The Paycheck Protection Program was rolled out in 2020 as a direct response to the job loss and economic hurdles caused by the COVID-19 pandemic. The program provides financial assistance to small businesses in the form of a forgivable loan for eight weeks of expenses such as payroll and rent. In order to receive this money, it was mandated that a company must maintain payroll during the pandemic.

The Small Business Administration (SBA) who was tasked with distributing these loans outsourced to other money lenders – like banks – to help provide the funds, while other private sector companies aided with administration. The requirements to get the loans, which were at first quite strict, were gradually reduced. As a result – and due to the large sums of some loans – fraudulent claims began to run rampant.

While the act has certainly helped small business during a time of need, there are others who have taken serious advantage of the system for personal gain. As of October 2020, the U.S. Justice Department criminally charged more than sixty different individuals with PPP-related fraud for a combined total of more than $220 million in fraudulent funds.

This includes four Arizona residents who were brought up on charges of conspiracy, money laundering, and wire fraud among others. These individuals attempted to submit 15 different false claims which, if successful, would have accumulated more than $3 million in fraudulent loans.

Cases spiked with a record-breaking number in September 2020, with a total of 19 reported fraud cases.

PPP Loan Fraud Cases

Primarily, there are two “main” or “trending” types of crimes when it comes to these fraud cases. The first category includes individuals or small business representatives who lied on their application form in order to misrepresent the business itself (i.e. that it exists), the number of active employees at a business, etc., and use this money to make personal purchases. The second category is PPP fraud committed by organized crime bodies.

As a direct result of the rise of PPP fraud, Congress developed a subcommittee in order to review loan data and any mysterious, flagged claims. This included cross-referencing loan applications with companies identified in the government’s Federal Awardee Performance and Integrity Information System (FAPIIS) and System for Award Management (SAM) databases, which track information consistency and misconduct.

Fraudulent information such as inconsistencies with business addresses, companies created after the implementation of the PPP in February 2020, and a lack of information about the borrower are all flagged for review. New investigations regarding PPP fraud are a combined effort from numerous entities throughout the federal and state governments. Big investigative players include the U.S. Secret Service as well as non-government entities such as private banks who are cracking down on PPP loan audits.

And fraudsters aren’t just falsely applying for loans, either. Now they’re going straight to the source – small businesses. In order to combat false phishing schemes with fraudsters acting under the guise of representing the Small Business Administration (SBA), the Office of Inspector General released helpful information to assist small businesses in protecting themselves from scammers.

Consequences of PPP Fraud in Arizona

To be clear: PPP fraud is a federal offense. This means that you can be charged on a federal level. Maximum penalties include a whopping $1 million in fines and 30-year prison sentence. The Department of Justice is using previously-established statutes to prosecute these crimes, so depending upon the circumstances of each individual case, this fraud can be broken down and defined in different ways, such as federal bank fraud or wire fraud.

Offenders under the age of 18? They’re going to be facing the same severity of charges as an adult.

Another piece of legislation that may be used by federal prosecutors is the False Claims Act (FCA), which allows charges to be drawn on both criminal and civil levels. The DOJ can utilize the FCA in order to pursue charges for anyone committing fraud with federal benefit programs of any kind. Fines under this legislation can amount to more than $23,000 with liability costs and legal fees going well above this number. Those found guilty of fraud will also be excluded from any future participation in federal aid programs. Depending upon the severity of the case, the guilty party may also face prison time.

Because the FCA does have the potential of carrying both criminal and civil prosecution, it’s important for individuals and business owners alike to remember that “lack of intent” may not be a sufficient defense. Carefully analyze your particular situation and the facts and circumstances that you can use to build a suitable defense strategy. Simply relying on “I didn’t mean to” is not enough.

But what about the specific types of charges that can be brought against you when it comes to PPP fraud? Of course, everything depends on your specific case and how exactly the fraud was committed. Among the charges that have been brought against PPP fraudsters already, bank fraud, wire fraud, mail fraud, and identity theft have all been included. Each of these charges alone carries a maximum sentence of 20 to 30 years in prison and up to $1 million in fines. Identity theft also carries a minimum sentence of two years in prison.

Not a U.S. citizen? Individuals who are found to be guilty of committing PPP fraud can expect to be deported from the United States with removal proceedings beginning immediately.

Defending Against PPP Fraud Accusations and Protecting Your Rights

The most common defense against PPP fraud – and one that is, quite frankly, often misused – is lack of intent. Perhaps you accidentally misrepresented yourself or your business on your loan application; you did not intend to commit a crime. Remember – as one of the most common defense strategies, legislation (such as the ability to prosecute on a civil level) is in place to combat this. Make sure you strategize with your lawyer to come up with a defense plan that is specifically curated to your situation and needs.

Another common defense is the explanation that the PPP loan funds were used for legitimate business purposes. The misuse of PPP funds is something that has raised a lot of red flags and garnered a lot of attention throughout the United States – government prosecutors are eager to convict guilty parties and set an example – so it is more important than ever that you present a solid defense for the legitimacy of these expenditures.

If you are being audited or charged for PPP fraud, contact a criminal law attorney immediately. In order to build a solid defense, you need someone who is not just familiar, but highly experienced in criminal law; specifically, with laws pertaining to all manner of fraud. Guilty or innocent, you need someone to protect your rights, and that is what criminal attorneys are here to do.

Unsure about your next steps? Reach out to our team of experienced criminal law attorneys and schedule a consultation today. We’ll walk you through your options and guide you toward the right defense strategy for you.