Over the course of the COVID-19 pandemic in 2020, the federal government created various programs to help businesses, particularly small and family-owned operations, stay afloat. One of those initiatives was the Paycheck Protection Program (“PPP”). To an effort to limit the amount of fraud, the government established strict eligibility requirements and restrictions on how the money may be used. Failure to follow these rules, even unintentionally, could result in someone being the target of a Department of Justice (DOJ) criminal investigation.
The white collar criminal defense attorneys of Griffin Durham Tanner & Clarkson LLC represent individuals and businesses that have been accused of defrauding the federal government. If you received a Covid-19 relief loan through the PPP or Small Business Administration and are facing fraud allegations, our dedicated team can help.
The Basics Of The Paycheck Protection Program
The Paycheck Protection Program, or PPP, provided loans through the Small Business Administration (“SBA”) to companies facing financial distress because of Covid-19. More specifically, PPP loans were designed to help employers maintain payroll, hire employees who had been laid off, and cover certain types of overhead expenses.
The PPP provided up to eight weeks of payroll costs, including benefits, and paid for other expenses such as:
- Mortgage interest
- Covid-19-related worker protection costs
- Uninsured property damage costs related to looting or vandalism during 2020
- Certain supplier and operations expenses
Eligible companies included the following:
- Sole proprietors, independent contractors, and self-employed individuals
- Small businesses that meet certain SBA’s size standards
- Any business, non-profit organization, veterans organization, or tribal business with the greater of 500 employees, or that meets the SBA industry size standard if more than 500 employees
- Certain businesses in the accommodations and food services industries
The program ended on May 31, 2021; however, in certain circumstances, these loans can be forgiven.
What Are The Requirements For Loan Forgiveness?
A borrower can apply for loan forgiveness once all PPP funds have been exhausted. Borrowers are allowed to apply up to the maturity date of the loan. To apply, the following criteria must be met:
- Employee and compensation levels must be maintained;
- The funds must be spent on eligible expenses, including payroll;
- At least 60% of funds must be spent on payroll
Certain paperwork must be filled out and documentation provided. The SBA maintains forms and detailed instructions concerning loan forgiveness on its website.
Why Are Some Borrowers Being Investigated For Paycheck Protection Fraud?
Since the launch of the PPP, the DOJ has had a laser focus on identifying alleged wrongdoing. Over the past year, DOJ has aggressively pursued paycheck protection program fraud charges against well over 100 defendants in at least 70 criminal cases. Investigators has recovered at least $65 million in cash as well as property and luxury items fraudulently purchased with funds. Charges filed cover an array of conduct such as:
- Business owners who inflated their payroll expenses to obtain larger loans than they qualified for
- Reviving dormant corporations and purchasing shell companies with no real operations to apply for multiple loans
- Submitting identical loan applications and supporting documents under the names of different companies
- Spending loan proceeds on prohibited items such as houses, cars, jewelry, and other luxuries
- Using stolen and fictitious identities and sham companies to secure loans
- Money laundering through a web of bank accounts to make improper purchases
- Bank fraud, wire fraud, and mail fraud
Because the loan forgiveness process is ongoing, it is expected that DOJ action will also focus on borrowers who fraudulently request forgiveness by falsely certifying that they complied with the criteria listed above. Therefore, a defendant could have legitimately applied for and used PPP funds, yet failed the requirements for forgiveness and applied for it anyway. That is where the DOJ action could be directed for that particular defendant.
If convicted of paycheck protection program fraud, a defendant could face significant jail time, heavy fines, and restitution for funds improperly obtained.
How Our Defense Team Can Help
If the SBA believes that someone has procured or used PPP funds fraudulently, or fraudulently applied for loan forgiveness, it will refer the matter to the DOJ. The DOJ has made it clear it will continue to investigate and bring charges against individuals and businesses suspected of criminal conduct involving PPP funds. If you’ve been notified that you are the subject of a criminal investigation, these are some critical steps you must take:
- Document everything you can relate to your application for PPP funds, including the supporting records
- Document how the money was spent to show that inappropriate purchases were not made
- Review the loan forgiveness requirements and ensure you complied with them
- Retain a skilled white collar criminal defense attorney who has experience with allegations concerning SBA and PPP loan fraud
One of the most important steps that you must take is to not speak with any officials or agents of the DOJ or SBA, and to instead exercise your right to obtain legal counsel. Any information you provide to the government could be used against you.
Considering how broad the DOJ’s campaign is to crack down on PPP fraud, there’s a good chance that numerous individuals and businesses who did nothing wrong will still be suspected of fraud. Your attorney should understand the nature of the criminal allegations being made against you, along with the specific requirements of the PPP.
Contact Our Small Business Administration And Covid-19 Fraud Defense Attorney
Federal criminal investigations are serious, and they demand the serious legal representation that our law firm provides. We will investigate the charges against you, track down supporting documentation related to your application and expenditures, and advise you of your legal rights.
If you’ve been accused of Payment Protection Program or SBA loan fraud, let Griffin Durham Tanner & Clarkson LLC go to work for you today. Give us a call to schedule your confidential consultation.