concerns about widespread fraud under the Paycheck Protection Program (PPP), the federal government is calling upon whistleblowers to report their employers’ and other businesses’ misuse of PPP funds. Our firm is defending companies across the country in PPP loan fraud investigations.
If your company received a loan under the federal Paycheck Protection Program (PPP), it is facing risks on a number of different fronts. The U.S. Small Business Administration (SBA) is auditing PPP loan recipients pursuant to a directive from the U.S. Treasury Department, and the U.S. Department of Justice (DOJ) is actively pursuing investigations for PPP loan fraud. While the SBA is auditing all recipients of PPP loans of $2 million or greater and the DOJ is relying on information from the SBA, various other government sources, and potentially PPP lenders, these agencies are also relying on tips from whistleblowers.
Under federal law, whistleblowers who report fraud under federal government programs are entitled to receive a percentage of any amount the government recovers. This percentage can be as high as 30 percent under the False Claims Act (FCA), which is one of the primary statutes that the DOJ uses to prosecute government program fraud allegations. For a $2 million PPP loan, this potentially means that a whistleblower could receive up to $600,000 for doing little more than making a very generalized allegation of PPP application fraud, forgiveness certification fraud, or misuse of PPP funds.
Is Your Company Being Targeted with Allegations of PPP Loan Fraud?
If your company is being targeted with allegations of PPP loan fraud, defending against the whistleblower’s allegations will require a strategic defense that is tailored to the circumstances at hand. There are many aspects of whistleblower (qui tam) lawsuits that are different from federal inquiries triggered by other means, and PPP loan fraud allegations involve specific statutory and regulatory issues as well. The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains specific requirements for PPP loan application and forgiveness eligibility, and the SBA has provided additional mandatory guidance for companies applying for and receiving PPP loans. As a result, companies targeted in whistleblower complaints must tailor their defenses appropriately, and they must present these defenses effectively within the parameters of federal qui tam litigation.
At Oberheiden P.C., we are representing companies across the country in federal audits and investigations during the COVID-19 pandemic. This includes federal investigations triggered by whistleblower complaints. As defense counsel, our attorneys have an extensive track record of resolving qui tam lawsuits favorably for our clients; and, as former federal prosecutors and investigative agents, we have a clear understanding of how the government prosecutes whistleblower claims.
Whistleblower Defense Resources for PPP Loan Recipients
We have a well-established qui tam defense practice that encompasses all types of claims under the False Claims Act and other whistleblower statutes. As your company’s defense counsel, we will promptly and effectively intervene in the government’s investigation, and we will use the available evidence and any deficiencies in the whistleblower’s complaint to vigorously pursue a favorable result. The reality of whistleblower litigation is that relators’ allegations are often (though not always) flawed, and in many cases resolving the case without charges being filed is a matter of demonstrating to the DOJ that the expenditure of federal resources is unwarranted.
Our attorneys have written extensively on the topic of federal whistleblower defense for corporate entities. We encourage you to use the following resources to learn more about what we can do to protect your company:
- What Happens in a Federal Whistleblower Case Involving Allegations of PPP Loan Fraud? Federal whistleblower cases are unique from “ordinary” federal investigations in many respects, and executing an effective defense strategy requires a comprehensive understanding of the laws, procedures, and risks involved. Our general whistleblower (qui tam) defense page provides an overview of the process of successfully defending against whistleblower allegations.
- How Do You Dismiss a Whistleblower Case under the False Claims Act? Due to the unique nature of federal whistleblower cases, there are a number of ways that whistleblowers’ allegations can be successfully overcome. Our attorneys have significant experience in whistleblower cases under the FCA and other federal statutes, and we will work diligently to present a decisive case for dismissal.
- When Should a Company Settle a Whistleblower Complaint? In some cases, the most practical solution will be to settle a whistleblower complaint and avoid the risks of going to trial. However, settling a lawsuit involving the federal government is very different from settling a dispute between private parties, and there are special rules and mandatory terms that apply. With our attorneys’ experience in federal whistleblower cases, we can assess if and when it is in your company’s interests to pursue a settlement, and we can work to negotiate a favorable agreement on your company’s behalf.
