The economic impact of the COVID-19 pandemic has been disastrous for small businesses throughout Georgia. To combat the financial harms caused by this global disaster, the federal government created a fund to assist small businesses to recoup economic losses sustained as a result of the virus. Administered by the Small Business Administration (SBA), the fund includes several types of assistance available to small businesses. However, the eligibility and requirements for obtaining and using these funds can be tricky. Failure to meet all criteria may result in suspicion of fraud. If the Small Business Administration alleges you or your business engaged in fraud when seeking or applying for COVID-19 economic assistance, the Georgia white-collar criminal defense team at Griffin Durham Tanner & Clarkson can assist you.
Recognizing the impact of COVID-19 on small businesses and individuals, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020 and the American Rescue Plan Act (ARPA), which each designated trillions of dollars to deal with the economic fallout of the virus. CARES and ARPA spurred the creation of several programs that allow small businesses to apply for financial assistance. These programs, administered by the SBA, include the Paycheck Protection Program, the Economic Injury Disaster Loan Program, the Shuttered Venue Operators Grant, and the Restaurant Revitalization Fund.
Paycheck Protection Program (PPP)
The PPP is a loan program designed to incentivize small businesses to keep employees on the payroll. PPP loans may be forgiven. This means that they are not required to be repaid if borrowers meet loan forgiveness requirements. Requirements for loan forgiveness include maintaining employee and compensation levels and using the loan proceeds on payroll and related expenses.
Economic Injury Disaster Loan (EIDL) Program
The EIDL Program is designed to assist small businesses and sole proprietors meet financial obligations and expenses that are struggling due to the COVID-19 pandemic. EIDLs are expected to be used for the normal operating expenses of a business. Early on, the EIDL Program included loans as well as advances that did not have to be repaid. Funding for advances has been exhausted, but businesses are still eligible to obtain loans to help cover operating expenses.
Shuttered Venue Operators Grant (SVOG)
The SVOG is a program with over $16 billion dedicated to assisting live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, movie theater operators, and talent representatives. Businesses or nonprofits are eligible for grants of the lesser of 45% of their gross earned revenue or $10 million dollars. These grants do not have to be repaid.
Restaurant Revitalization Fund (RRF)
The RRF is a fund established to assist restaurants and bars keep the doors open. The RRF provides restaurants with funding equal to their pandemic-related revenue losses, up to $10 million per business. Restaurants and bars are not required to repay the funding as long as the funds are used for eligible expenses before March 11, 2023.
Allegations of Small Business Administration Fraud
The eligibility requirements and use of funds for the COVID-19 economic relief packages are very specific. If the SBA believes or is informed that a business was not eligible for aid or made improper use of aid, the administration will refer the matter to the Department of Justice. As announced on May 26, 2021, DOJ has already started widespread crackdowns on conduct it believes to be fraud. The Department of Justice has the authority to bring federal criminal charges against those who allegedly obtained funds from the SBA through fraud or misrepresentation or improperly utilized SBA funds.
The Department of Justice hopes to make examples of people or businesses that improperly applied for and used economic relief funds to discourage such practices. To date, the Department of Justice has charged over 120 defendants with fraud related to PPP loans and continues to focus on fraud related to other SBA funding under CARES and ARPA.
Consequences of being found guilty of such fraud include jail time, fines, and restitution of improperly obtained funds.
How to Avoid Criminal Investigation
The best way to avoid being investigated for fraud related to Small Business Administration funding is to apply for funding in good faith. You must keep detailed records related to funding applications to support the factual assertions made in the application. You also must use the funds consistent with the program requirements. That way, should there be any question as to whether expenses were covered under CARES or ARPA, you can substantiate your use of any funds.
If You are Accused of SBA Funding Fraud, Contact Us Now
If you are accused of defrauding the SBA in relation to COVID-19 relief funds, it is imperative that you speak to an attorney with experience in federal cases and white-collar criminal defense. Federal investigations are serious matters, and you need an attorney who has navigated the federal criminal justice system on your side. At Griffin Durham Tanner & Clarkson, we have years of experience prosecuting and investigating these cases and experience representing criminal defendants.