*This article was originally published on May 13, 2021. It has been updated as of August 30, 2022
PPP Fraud, or Paycheck Protection Program Fraud, is fraud connected to the Small Business Administration (SBA) run program. This relatively new program has run generally well. However, as with any well-intentioned program, people will find a way to abuse it. The Federal Government has accused hundreds of individuals with charges related to PPP Fraud. PPP Fraud generally has to do with 3 different fraudulent actions.
- First, falsifying records in order to qualify.
- Second, misusing received funds.
- Lastly, charges related to monetary fraud in general, like wire fraud, bank fraud, fraud against the United States, etc. There are of course other charges that can arise from this kind of fraud.
PPP Fraud is a relatively recent phenomenon. Because of this, the understanding of the situation is rapidly changing. What can and will be prosecuted in the future is still up in the air. Here you can learn more about what the Payment Protection Program is and some examples of publicized fraud cases.
We’ve written extensively on this subject, if you want to read more click here.
Background into the PPP Loan system
The Paycheck Protection Program has been one of the largest and most well-known of the governmental responses to the nation’s economic hardships caused by the COVID-19 pandemic. This program is run by the Small Business Administration (SBA). Per the agency’s name, the program is supposed to help small businesses (those with under 500 employees). Essentially a business owner goes to a bank, applies for the PPP loan (which the federal government backs), and that business owner receives favorable loan terms.
The program has handed out almost $400 billion through almost 4 million different applications. It’s worked for businesses of all sizes from nail salons to law firms. But, it started out with more backlash than praise. There were questions of efficacy and who was receiving the money. Part of this backlash was tied to the ability to defraud the program.
Still, the program has been largely successful. It has been credited as one of the factors behind avoiding a total economic collapse at the height of the quarantine during the COVID-19 Crisis. The program was established so those small businesses could pay for employee wages as well as some overhead costs. These limitations are what is used by the judicial system when investigating fraud cases.
Heightened Prosecution for PPP Loan Fraud Cases
The first wave of PPP Loan payments finished in August of 2020. Due to the speed, weight, and size of the program, the government has originally relaxed stringent processing requirements for banks and businesses. This situation allowed some individuals to unduly benefit from the program by exploiting the system which was quickly put in place. Some individuals have fraudulently claimed loans by lying about their business (both the size and scope) and by misusing funds. Since the end of the first wave of payments in August of 2020, the justice department has been working with multiple government agencies to investigate allegations of fraud.
In August of 2022, President Joe Biden signed bills that extended the statute of limitations on prosecuting these cases of fraud. Federal prosecutors have had a 10-year window to prosecute cases of federal bank fraud. Now, this 10-year window has been extended to other charges as well. The government argues that this will allow the Justice Department more time to prosecute PPP Loan Fraud.
The DOJ’s Inspector General on the matter spoke before congress and explained that they believe 10% of PPP Loans were given out to people who did not qualify. We’ve written about the DOJ’s ramped-up investigations. They’ve confirmed that they’re in it for the long run. With millions of applications to sort through, hundreds of thousands of investigations to conduct, and only a limited number of investigators at work, the DOJ will need years to complete its task.
Notable Examples of PPP Fraud
To date, a few hundred individuals, out of the millions which applied, have been charged with fraud related to the Paycheck Protection Program. Many of these charged individuals were working with each other to defraud the system. Some cases look like this; a “Southern California businessman” charged with fraud over “roughly $5 million” from PPP loans. Of course, not all cases of PPP fraud carry the same weight. Other cases have to do with a network of fraud, like the tax preparer who helped multiple people in on the scam.
We recently wrote about the Justice Department ramping up its investigation and prosecution of individuals. These investigations have affected people from all walks of life, including a former NFL player who was sentenced to 3 years. These examples show that the system for fraud can be both obvious and hidden. It can also potentially bring down innocent individuals, at least through allegations, connections, and charges.
Need a Criminal Defense Attorney with years of experience defending Fraud Cases? Call our offices.
Here at Arora Law, we have a number of attorneys experienced in covering a wide range of practice areas including criminal offenses, fraud, and other White-Collar Crimes.
The Arora Law Firm works throughout the Metro Atlanta area including Fulton, Cobb, DeKalb, Fayette, and Gwinnett Counties. Manny Arora, the founder of the firm, has been recognized nationwide as a veteran criminal defense attorney, see Manny’s and our other attorneys recognition here.
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