Federal prosecutors have arrested more than a thousand people and recovered over $1 billion in cash related to PPP loan fraud charges. The typical case of PPP (Paycheck Protection Program) loan fraud involves a business overstating the number of employees on the payroll. Other common schemes include using PPP loan funds for personal expenses, such as buying cars or houses or using the funds to pay off other debts.
PPP loan fraud was so pervasive that the Department of Justice (DOJ) established “Strike Force” teams, including one in Florida, dedicated to investigating the crimes. Other organizations are also working to assist the DOJ’s efforts in prosecuting those who fraudulently claimed PPP funds. The Department of Treasury’s Office of Inspector General (OIG) has been particularly active in this area and has set up a hotline to investigate potential PPP fraud cases. Further, the Small Business Administration has been conducting its investigations into allegations of misuse of PPP funds and has been successful in uncovering numerous cases of fraud.
PPP Loan Fraud Consequences
The DOJ has also taken charges against larger organizations or individuals that have allegedly stolen the identities of other businesses or individuals to fraudulently obtain PPP loans. As well as charges of fraud, the government has pursued enforcement actions against other related criminal activities such as money laundering and wire fraud.
So far, the majority of PPP fraud suspects prosecuted by the DOJ have agreed to plead guilty and return the money they obtained fraudulently. This has been a successful strategy as, according to a spokesperson from the DOJ, more than 65 percent of PPP fraud prosecutions have resulted in criminal convictions.
The DOJ has also obtained civil orders to freeze the assets of several individuals suspected of engaging in PPP fraud. This has recovered billions of dollars in taxpayer funds and has allowed the government to pursue charges in criminal proceedings.
Overall, federal prosecutors have taken a strong stance against alleged perpetrators of PPP-related fraud. Those found guilty may face up to 30 years in prison and millions of dollars in fines.
PPP Loan Fraud Jail Time and Sentencing
Individuals convicted of PPP loan fraud can face significant jail time. The length of the sentence depends on the severity of the offense, the amount of money involved, and the defendant’s criminal history.
For example, two Florida men recently pled guilty to fraudulently obtaining $35 million in PPP loans and face years in federal prison. Similarly, a California man was sentenced to more than 11 years in prison for defrauding the program of over $12 million.
Businesses convicted of PPP loan fraud can also face significant penalties, including fines and forfeiture of assets. In some cases, the government can also seek to bar the company from doing business with the federal government in the future.
PPP loan fraud can take many forms, including submitting false information on loan applications, misusing the funds, or failing to meet program requirements. PPP loans are intended for payroll, rent, utilities, and other approved expenses. Individuals or businesses that use the funds for personal expenses or other unauthorized purposes can be charged with PPP loan fraud.
People can also be charged with fraud when applying for PPP loan forgiveness. For example, businesses that fail to maintain employee headcount and salary level requirements may face charges.
While the Covid public health emergency may be officially over, those who defrauded the PPP program may be facing the consequences for quite a while. The Justice Department says it “will continue to work relentlessly to combat pandemic fraud and hold accountable those who perpetrate it.”