The Internal Revenue Service (IRS) continues to investigate, charge, and prosecute criminal cases against business owners who may have violated the law creating the Paycheck Protection Program (PPP) intended to help small and large companies weather the COVID-19 financial storm. The pace at which new criminal charges are being filed suggests that at least hundreds or even thousands of new criminal indictments will be issued in PPP fraud cases.
PPP fraud is believed to be the biggest financial fraud in history, with between $80 billion and $100 billion stolen.
If you received a PPP loan and think you may be under federal investigation by the IRS Criminal Investigation Unit, contact the experienced, board-certified criminal defense lawyers at Stechschulte Nell, Attorneys at Law in Tampa. Federal criminal investigations and prosecutions involve special rules and procedures you need to be aware of to make the most beneficial decisions.
What is Criminal PPP Fraud?
Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 29, 2020 to provide included about $350 billion in forgivable loans to businesses suffering massive economic losses because of the COVID-19 mandatory closings. The plan was called the Paycheck Protection Program (PPP).
Later, the government authorized another $321 billion dollars in related spending programs, including Pandemic Unemployment Assistance (PUA), Economic Injury Disaster Loans (EIDL), the Provider Relief Fund (PRF), Federal Pandemic Unemployment Compensation (FPUC), and Economic Impact Payments (EIP).
The PPP loans were intended to provide payroll funds to businesses to encourage them to keep their staff working rather than laying them off.
Businesses that complied with the requirements would be forgiven the loan. But a hastily constructed administrative infrastructure distributed payments with few quality controls and little due diligence.
Not surprisingly, billions of dollars were misappropriated by thousands of businesses and individuals who overstated the number of people they employed, collecting millions of dollars to which they were not entitled. Other honest but desperate small business owners signed up quickly and with little guidance from the Small Business Administration, often including incomplete or mistaken information or misunderstanding the PPP’s rules.
Dozens of schemes were used to violate the PPP law and are now being federally prosecuted, including:
- Obtaining PPP funds by misstating material facts;
- Falsifying information in filed requests for loan forgiveness;
- Applying for PPP loans from multiple lenders (loan stacking);
- Using PPP loans for improper or unapproved purposes;
- Providing false information during PPP loan audits and fraud investigations;
- Using false identification (identity theft) to obtain PPP loans.
PPP Fraud Criminal Prosecutions
Criminal indictments obtained by federal authorities in the Department of Justice and the IRS charge PPP fraud defendants with one or more of the following crimes carrying the corresponding penalties for each count:
- Bank Fraud — 18 U.S.C. § 1344 — up to 30 years in prison and a $1 million fine;
- Wire Fraud — 18 U.S.C. § 1343 — up to 20 years in prison and a fine; 30 yrs. and $1 mil. fine if during a presidentially declared disaster or emergency;
- Mail Fraud — 18 U.S.C. §1341 — up to 20 years in prison and a fine; 30 yrs. and $1 mil. fine if during a presidentially declared disaster or emergency;
- False Statements to a Federally Insured Bank — 15 U.S.C. § 645 — up to 10 years and a $50,000 fine, or up to 2 years and a $5,000 fine, depending on the nature of the false statement;
- False Statements — 18 U.S.C. §1001 — up to 5 years in prison and a fine.
Defenses to PPP Fraud Charges
When a person learns they are under investigation or think they may be indicted for any federal PPP fraud criminal offense, they must contact an experienced PPP criminal defense lawyer. Any delay in obtaining the best federal court criminal defense attorney can cause profound disadvantages for an accused person.
The PPP program was created in response to an urgent financial threat to the American economy. Because of the speed with which the system was organized, many PPP loan applicants were uncertain about the rules governing the details of the loan process.
Unless a loan applicant was represented by an attorney or a financial professional when they requested the loan, they often misunderstood the restricted purposes for which the money could be used. Some applicants paid personal debts, home mortgages, and other disallowed expenses without realizing they were violating the law.
To convict any defendant of a fraud-related offense, the government must prove beyond a reasonable doubt that the person acted with criminal intent. In law, we refer to that intent as “mens rea.” In other words, they must have a “guilty mind.”
No defendant can commit criminal fraud unintentionally or accidentally. As experienced criminal defense attorneys with years of experience successfully representing people accused of fraud, we at Stechschulte Nell know how to explain our client’s innocence to prosecutors and courts.
Successful criminal defenses to PPP fraud charges could include the following:
- Client did not intend to deceive or mislead the alleged victim,
- Client always acted in good faith, although they did make mistakes,
- The alleged inaccurate or untruthful statement did not involve a “material misrepresentation” that was significant enough to influence the decision to grant the client an advantage,
- The alleged victim suffered no financial loss,
- Client was not an ineligible loan recipient as alleged,
- Client was not the person who submitted the information (identity thief did it).
The defense of your PPP fraud charges will depend on the facts of your case, your circumstances, your background, and other particular factors we will use to oppose your prosecution.
Avoid PPP Fraud Criminal Prosecution Completely
Contacting a qualified, board-certified criminal defense lawyer as early as possible is your best defense against PPP fraud charges. When engaged early, an experienced PPP fraud defense lawyer will gather all of the pertinent documents and electronically stored information (ESI) that could clarify what occurred.
In many cases, sharing exculpatory information with federal prosecutors and IRS criminal investigators will shed enough good light on the events to discourage the government from pursuing an indictment. Instead, the federal government may opt to seek civil penalties because they do not believe they will prevail in a criminal prosecution during which they must prove guilt beyond a reasonable doubt.
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PPP Loan Fraud Defense
If you have questions or concerns about a possible PPP loan fraud investigation, contact us at Stechschulte Nell, Attorneys at Law in Tampa. We’re here to defend you.
Contact us today for a case review at 813-280-1244.