If You’re Under Investigation for Paycheck Protection Program (PPP) Fraud, You Need an Experienced Texas PPP Fraud Lawyer on Your Side
The federal government is cracking down on Paycheck Protection Program (PPP) fraud. Since the U.S. Government Accountability Office (GAO) first announced concerns about the lax controls in place to prevent fraud under the PPP in 2020, the Internal Revenue Service’s Criminal Investigation division (IRS CI) and other federal law enforcement authorities have been focused on uncovering and prosecuting fraudulent PPP loan schemes. If you are under investigation or facing charges, you need experienced legal representation, and it is important that you speak with a Texas PPP fraud lawyer right away.
At Brown, P.C., we represent individuals and businesses in high-stakes and large-scale PPP fraud matters. Our lawyers have decades of experience and have handled some of the largest and most high-profile federal criminal tax cases in recent history. As a result, we know what it takes to successfully defend individuals and businesses in PPP fraud cases; and, if you need to speak with a Texas PPP fraud lawyer, we encourage you to get in touch promptly.
PPP Fraud Allegations Can Take Many forms
IRS CI and other federal authorities are targeting all forms of Paycheck Protection Program fraud. This includes fraud at all stages of the PPP loan lifecycle—from the initial application process in 2020 and 2021 to submitting certifications for loan forgiveness. Our lawyers are available to provide representation in cases involving allegations of:
PPP Loan Application Fraud
Many PPP fraud investigations are focusing on fraud during the application process. Paycheck Protection Program loans were only available to eligible businesses—and, while the eligibility criteria weren’t always entirely clear, the federal government still expected strict compliance.
During these investigations, Special Agents are examining all aspects of PPP loan applicants’ filings. As a result, these investigations are frequently leading to allegations including (but not limited to):
- Falsely representing that the applicant qualified as a “small business concern;”
- Falsely representing that the applicant needed financial assistance due to “the uncertainty of current economic conditions” during the COVID-19 pandemic;
- Submitting falsified payroll records, tax returns, or other supporting documentation;
- Submitting other false records or representations in support of a PPP loan application; and,
- Filing PPP loan applications on behalf of newly-established business entities and ineligible shell companies.
Crucially, federal authorities are targeting both successful and unsuccessful loan applicants during PPP fraud investigations. Under federal law, attempting to commit fraud carries the same penalties as successfully committing fraud in many cases. As a result, regardless of whether you or your business received a PPP loan, if you are now under investigation or facing charges, it is imperative that you speak with an experienced Texas PPP fraud lawyer as soon as possible.
PPP Loan Conspiracies
In addition to targeting individuals and businesses that applied for PPP loans, IRS CI and other federal authorities are also targeting entities and individuals that assisted with the submission of fraudulent PPP loan applications. Here, too, the government is focusing on cases involving both successful and unsuccessful attempts to fraudulently obtain the PPP’s forgivable government-backed loans.
Under the federal conspiracy statutes, any person involved in a conspiracy to defraud the federal government or commit mail fraud, wire fraud, or any other federal fraud-related offense can face statutory fines and a minimum of five years of federal imprisonment. However, similar to attempted fraud, conspiracy to commit fraud can also carry the same penalties as perpetrating a successful fraudulent scheme in many cases. The federal mail fraud and wire fraud statutes allow for prosecution in an extremely wide range of circumstances; and, in these cases, alleged co-conspirators can face up to a $1 million fine and 30 years of prison time for a single count.
PPP Loan Stacking
While eligible businesses that received a PPP loan during the First Draw were permitted to apply for another loan during the Second Draw, obtaining multiple PPP loans was otherwise prohibited. The federal government refers to unlawfully obtaining (or unsuccessfully applying for) multiple PPP loans as “stacking,” and stacking allegations can present serious risks for businesses, business owners and other individuals.
Although many of the federal government’s PPP loan stacking investigations are focused on individuals and organizations that perpetrated intentional loan fraud scams, many legitimate businesses are facing scrutiny as well. If your business obtained multiple PPP loans, you should consult with a Texas PPP fraud lawyer promptly. If the federal government is looking into your business’s PPP loans, you will need experienced legal representation to avoid unnecessary consequences. If authorities are not yet examining your business’s PPP loan history, you may be able to avoid an investigation with a proactive approach.
Using PPP Funds for Ineligible Purposes
One of the most common forms of PPP fraud involves using a business’s loan funds for ineligible purposes. Even when businesses qualified for PPP loans, they were only permitted to use their loans for the business expenses authorized under the CARES Act—namely payroll, mortgage interest, rent and utilities.
Many of these investigations are focusing on the use of PPP loan funds to cover personal expenses. Making personal use of PPP loan funds was expressly prohibited, and many people have been found guilty of using their loans to purchase homes, luxury cars and other high-priced items. These investigations also present substantial risks, with federal prison time being a very real possibility.
Fraudulent PPP Loan Forgiveness Certifications
Obtaining forgiveness of a PPP loan requires certification that a business only used its loan funds for authorized purposes. Falsely certifying compliance with the terms of the Paycheck Protection Program constitutes federal fraud, and fraudulent forgiveness certifications have become a key focus in the government’s fight against all forms of PPP loan fraud.
Here, too, many business owners have struggled to understand what is (and isn’t) permitted—often due to a lack of clarity in the CARES Act and the federal government’s guidance issued under the PPP. But, the U.S. Department of Justice (DOJ) has made clear that this isn’t a justification for fraud. While lack of intent may mean that criminal prosecution is unwarranted, all business owners who have submitted fraudulent loan forgiveness certifications are at risk for facing civil penalties—and they will need to overcome any alleged evidence of intent to avoid criminal charges.
