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PPP FRAUD: GOVERNMENT LOANS AND FEDERAL ARRESTS

Updated: May 10, 2021

Why was the PPP Loan Created?

The PPP was designed by lawmakers to allow the SBA to help small businesses hard hit by the COVID-19 Quarantines and Stay-at-Home Orders, where many were forced to close their doors or limit their operations. Revenue streams dried up; the PPP was a way to help small businesses stay afloat during the Pandemic.


Under Section 1102 of the CARES Act, the SBA can guarantee 100% of loans offered to qualifying small business owners under the PPP. (See, Section 7(a)(36) of the Small Business Act (15 U.S.C. §636(a)(36)).


PPP Extended in March 2021

This week, the PPP Extension Act of 2021 became law, extending the deadline for applications to May 31, 2021, to obtain relief under the program.



The PPP Fraud Problem: Lots of Federal Indictments Are Coming

The SBA is not only on the lookout for helping people suffering during the COVID Pandemic, it is also suspicious that some of the applications received and approved may be based upon inaccurate or dishonest information. From the federal government’s perspective, lots of PPP applications have proven to be erroneous and therefore, criminal acts of fraud.


Already, the newly appointed U.S. Attorney General, Merritt Garland, has announced the Justice Department’s zeal in going after PPP fraud prosecutions. DOJ news release


Federal Task Force Dedicated to Prosecuting PPP Fraud

To address the PPP Fraud issue, a special task force was formed to focus solely on PPP Fraud prosecutions. Brian D. Miller was confirmed by the United States Senate on June 2, 2020, to be the “Special Inspector General for Pandemic Recovery” (SIGPR). Mr. Miller is the person heading up the federal task force to uncover many of these PPP frauds.


Criminal Charges: Bases for PPP Fraud Arrests

Insofar as federal prosecution of individuals for PPP loan fraud, the ultimate indictments and prosecutions can include several different charges in a federal criminal law palette, such as:

  • Wire Fraud (18 U.S.C. 1343): Wire fraud is the use of interstate telecommunication wires to commit a fraud.

  • Bank Fraud (18 U.S.C. 1344): Bank fraud is a misrepresentation to a financial institution that results in unjust financial gain.

  • False Statements to a Bank (18 U.S.C. 1014): A false statement to a bank is a material misrepresentation to a bank. A representation is material if it tends to influence a financial decision.

  • False Statements to the SBA (18 U.S.C. 1014): A false statement to the SBA is a material misrepresentation to the SBA.

  • False Claims (31 U.S.C. 3729-3733): A false claim is any claim for reimbursement to the government that is materially false.

  • Conspiracy to Defraud the Government (18 U.S.C. 371): A conspiracy to defraud the government is any agreement by two or more persons to commit the crime of fraud (bank fraud or wire fraud).

  • Money Laundering (18 U.S.C. 1956-1957): The transfer of the proceeds of unlawful activity to conceal its location or source is money laundering.

  • Tax Evasion (26 U.S.C. 7201): Tax evasion is committed by evading the requirement to pay taxes.

  • Racketeering (18 U.S.C. 1961): Racketeering is the carrying on of a criminal enterprise or business that engages in certain criminal acts.

  • False Statement (18 U.S.C. 1001): A false statement to the government is an intentionally false statement that is material.

PPP Loan Information:

PPP Loan Forgiveness - Straight from the SBA

PPP Loan Verification Rules - Are not made public to cut down on the loan fraud.

PPP Loan Fraud - Report if someone applied for a loan in your name or business name. Or if you paid someone for assistance and they put false information on your application.

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