- What Defense Strategies Can Companies Use to Overcome Whistleblower Allegations? Regardless of whether it makes sense to pursue a settlement or there are opportunities to fight for dismissal, achieving a favorable result requires the ability to build and execute an effective defense strategy. This strategy must be specifically tailored to the facts of your company’s PPP loan fraud case, and it must account for all potential issues and contingencies that may arise during the qui tam litigation process.
- What Constitutes a “False Claim” and When Can a Whistleblower Substantiate a Claim for PPP Loan Fraud? When facing whistleblower allegations in relation to your company’s application for PPP funds, use of PPP funds, or certification for PPP loan forgiveness, it is imperative to have a thorough understanding of what it takes for a whistleblower complaint to succeed. In this Q&A, founding attorney Nick Oberheiden, PhD discusses possible scenarios and explains why companies need to aggressively confront whistleblowers’ allegations of fraud.
PPP Loan Fraud Resources for Businesses
Established in March 2020, the PPP was intended as a lifeline for businesses that were struggling due to the economic impacts of the COVID-19 crisis. However, the language of the CARES Act left many questions unanswered, and it is now widely believed that many companies received PPP loans that did not actually qualify. Intentional fraud appears to have been an issue as well, and the DOJ is actively pursuing multiple cases against individuals and companies that are accused of knowingly attempting to take advantage of the PPP’s limited oversight.
The SBA’s auditing initiative and the DOJ’s focus on prosecuting PPP loan fraud are largely a result of these two factors. The volume of suspected fraud is also enticing many employees to file whistleblower complaints against their employers in hopes of securing relator compensation. For more information on the PPP’s requirements and the risks of facing PPP loan fraud allegations, we encourage you to read:
- Do You Know if Your Company is Complying with the Terms and Conditions of the PPP? When facing allegations of PPP loan fraud, one of the first steps your company must take is to determine whether it is in full compliance with the terms of the program, as established by the CARES Act. This includes full compliance with the application requirements, the requirements for use of PPP funds, and the eligibility criteria for loan forgiveness.
- What Types of Claims, Acts, and Practices Constitute “PPP Loan Fraud”? Already, the DOJ and SBA have identified several types of claims, acts, and practices that they are considering to constitute PPP loan fraud. Some of these are fairly obvious (i.e. fraudulently certifying that all PPP funds were used for authorized purposes in order to receive loan forgiveness), while others are not. Critically, both intentional and unintentional missteps can support fraud allegations, and companies must be prepared to defend against both types of allegations in whistleblower litigation.
- What are the Potential Consequences of a PPP Loan Fraud Investigation? The DOJ’s early prosecutions of individuals and companies accused of PPP loan fraud shed light on the types of penalties that are on the table in these cases. Federal prosecutors are pursuing a variety of different charges, and the penalties for these charges range from substantial fines to decades of federal imprisonment.
- Can Your Company’s PPP Lender Disclose Information During a Whistleblower Investigation? In addition to whistleblower complaints, one other source of information upon with the DOJ is relying is the issuance of subpoenas to PPP lenders. If the DOJ issues a subpoena to the bank that issued your company’s PPP loan, then the bank may be required to disclose information about your company’s application—including your company’s representations regarding PPP loan eligibility.
- What Should I Do If My Bank Freezes My PPP Loan Account? Some companies are having their PPP loan accounts frozen in connection with federal fraud investigations. If your company’s account is frozen – either before or after a whistleblower complaint is filed – this is likely to be indicative of federal prosecutors’ determination that there are grounds to pursue a PPP loan fraud case.
Contact the PPP Loan Fraud Defense Attorneys at Oberheiden P.C.
If your company facing a whistleblower complaint pertaining to the Paycheck Protection Program, or if you are concerned that your company could be at risk for allegations of PPP loan fraud, we encourage you to get in touch. To speak with one of our senior federal defense attorneys in confidence, call 888-680-1745 or request a complimentary initial consultation online now.