Fraud During PPP Audits and Investigations
Some PPP loan applicants and recipients are also facing criminal charges for engaging in fraud during PPP audits and investigations. Making false statements or concealing information during a federal inquiry is itself a crime that carries statutory fines and federal prison time. While business owners and others targeted in PPP fraud cases must be careful to avoid sharing information that could lead to prosecution, they must be equally careful to avoid engaging in conduct that could trigger additional allegations.
Tax Evasion and Tax Fraud
Submitting falsified tax returns in support of a PPP loan application, improperly deducting non-qualifying expenses, and other tax-related violations can lead to allegations of tax evasion and tax fraud. IRS CI is one of the primary federal authorities involved in investigating PPP-related crimes, and it is paying particular attention to cases that involve apparent violations of the Internal Revenue Code. Even if a business has otherwise complied with the terms of the PPP, if it has accounted for income, payroll or other expenses improperly on its federal returns, this alone could lead to an invasive investigation and the potential for high-stakes federal criminal prosecution.
Potential Charges in PPP Loan Fraud Cases
These allegations—among others—can lead to a variety of federal criminal charges. When facing a PPP fraud investigation, it is imperative to quickly gain a comprehensive understanding of the charges that are on the table. This is the only way to execute a targeted and strategic defense. Some examples of potential federal criminal charges in PPP loan fraud cases include:
- Attempt and Conspiracy (18 U.S.C. Sections 371 and 1349)
- Bank Fraud (18 U.S.C. Section 1344)
- Government Fraud (18 U.S.C. Sections 1014 and 1031)
- Mail Fraud and Wire Fraud (18 U.S.C. Sections 1341 and 1343)
- False Statements or Concealment (18 U.S.C. Section 1001)
- Willfully Preparing a False Tax Return (26 U.S.C. Section 7206)
- Tax Evasion (26 U.S.C. Section 7201)
Again, these are just examples. Special Agents look for evidence of any and all conduct that can be prosecuted during PPP loan fraud investigations. Once again, an informed and comprehensive defense strategy is critical, and mounting an effective defense starts with engaging experienced legal counsel promptly.
Potential Penalties in PPP Loan Fraud Cases
Regardless of the specific charges filed, prosecution for PPP loan fraud can expose individuals and businesses to substantial penalties. Depending on the specific circumstances involved, allegations of PPP loan fraud can lead to consequences including:
- Asset freezes
- Asset seizures and forfeitures
- Back taxes, interest and penalties
- Criminal fines (which can be as high as $1 million per count for some charges)
- Federal imprisonment
Some of these consequences (i.e., asset freezes and seizures) can be imposed during the investigative process—before charges have been filed, and long before you have had a chance to defend yourself in court. While a Texas PPP fraud lawyer may be able to help you avoid these consequences, doing so will require a highly strategic and highly proactive defense.
Potential Defense Strategies in PPP Loan Fraud Cases
As is the case with all federal white-collar crimes, there are several potential defenses to allegations of PPP loan fraud. Each of the charges listed above requires that the DOJ prove several discrete elements; and, if the DOJ’s evidence of any single element is lacking, this should be enough to prevent prosecution.
Along with challenging the sufficiency of the government’s evidence, there are various other ways to fight PPP loan fraud allegations as well. However, as is always the case in federal criminal matters, the defenses available in any particular case depend on the specific circumstances involved. With this in mind, some examples of defense strategies a Texas PPP fraud lawyer may be able to assert on your (or your business’s) behalf include:
Evidence of PPP Loan Compliance
One option that will be available in some cases is to affirmatively demonstrate compliance with the terms of the Paycheck Protection Program. If you have the documentation you need to prove that your PPP loan and forgiveness certification are valid, then making strategic use of this documentation could be the simplest path toward a favorable resolution.
Insufficient Evidence of PPP Loan Fraud
While affirmatively demonstrating compliance is one option, you do not have the burden of proof. If the DOJ’s evidence of PPP loan fraud is insufficient in any respect, then prosecution is unwarranted.
Insufficient Evidence of Willfulness or Intent
Establishing criminal culpability for PPP loan fraud requires evidence of willfulness or intent in most cases. If you unknowingly or unintentionally violated the terms of the PPP, then you (or your business) may be civilly liable, but criminal fines and prison time should not be on the table.
Constitutional Violations
If federal agents violate your constitutional rights when conducting a search or seizure, any evidence obtained through the search or seizure may be inadmissible in federal court. Without admissible evidence, the DOJ won’t be able to prosecute. Other constitutional violations can provide defenses in federal criminal cases as well.
Evidentiary Issues or Procedural Miscues
Along with constitutional violations, various other evidentiary issues can raise questions that are sufficient to prevent successful prosecution of PPP loan fraud and other federal crimes. Procedural miscues during the government’s investigation and prosecution can give rise to defenses as well. When you engage an experienced Texas PPP fraud lawyer to represent you, your lawyer will thoroughly evaluate all potential defenses and work to secure a favorable outcome as quickly and quietly as possible.
Request a Confidential Consultation with a Texas PPP Fraud Lawyer
If you need to know more about defending against allegations of PPP loan fraud in Texas, we invite you to get in touch. To request a confidential consultation at Brown, P.C., please call 888-870-0025 or contact us online today.