Can Unsuccessful PPP Loan Applicants Face Prosecution for Fraud?

Articles/News, Offshore Account Update

Posted on July 31, 2023 |

Submitting fraudulent loan documents to a federally insured bank is a federal crime. This is true regardless of whether the submission results in the issuance of a loan. The federal bank fraud statute (18 U.S.C. Section 1344) is extremely broad, allowing for prosecution of any one who “knowingly executes, or attempts to execute, a scheme or artifice . . . to defraud a financial institution.”

Under 18 U.S.C. Section 1344, anyone found guilty of bank fraud can face up to a $1 million fine and 30 years of federal imprisonment.

In addition to bank fraud, individuals who submit fraudulent loan documents can face other federal charges as well. When the loan is backed (or would be backed) by the federal government, the risks are even greater.

Federal Authorities Are Targeting Successful and Unsuccessful PPP Loan Applicants in New Jersey

When the federal government launched the Paycheck Protection Program (PPP) in 2020, its goal was to help stabilize the economy while also helping businesses keep their employees on the payroll. While it served this purpose—at least in part—it also proved to be a prime target for fraud. The most recent estimates put the total number of fraudulent loans at over 70,000, with approximately $80 billion (about 10 percent of all PPP loan proceeds) being issued to individuals and businesses that didn’t qualify.

In 2023, the federal government is continuing to do damage control. It also wants to make sure that the same thing doesn’t happen again. As a result, in addition to targeting individuals who fraudulently obtained PPP loans (and loan forgiveness), it is also targeting individuals who unsuccessfully submitted fraudulent PPP loan applications.

As discussed above, these investigations present substantial risks. Individuals targeted in PPP loan application fraud investigations need to engage experienced defense counsel promptly, and those who have concerns (but aren’t yet facing scrutiny) should consult with a lawyer about the options they have available. If the federal government isn’t investigating yet, voluntary disclosure may be an option. But, in all cases, informed decision-making is critical, as additional mistakes can prove incredibly costly.

What Constitutes PPP Loan Application Fraud?

Federal allegations of PPP loan application fraud can take several forms. Recent IRS Criminal Investigation (IRS CI) press releases shed light on the types of evidence the government is using to prosecute cases involving unsuccessful PPP loan applications. This includes evidence such as:

  • Falsified tax returns
  • Falsified payroll and revenue records
  • Corporate documents showing that companies are newly formed or do not have the number of employees listed on a PPP loan application
  • PPP loan applications filed on behalf of a single company with multiple lenders
  • PPP loans applications filed by a single individual on behalf of multiple companies

Ultimately, however, the evidence prosecutors can use to prove fraud depends on the facts of each individual case. To find out what evidence prosecutors may be able to use against you, you should discuss your situation with an experienced federal defense lawyer promptly.

Discuss Your Situation with Federal Defense Lawyer Kevin E. Thorn in New Jersey

If you need to know more about how to defend against federal allegations of PPP loan application fraud, we encourage you to contact us promptly. Call 201-842-7696 or contact us confidentially online to request an appointment with federal defense lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.

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