On March 29, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The Paycheck Protection Program (PPP) was created within the Act and funded with $349 billion. For some qualified small firms, individuals, and nonprofit organizations, PPP offered fully guaranteed SBA loans that may be forgiven if the loan’s funds were used appropriately under the law. Payroll, rent, utility bills, and some other expenses are all considered eligible costs. The program’s funding was eventually enhanced to $813.17 billion and the SBA continued accepting applications until May 31, 2021. 

The federal government has investigated an unprecedented quantity of fraud reports from numerous sources since the program's inception. Several law enforcement agencies have discovered widespread patterns of possible fraud, including forged signatures on loan documents, inflated wages, fabricated tax returns, identity theft, and improper use of funds. According to the data from the SBA loan reports, over 70,000 potentially fraudulent PPP loans amounting to more than $4.6 billion have been identified. The federal government has already been successful in obtaining numerous convictions, lengthy prison sentences, fines, restitution, and forfeiture of assets from numerous individuals across the country.  

What is a PPP Loan? 

The PPP loan was created to aid small businesses that were severely impacted by the Covid 19 pandemic. Many businesses suffered financially when several states shut down. The PPP loan aimed at keeping businesses operational. The loan had certain eligibility requirements that had to be met to apply. This included ensuring the type of small business structure for strictly private companies and requiring applicants to provide tax returns, payroll returns, and certain corporate documents. Once an application was approved and the funds were dispersed to the business’ bank account, debt forgiveness on the loan was available if the PPP funds were used in accordance with SBA requirements. The loan covered certain business costs such as payroll, rent and utility payments, operational expenses, and many other costs associated with the operation of a business. 

What is PPP Loan Fraud? 

You could be under investigation for PPP loan fraud if you provided false or fabricated documentation or misrepresented your income or other information on a PPP loan application. Depending on the specifics of your case, PPP loan fraud may give rise to several federal criminal offenses, including bank fraud, wire fraud, mail fraud, and identity theft.

Types of PPP Loan Fraud

You may face charges for a number of federal financial crimes if you are under investigation for PPP loan fraud. These crimes may consist of:

1. Bank Fraud– Bank Fraud involves attempting or engaging in a scheme to defraud a federally insured financial institution. Since all PPP loan applications had to be processed through a qualified bank, bank fraud could be a potential charge if a fact was misrepresented or false supporting documentation was submitted. 
2. Wire Fraud – Wire Fraud involves attempting or engaging in a scheme to defraud an individual or entity of money using wire, radio, or television communication that affects interstate commerce. Any PPP loan fraud inquiry would probably lead to wire fraud as PPP loans are serviced by wire transfers from the SBA to the borrower's bank account. 
3. Mail Fraud – Mail Fraud involves attempting or engaging in a scheme to defraud an individual or entity of money using the United States Postal Service. A person may be prosecuted with mail fraud if they utilized the mail to provide fraudulent documentation to their lender or to the SBA in support of their PPP loan application. 
4. Identity Theft– Identity Theft involves unlawfully using another individual’s identity in furtherance of a crime. A person may be prosecuted with identity theft if they applied for a PPP loan using someone’s identity and not their own. 
5. Money Laundering– Money laundering involves the transferring of money through a series of transactions to make it appear legitimate while hiding the proceeds of unlawful activities. 
6. False Statements to Financial Institution – Similar to Bank Fraud, this crime involves knowingly making a false statement to a federally insured bank. Any person that misrepresents facts on a PPP loan application, can be charged with False Statements to Financial Institution. 

Who Investigates PPP Loan Fraud? 

PPP Loan Fraud can be investigated by a number of federal agencies including, but not limited to, the Federal Bureau of Investigations (FBI), the Office of the Inspector General (OIG), U.S. Department of Justice (DOJ), and the Internal Revenue Service (IRS).

What are the possible penalties for PPP Loan Fraud?

Each of the criminal charges above carries serious potential consequences.

1. Bank Fraud – Punishable by up to 30 years in a federal prison and a $1,000,000 fine.
2. Wire Fraud –Punishable by up to 30 years in a federal prison and a $1,000,000 fine.
3. Mail Fraud – Punishable by up to 30 years in a federal prison and a $1,000,000 fine.
4. Identity Theft – Punishable by up to 30 years in a federal prison and a $1,000,000 fine. The crime can also be punishable by a minimum mandatory sentence of 2 years which will run consecutively to any other conviction. 
5. Money Laundering – Punishable by up to 20 years in a federal prison and up to a $500,000 fine or twice the value of the proceeds. 
6. False Statements to Financial Institutions – Punishable by up to 30 years in prison and a $1,000,000 fine. 

