Small Business Administration Fraud (PPP Fraud)
The Coronavirus Act, Relief, and Economic Security (“CARES”) Act is a federal law enacted in March 2020. It was designed to provide emergency financial assistance to Americans suffering the economic effects of the Covid-19 Pandemic. The CARES Act authorized forgivable loans to small businesses for job retention and certain other expenses through a program referred to as the Paycheck Protection Program. (“PPP”)
In order to obtain a PPP loan, a qualifying business must submit a PPP loan application which is signed by an authorized representative of the business. In the PPP application, the small business must state among other things its,
- average monthly payroll expenses; and
- number of employees.
These figures are used to calculate the amount of money the small business is eligible to receive under the PPP.
The Small Business Administration is aware that the PPP program creates the risk that some individuals will submit fraudulent applications to defraud the Government. For instance, if an applicant purposely inflates his payroll expenses or the number of his employees, he may be subject to prosecution for SBA or PPP fraud.
While this is a new law, the Government has already filed charges against individuals alleging they submitted fraudulent PPP loan applications. As the money allocated is for relief, the Government is zealously investigating potential fraud cases.
There are potential defenses to such charges. The PPP loan application process is complicated and an honest individual may make mistakes with no criminal intent in completing the paperwork. Additionally, If someone else submits a PPP loan application, and an honest individual is unaware of the fraudulent nature of the application, that individual would have a defense.
Every case is different. Defenses are based on the facts in each scenario. If you are under investigation for SBA or PPP fraud, you should take the matter very seriously and you should have legal representation. I have experience in defending against this kind of investigation.