Can You Be Federally Charged for PPP Fraud?

To answer the question posed in the title of this blog, yes. Federal authorities have brought—and probably will continue to bring—charges against individuals and businesses for fraud against the PPP. Through the Paycheck Protection Program (PPP), the government distributed forgivable loans to companies. Businesses were required to spend at least 60 percent of PPP funds on payroll expenses, and the remaining money could only be used for a few different purposes. 

There was some confusion among PPP loan recipients in the program’s early days about criteria that must be met before obtaining loan forgiveness. Now that there is some clarity around PPP loan forgiveness, federal agents are adopting a more aggressive posture toward those they suspect of PPP fraud. 

If a business that received PPP loans simply cannot prove it properly used the funds, it would only need to pay back the money with one percent interest. In cases where the PPP recipient lied in order to receive money or get the loans forgiven, though, criminal charges could be in order.

A few ways PPP fraud could be perpetrated include: 

  • Falsifying information on the initial PPP application (such as inflating payroll figures)
  • Spending loan money on unapproved items
  • Using someone else’s personal information to obtain a PPP loan
  • Giving false information when applying for loan forgiveness (such as fake payroll records or tax documents)
  • Lying to federal agents who question you during a PPP audit or investigation

Specific Criminal Charges 

There are a number of criminal allegations associated with PPP fraud, including bank fraud, wire fraud, mail fraud, making false statements to federal agents or financial institutions, money laundering, and even tax evasion. 

Increasingly, though, bad actors are being charged with conspiracy to commit fraud. The most common way for PPP applicants to be charged with conspiracy is to lie on applications. This can be done by applying on behalf of companies that don’t exist, applying on behalf of defunct companies, or giving false information on the number of employees. Generally speaking, conspiracy charges arise after at least one person takes a step toward actually committing a crime. 

Conspiracy to defraud the federal government is a felony that carries a maximum prison sentence of five years (18 U.S. Code § 371) and possible fines. However, depending on the underlying crime the co-conspirators agreed to, punishment could be much more severe. For example, the maximum prison sentence for conspiracy to commit wire fraud is 20 years, which is the same for actual wire fraud. 

A Federal Case Requires an Experienced Attorney

Because there was a great deal of confusion surrounding PPP loans in the beginning, plenty of business owners may have unwittingly committed fraud by applying for and spending PPP money. Regardless of the reason for your facing a PPP audit, federal investigation, or criminal charges, the best resource is a skilled criminal defense firm. Attorney Charles A. Banker, III has spent his legal career providing Texans with aggressive legal representation, and our team would be honored to serve you. Call us today to set up a free consultation.

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The Law Offices of Charles A. Banker, III

Our firm’s founder, Charles A. Banker III, has been a solo criminal defense practitioner with offices in Houston and McAllen, TX for over 30 years. He understands what it means to work independently in today’s hyperconnected world, but he also knows that sometimes you need to lean on others.

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