If the defendant is not a citizen of the United States, a conviction for any of these criminal crimes might result in deportation proceedings in addition to the previously mentioned punishments.

What are possible defenses to PPP Loan Fraud?

An arrest to a crime does not always result in a conviction. If you, or someone you know, is arrested for any of the crimes related to PPP loan fraud, they may have several defenses available to them.

Lack of Knowledge or Intent – You may have a defense of lack knowledge or intent if you unknowingly provided incorrect information on a PPP loan application. Most crimes related to PPP loan fraud require the government to prove you intentionally or knowingly misrepresented a fact or falsified a document on the application.  This situation could arise if you relied on a 3^rd party to apply for a PPP loan on your behalf or you genuinely made an honest mistake as to the facts on your PPP loan application. 

PPP Loan Used for Legitimate Purposes – If the government is not accusing you of misrepresenting facts on your application, but instead accusing you of misusing funds, you may have a defense against PPP loan fraud if you can prove the proceeds from the loan were used for a legitimate purposes under the CARES Act. According to the PPP loan requirements, every person who submitted a PPP loan application had to attest that the monetary aid would be utilized for "business-related" costs which included payroll, rent, utilities, and “covered operations expenditures”.  It could be argued that some of these terms are vague and that your use of your PPP loan falls under one of the authorized uses under the regulations.   

Identity – In every criminal case, the federal government must prove that you are the person who committed the crime. In the majority of PPP loan applications, the applicant submits the application and accompanying materials online without ever visiting a bank or speaking with someone from the SBA. As a result, the government will often rely on circumstantial evidence to establish your identity as the applicant and recipient of the funds. You may have a potential defense if the prosecution does not have circumstantial evidence that proves beyond a reasonable doubt that you were the one that committed the crime.

Find an Attorney for PPP Loan Fraud in Miami, FL

If you are being investigated or have been charged for any crime related to PPP Loan Fraud in Miami, FL, you will need an experienced and aggressive criminal defense attorney for representation. The crimes associated with PPP loan fraud have serious consequences and your liberty could be at stake.

E.J. Hubbs has experience as both a criminal defense attorney and as a former prosecutor. With over 10,000 criminal cases in his career, he has the experience necessary to give you the best chance to get a favorable result. In addition, he is Board Certified in Criminal Trial Law by the Florida Bar; an honor held by less than 1% of attorneys in Florida.

Hubbs Law represents clients on all types of criminal cases, including crimes related to PPP Loan Fraud, in Miami, South Miami, Hialeah, Cutler Bay, Miami Gardens, Kendall, Palmetto Bay, Pinecrest, Homestead, and anywhere else in Miami-Dade County.

Hubbs Law offers free consultations for all criminal cases. Contact us anytime to discuss a case or legal issue at 305-570-4802.

Additional Resources

Department of Justice (DOJ) - Fraud Section Enforcement Related to the Cares Act– The Department of Justice (DOJ) is tasked with enforcing federal law. Find press releases related to PPP Loan Fraud and court documents related to publicly charged cases. 

Small Business Administration (SBA) - PPP Loan Data and Reports – The Small Business Administration is the federal agency that provides assistance to small businesses through loans like the PPP loan. Find data and forgiveness reports related to the PPP loan. 

Small Business Administration – Office of Inspector General (SBA-OIG) - The Office of Inspector General investigates PPP loan fraud reported to the SBA.  Click here to learn more about the agency’s pandemic response oversight plan, reports, recent cases, congressional testimony, and more. 

Internal Revenue Service (IRS) - Criminal Investigation Press Releases – The Internal Revenue Service (IRS) is the revenue service for the United States, responsible for administering and enforcing federal tax law. Read about criminal investigations and cases related to PPP loan fraud and other fraudulent schemes. 

Federal Bureau of Investigations (FBI)- The FBI is the main federal law enforcement agency whose responsibility is to enforce federal criminal laws.  Click here for information and tips as the FBI attempts to combat COVID-19 scams including PPP loan fraud.