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PPP Loan Fraud: Understanding the Basics

PPP Loan Fraud: Understanding the Basics

The COVID-19 global pandemic has changed our lives in ways we had no way of anticipating, and the law is certainly no exception. The federal government’s CARES Act included a Paycheck Protection Program (PPP) that provided financial support to small businesses during the swift economic downturn precipitated by the pandemic. While the program allowed many small businesses to keep their doors open, there have also been fraud charges in relation to misuse. And because this governmental response was so abrupt, there are wrinkles to be ironed out along the way.

The Government Cracks Down

Reports related to fraud, waste, and abuse with the Paycheck Protection Program have led to federal crackdowns on recipients who are not on the up and up. If your small business is under investigation, do not panic – but do seek the professional legal counsel of an experienced criminal defense attorney.

The Three Categories of Fraud

Federal investigators are focusing on the following three forms of PPP fraud:

  • Application fraud

  • Misuse of loan funds

  • Forgiveness certification fraud

A violation in any of these categories can lead to civil or criminal penalties.

Application Fraud

Application fraud can take many forms. In order to qualify, small businesses must have experienced specific concerns related to small business ownership. Further, their applications must be truthfully based on genuine business concerns that were precipitated by the pandemic-related economic downturn.

Misuse of Loan Funds

Recipients of PPP loans must be used for approved purposes only, which include:

  • Meeting the business’s payroll requirements

  • Paying off the interest generated by pre-existing obligations

  • Paying insurance premiums

  • Covering utility costs

The funds issued by the PPP must be used in the furtherance of one’s business operations. When a business uses funds obtained through PPP for non-approved purposes, it can face fraud charges.

Forgiveness Certification Process

There are express certification requirements for seeking financial forgiveness, which include certification of all the following:

  • That the business actually incurred the kind and amount of expense for which forgiveness is sought

  • That the business reduced the amounts requested for forgiveness by any decrease in full-time employees or any decrease in hourly wages or salaries paid

  • That the amount requested for forgiveness includes no more than 25 percent of non-payroll costs

The Whirlwind Nature of the Program

COVID-19 came at us seemingly out of nowhere, and the PPP had to be created and implemented quickly in order to help support small businesses when they needed the help most. As a result, there has been plenty of room for ambiguity and missteps along the way. If you find yourself facing PPP-related fraud charges, the best course of action is to consult with an experienced criminal defense attorney as soon as possible.

Do Not Wait to Consult with a Formidable Killeen Criminal Defense Attorney

PPP-related fraud charges are in their nascent stages, and if you find your business facing such a charge, you need professional legal counsel on your side. Brett Pritchard at The Law Office of Brett H. Pritchard in Killeen, Texas, is an adept criminal defense attorney who is committed to skillfully advocating for your legal rights in the face of confusing charges predicated on fledgling laws and guidelines that are less than perfectly formed. Your case matters, so please do not hesitate to contact us online or call us at 254-501-4040 for more information today.
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