Can I Be Arrested for PPP Fraud?
As part of the federal CARES Act of April 2020, the Paycheck Protection Program (PPP) allows eligible companies to claim up to $10 million in forgivable loans. Unfortunately, as news programs have consistently reported, fraudulent PPP claims have become a widespread problem. Defrauding the PPP is a federal crime that can lead to your arrest. Therefore, it’s essential that you understand your eligibility for and the rules surrounding a PPP loan, or you could end up spending years in prison.
What Is the Paycheck Protection Program?
In an attempt to prevent massive cuts to employment, the federal government authorized the Small Business Administration (SBA) to create the PPP. The goal of the PPP is to provide companies with funds they can use to keep people employed during the COVID-19 pandemic. Generally, the only businesses eligible for SBA stimulus relief under the PPP are those with fewer than 500 full-time employees.
The PPP would provide eligible companies with loans up to $10 million to cover expenses such as:
- Payroll
- Rent
- Mortgages
- Utilities
The funding can last up to eight weeks and is intended to supplement business losses from the pandemic. If a company that received PPP funding proved the money went to “qualified expenses,” the SBA would forgive the loan’s balance.
In early 2021, the SBA reopened the PPP for a second round of loans. Both businesses that drew from the first round and new applicants are eligible to receive funds in the second round of the PPP.
How Is PPP Fraud Defined?
Defrauding the SBA is a crime. Any individual who obtains or attempts to get PPP funds for an ineligible company or purpose can end up arrested and facing charges. As part of the law creating the PPP, the government appointed a Special Inspector General for Pandemic Recovery to monitor stimulus funds and search for fraud.
The Special Inspector General will prosecute you if you attempt to obtain funds you are not entitled to or seek forgiveness for misspent PPP loans.
Some examples of PPP fraud include:
- Filing paperwork that overstates your amount of payroll costs to receive extra funding
- Submitting a false claim that states the pandemic negatively affected your business
- Claiming your business is eligible because it has under 500 employees when you know it actually has more full-time staff
- Spending PPP funds on non-qualified expenses and then attempting to receive forgiveness for that spending
For example, if your company received PPP money and spent it on a new truck, it would be a crime to file paperwork stating the money went towards payroll. Another common tactic would be to claim you pay an employee $60,000 when they, in fact, are only paid $45,000. If you submit paperwork with the inflated payroll figure to receive extra PPP funds, you may be guilty of fraud.
What Are the Punishments for PPP Fraud?
Committing PPP fraud is a federal felony that could end up costing you your freedom. The Small Business Act governs loan fraud prosecutions. If you made false statements or overvalued any securities on PPP paperwork, you could face up to two years in federal prison and a $5,000 fine.
However, if your fraud included any embezzlement, such as using PPP funds for personal expenses, you face harsher penalties. PPP fraud that includes embezzlement can lead to five years in federal prison and a $10,000 fine. Additionally, any federal prosecution will require you to pay restitution for any PPP funds you received fraudulently.
Are you being investigated for PPP fraud in Fullerton, California? You will need the skilled criminal defense team of Chambers Law Firm on your side. Contact us today at 714-760-4088 or dchambers@clfca.com to set up a consultation.
