At the beginning of the pandemic, the U.S. Government opened the doors for small businesses and individuals to apply for loans to recoup any losses, pay bills, or help employees. Now that programs have ended, the Government has begun cracking down on alleged fraud cases across the country. If you find yourself at the receiving end of fraud charges, you will want to fight them as hard as you can. Read on to learn more about:
What PPP Loans are and new government efforts to combat fraud;
The Faces of COVID-Relief Fraud and how it relates to common types of fraud; and
How to Fight Charges when backed into a corner.
The Pandemic and PPP Loans
On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The $2.2 trillion stimulus included the creation of the $350 billion Paycheck Protection Program (PPP) to help small businesses sustain themselves through the pandemic. The program invited business owners to apply for a loan and, eventually, loan forgiveness—based on the loan’s use and how it assisted the business. Congress eventually increased PPP’s available funds to $669 billion.
Another impact of CARES was its expansion of the Small Business Administration’s Economic Injury Disaster Loans (EIDL loans) to cover nonprofit organizations to help owners pay operating expenses or bills to make up for a loss in revenue.
Maryland’s own Emergency Relief $75 million Loan Fund offered up to $50,000 to businesses whose applications demonstrated financial stress—such as tenants not being able to pay rent, inability to pay rent due to reduced sales, or disrupted supply network.
By May 31, 2021—the end of PP, the Small Business Administration processed nearly 12 million loans totaling $800 billion dollars; this does not include EIDL loans, though, which are still available.
The same month, Attorney General Merrick Garland established a COVID-19 Fraud Enforcement Task Force. In August, the Department of Justice announced they had prosecuted more than 100 defendants in more than 70 criminal cases—confiscating upwards of $65 million. DOJ studies, too, claim around 15 percent of all PPP loans contained at least one indication of possible fraud.
It is safe to say both the US and Maryland Justice Departments are on high alert for PPP fraud now that many of the programs have ended.
What Does OVID-Relief Loan Fraud Look Like?
Fraudulent claims that result in your collection of money via PPP or EIDL loan programs are serious and could result in multiple charges and penalties.
Of course, some instances are more serious than others. The more money you defraud, the more severe charges may be. Likewise, if you involve other people in a scheme—innocent people who end up willingly forfeiting money—you could face harsher charges, too.
The type of fraud committed varies case-to-case. In the digital age, it is common to see wire fraud as the charge. Wire fraud is any scheme to defraud another person using electronic means. Federal charges carry up to 20 years in prison, three years of supervised release, and $250,000 in fines; however, the government may also require you to forfeit assets or pay additional restitution to victims. You might also face bank fraud as a result of allegedly deceiving a financial institution through a lie on your PPP loan application. A misdemeanor bank fraud charge carries up to a year in jail, but a more serious felony charge carries up to 30.
In recent times, cases of PPP-related fraud in Maryland include:
Applying for PPP loans using multiple identities or business identities in an attempt to take more money than you’re owed
Using PPP loans to buy luxury items or for otherwise unapproved purposes
These might seem like highly specific cases, but though there is no ‘one way’ to commit fraud, an otherwise ‘ingenious’ way to score some extra cash under-the-rug could start fitting the mold quickly.
Know Your Legal Options If Accused of Fraud
If a law enforcement officer interrogates you about your role in a PPP fraud case, do not talk without a lawyer present.Anyone can be charged for fraud. However, it is considered a ‘white-collar crime,’ any level of business professional, regardless of association, could participate in or be accused of fraud.
A police investigator might tell you that they “just want to help” and that you answering a few questions can help them help you—from your position, that might sound like all you want. Do not take it, though. Talk to an attorney first. They can help you assess your situation and organize a defense to allegations. If anything, they can tell you what to say and when to say it.
Quick side note, too: always take extra time to keep your business records in check. Having a paper trail in-hand and proof to show your practices goes a long way for a lawyer to get the full picture of your case.
With these, your lawyer will craft an aggressive defense against your allegations. All fraud cases are different, but especially with wire fraud, there are a few commons defenses.
Lack of Intent to Commit Fraud: you might be caught in a situation where you did not intend to commit fraud yet face serious fraud charges. If you have kept a file of your business records and can provide the necessary proof to your lawyer, they might proceed with a lack of intent defense. Likewise, with how ‘new’ these loans may be to you, you might have made a slip-up on the form.
Acting in Good Faith: if you believe that the claims you made that led to fraud allegations were genuine, your lawyer could use a good faith defense. Now, even if you claim good faith, the statements that lead to fraud might seem otherwise to a judge and jury.
Claiming Legitimate Use: as mentioned above, PPP and EIDL loans require you use them for business expenses. If you’re facing fraud charges alleging you misused a loan and you can prove the opposite, your lawyer can use that in a defense.