With the onset of the Coronavirus (COVID-19), the US government drafted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to support people whose livelihoods were disrupted by the pandemic. Part of the support is the Paycheck Protection Program (PPP) that has given financial assistance to businesses to the tune of about $1 trillion. Besides, the government offers loans to small businesses through the SBA platform.
However, there was little oversight in the qualification of recipients and disbursement of loans, which created a loophole for individuals to engage in bank fraud. As a result, many loan recipients are under investigation by the US Department of Justice regarding their loan applications.
The department wants to ascertain if the loan applications were correct and if the mistakes made were deliberate or a plan to defraud the government. If any wrongful actions were intended, they might lead to federal charges.
Types of SBA Loan and PPP Loan Fraud
Applying for Multiple Loans
This is also called clone loans or loan stacking. It is an event where one applicant makes multiple loan applications to different lenders. While it may be an error, fraudsters use this route to try their luck in getting multiple loans. It is a crime to apply for multiple loans for the same business.
Misrepresentation of Material Facts
SBA EIDL and PPP program applicants should certify that all facts stated about the businesses are true. If a business makes materially false information in their loan application, the federal agencies may investigate the matter and press charges if fraud is detected. False information may include falsifying accounts, business type, and the number of employees in the business.
Improper Use of Federal Funds
An EIDL or PPP program payment is supposed to be used for business expenses, including leases, mortgages, utilities, payroll costs, and variable costs. However, if the department discovers that the funds were used for other purposes, such as personal expenses, it may lodge an investigation and press charges.
Obstructing a Federal Investigation or Audit
Federal authorities (such as the IRS, FBI, and OIG) may require business owners investigating to submit documents and items or appear for summons at any point of the investigation. If one is found to have made false statements, withheld vital information, or obstructed a lawful investigation, it can lead to criminal charges.
The application process for either of the two loans is complex. You may make a mistake in the application process that may lead to investigations and charges in a federal court. PPP and SBA Loan fraud charges may lead to heavy penalties on conviction. Besides, the investigation may disrupt the smooth operation of your business, especially if you have to attend regular summons and deliver documentation on demand.
If you or the business is under investigation for any of the above reasons, contact a Boston criminal defense lawyer for legal assistance. La Firma Fernández has over 30 years of experience investigating and defending clients in money-based cases, including SBA and PPP. Contact us today if you are under investigation or already charged.