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What is PPP Loan Fraud?

PPP Loan Application

COVID-19 and PPP Loans

The Paycheck Protection Program (PPP) was established in March of 2020 as part of the government’s response to the coronavirus pandemic. In just over one year, the program has given more than $780 billion to nearly 11 million people.

Throughout the pandemic, millions of companies applied for this loan (which never needs to be repaid) after facing hardships caused by COVID-19. The goal was to provide businesses with money for payroll and other expenses.

What is PPP Fraud?

PPP Loan Fraud occurs when a business or person submits an application or certification for a loan under the federal Paycheck Protection Program that is false. In addition, if the business or individual does not abide by the guidelines on how to spend the funds or falsely applies for PPP loan forgiveness, they could also be investigated for PPP loan fraud. A company can be accused of PPP fraud if:

  • It made a false statement on the application
  • It applied for PPP loans from multiple lenders (known as “loan stacking”)
  • It used PPP loan money for an unapproved purpose
  • It submitted a false certification for PPP loan forgiveness

Over the past year, businesses were able to apply for PPP loans through commercial banks, so long as they met certain criteria.

PPP Loan Criteria

In order to qualify for the first round, businesses must:

  • Have been operational before February 15, 2020
  • Still be open and operational at the time of their application
  • Have 500 employees or fewer
  • Have 500 employees or fewer at each location (this is for businesses with multiple locations)

For businesses applying for the second round of PPP loans, they had to meet most of the above criteria regarding operational dates, as well as a few revisions, such as:

  • Having fewer than 300 employees
  • Having fewer than 300 employees per location
  • Showing a 25% or greater reduction in gross revenue

Are there PPP Loan Program Rules?

After being granted a PPP loan, rules regarding how it could be spent were strict. A complete list can be found on the U.S. Small Business Administration’s website. As a broad overview, businesses were required to spend the loan on payroll expenses (salaries, tips, paid leave, and employee benefits), utilities, and bonuses (hazard pay and commissions).

What are the Penalties for PPP Loan Fraud?

Because of the nature of PPP loan fraud, several different federal criminal statutes can apply depending on the situation. These statutes include making false statements to a federal agency, making false statements to the SBA, making false statements on a loan application, and bank fraud. Penalties for these statutes range from five to 99 years in prison and up to a $1,000,000 fine.

How to Respond if You’re Under Investigation

If you’re under investigation for PPP loan fraud, it’s imperative that you contact an attorney before speaking with federal agents. If you lie when being questioned, you could face additional charges on top of fraud.

Contact Law Office of Patrick J. McLain, PLLC today to schedule a consultation with an accomplished Dallas federal criminal defense lawyer. Our phones are answered at any time of day or night so that our clients can get in touch with us 24/7 at (214) 238-9392.

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