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PPP Loan and CARES Act Fraud

What Is the Paycheck Protection Program?

The Paycheck Protection Program is a government loan program established through the CARES Act for businesses who employ less than 500 people to gain assistance because of the impact of COVID-19. Small businesses are eligible for up to $10,000,000 to cover expenses such as payroll, mortgages, rent and utilities. The debt is forgivable if the money goes towards these “qualified expenses”.

What is PPP Loan Fraud or CARES Act Fraud?

Committing PPP loan fraud is to take advantage of the loan program and CARES Act by dishonestly obtaining money. You may be found guilty of PPP loan fraud if you purposely obtain, or attempt to obtain funds through the CARES Act.

What Are Examples of PPP Loan Fraud?

  • Claim the incorrect number of employees to qualify for the loan.
  • Wrongfully claiming that COVID-19 impacted your business.
  • Increasing payroll costs to get an increased amount of funding.
  • Using the funds for anything other than qualified expenses
  • Failure to identify an employee that left in order to continue receiving funds on their behalf.

What Are the Penalties for PPP Loan Fraud?

Under the Small Business Act, PPP loan fraud is charged as a federal crime. If convicted for making false statements or overvaluing securities you face felony charges punishable by:

  • Fine up to $5,000 and/or
  • A 2 year sentence in a federal prison.

If a person is charged with embezzlement under the PPP loan fraud they may face:

  • A fine up to $10,000 and/or
  • A federal prison sentence of 5 years.

What Defenses Can Be Used Against a PPP Loan Fraud Violation?

  • Intent is important. Defendants cannot be charged if they had no intent to defraud. For example, making a mistake on the complicated loan application could be a result of the violation. If it was not your intent to defraud, but a simple mistake, you cannot be charged for fraud.
  • An SBA mistake in communications, bank statements, accounting notes, receipts and even bills could seem like there is fraud occurring under a PPP loan. It is important to keep all data as reference in case there is a mistake in one of the weeks. 

The Office of the Special Inspector General for Pandemic Recovery is in charge of all PPP loan fraud investigations. All charges are prosecuted by the Department of Justice.

Are you in need of legal assistance involved with PPP loan and CARES Act fraud? KAASS Law may be able to provide you with the help that you need. You may call our office at (310) 943-1171 or by filling out the contact form below.

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