Which Federal Agencies Investigate PPP Loan Fraud?


 Which federal agencies investigate P.P.P. Loan Fraud? The knowledgeable attorneys from Scrofano Law P.C. answer this and more. Call us for an appointment today!

PPP Loan Fraud Investigated by These Federal Agencies

In March 2020, Congress approved a $2.2 trillion COVID-19 economic relief bill. CARES, or the Coronavirus Aid, Relief, and Economic Security Act, was enacted to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic Social Distancing Law which resulted in many businesses closing their doors and laying off employees.

The government offered a $349 billion Paycheck Protection Program (PPP) aimed at helping businesses remain competitive throughout the Coronavirus pandemic by providing them with financial assistance. This program was designed to help self-employed workers, sole proprietors, nonprofit organizations, and tribal businesses continue to pay their employees.

The PPP loan amounts were determined by the average payroll cost and the number of employees. PPP loan recipients had to use 60% of their loan to cover payroll expenses. The remaining 40% could be used to cover rent, utilities, and mortgage interest.

Additionally, businesses that retained their workforce, maintained every employee’s salary, and covered their business expenses were eligible for paycheck protection loan forgiveness.

Some businesses and individuals took advantage of the government during this national disaster by obtaining an economic injury disaster loan fraudulently, using the funds for non-business purposes, and receiving loan forgiveness. 

What Is PPP Loan Fraud?


PPP fraud occurred in the following ways:

  • Individuals or businesses provided inaccurate information when applying for Federal Paycheck Protection Program loans.

  • Business owners inflated their payroll expenses to obtain larger loans.

  • The business submitted several PPP loan applications to various lenders.

  • Some businesses and individuals revived dormant companies or purchased shell companies so they could apply for loans under multiple names.

  • Individuals used the proceeds of the loans for purposes not permitted under the program, such as purchasing houses, luxury cars, securities, jewelry, etc.

By late 2021, over $569 million in PPP loans were identified as fraudulent by the U.S. Department of Justice Criminal Fraud Division.

In August 2022, Congress passed the PPP and Bank Fraud Enforcement harmonization Act, establishing a ten-year statute of limitations for fraud cases under the Paycheck Protection Program.


What Are the Charges for PPP Loan Fraud?


Although the CARES Act is not a penal statute and has no criminal enforcement provisions, PPP loan fraud may still be prosecuted. Borrowers can be prosecuted on federal fraud charges for fraudulently procuring or seeking forgiveness for PPP loans under a variety of criminal statutes, including the following: 

  • Bank fraud

  • Wire fraud

  • Mail fraud

  • Tax evasion

  • Identity fraud, identity theft, or aggravated identity theft

  • Computer fraud

  • Lying to federal agents

  • Submitting False Statements to a Financial Institution under the False Claims Act

What Federal Agencies Investigate PPP Loan Fraud?


Currently, four federal agencies are investigating PPP loan fraud: the SBA Office of Inspector General (SBA-OIG), the Federal Bureau of Investigation (FBI), the US Department of Justice (DOJ), and the Internal Revenue Service (IRS).

  • The Small Business Administration Office (SBA) of the Inspector General is auditing and investigates any SBA PPP loans issued.
  • The Federal Bureau of Investigation (FBI), which conducts all types of federal fraud investigationsis targeting anyone who submitted false information or fraudulent documentation to support their PPP loan application or used the PPP loan funds for unlawful purposes.
  • The Department of Justice Criminal Division’s fraud section files cases against business owners or individuals that fraudulently applied for and received PPP funds.
  • The Internal Revenue Service (IRS) Criminal Investigation Unit is flagging individuals and businesses suspected of tax fraud.

The primary focus of PPP loan fraud investigations is to determine if charges should be brought against an individual or business for violating one or more of the PPP loan program requirements set by the federal government.

The agencies typically collect evidence through subpoenas, criminal complaints, and other means and prepare cases based on a variety of different charges. Federal authorities have also frozen companies’ PPP loan accounts to determine whether the businesses obtained the loans unlawfully or are misusing them.

How Are Businesses Flagged for PPP Fraud Investigations?


Generally, federal prosecutors have been targeting businesses and individuals who may have violated the PPP loan program by:

  • Making false statements on the PPP loan application

  • Submitting applications for PPP program loans from multiple lenders (also known as stacking loans)

  • Using PPP loan funds for an unauthorized transaction

  • Money laundering

  • Submitting false certifications for forgiveness of the PPP loan

  • Lying to agents during a PPP loan audit or investigation

Knowing which agencies are involved in a PPP loan fraud investigation, what they’re looking for, and their procedures will result in a successful defense strategy. Therefore, critical that you contact DC Fraud attorney as soon as possible.


How Do you know if your PPP loan is being investigated?


Generally, if you are flagged for PPP fraud, you will be contacted by a federal agent from a law enforcement agency or other federal authorities regarding your loan under the CARES Act. Your bank might also inform you that your bank accounts have been frozen or seized as part of investigations into PPP Loan fraud.

It’s important not to panic. Instead, contact an experienced white-collar crimes attorney as soon as possible to help you resolve the issue without incurring federal charges.

To help build your defense against PPP fraud, you can do the following:

  1. Gather your business and personal financial records and make digital copies. You will need these documents to prove that loan application was aboveboard.
  2. Do not throw away, shred, or destroy any documents related to business expenses. Destroying any vital document to avoid a PPP loan fraud investigation would lead to a separate criminal charge.

How Can a DC Criminal Lawyer Help You?


DC criminal lawyer will help you understand your rights and responsibilities and guide you through the criminal justice process. They can:

  • Assist you in gathering and preserving business documents that could support the CARES Act loan or the use of the funds received.

  • Interview any CPA, accountant, or financial advisor that you consulted when applying for the loan.

  • Interview employees who might be able to justify payroll costs and the need for the loan or use of funds.

  • Present all available arguments for mitigation or mistake to the government agents, investigators, law enforcement partners, or the prosecutor.

  • Structure and propose payback or other resolution of the matter, if appropriate.

It can be stressful and intimidating to be arrested and charged with a federal criminal offense in Washington, DC. A criminal defense lawyer who is knowledgeable and experienced can help you fight for a favorable outcome in court and negotiate a plea bargain, if necessary.

If you are convicted of federal fraud, you may face severe penalties, including jail time. So make sure you speak with a skilled federal defense lawyer from Scrofano Law as soon as possible.

As a criminal defense law firm in Washington, DC, Scrofano Law, PC represents clients in the District of Columbia, Maryland, and Virginia. Our goal is to provide you with the highest quality legal representation and communicate with you throughout the entire legal process so you can focus on what matters most: regaining freedom, your future, and your reputation.

Contact us for a confidential case evaluation with one of our experienced attorneys. 


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