PPP Loan Fraud

Full Information on PPP Loan Fraud from Attorneys Serving Clients Nationwide

The onset of the COVID-19 global pandemic and subsequent stay-home orders and shutdowns have resulted in a disastrous economic downturn in the United States. Soaring unemployment, an uptick in bankruptcy filings, and the demise of countless small businesses has put millions of Americans in peril.

The federal government responded by passing the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March of 2020. Among its many provisions, the $2.2 trillion relief package provided billions in low-interest and forgivable loans to prevent layoffs and bolster small businesses. CARES Act funding is rife with fraud, ranging from large corporations accessing funds earmarked for small businesses, to individuals who filed for PPP loans on behalf of non-existent business entities. This page provides full information on the loan programs created by the SBA and subsequent SBA loan fraud.

CARES Act Loans for Small Businesses

In addition to expanding Economic Injury Disaster Loans (EIDL) and other Small Business Association (SBA) loans, the CARES Act created the Paycheck Protection Program (PPP). PPP loans are forgivable loans available to businesses and non-profits, specifically designed to prevent layoffs.

PPP Loan Requirements

The Paycheck Protection Program (PPP) is a new initiative created in March of 2020 by the CARES Act. A total of $669 billion in low-interest and forgivable loans was available to enable small businesses, self-employed workers, and nonprofits continue to cover their paycheck costs. Applicants were required to meet certain PPP loan requirements, including:

• Less than 500 employees
• Less than 15 million tangible net worth
• Less than $5 million net income for each for last two years
• Located in the United States
• Certify necessity of the loan due to the pandemic

The amount for each PPP loan was set at approximately 2.5 times the company's paycheck cost. Only employees living in the United States could be factored into this total. The total amount allowed per employee was $100,000, up to $10 million total.

PPP loans have an interest rate of 1% and are forgivable under certain circumstances. In order to achieve loan forgiveness, companies receiving PPP loans must use the majority of the funds for payroll and related costs; a percentage of PPP loans can also be applied to mortgage, rent, utilities and similar business expenses.

SBA EIDL Loan Requirements

The CARES Act also expanded existing Economic Injury Disaster Loans (EIDL) from the Small Business Administration (SBA) to cover non-profit organizations and faith-based organizations, in addition to for-profit small businesses. Whereas PPP loans are made through private lenders, EIDL loans come directly from the SBA. Ranging in size from up to $25,000 for unsecured loans to as much as $2 million for secured loans, EIDL loans include a $10,000 grant made immediately upon application. Many businesses, some of whom clearly did not qualify, scrambled to apply for an EIDL loan to access the $10,000 grant.

PPP Loan Fraud

PPP loan fraud can range from a qualifying organization that claims an inflated Paycheck amount or uses the funds for non-approved purposes, to an individual who fabricates a false company in order to access PPP loans for personal gain.

PPP loan fraud may include bank fraud, wire fraud, money laundering, or other false claims, including:

• applying on behalf of a phantom company
• falsely certifying that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant"
• applying on behalf of a business with more than 500 employees, or who net worth or income exceeds allowable thresholds
• claiming employees on Paycheck who are non-existent or who are deceased
• misrepresenting the number of employees or their country of residence
• using funds to cover costs other than the business-related purposes defined by the PPP, which include retaining workers / maintaining payroll or making mortgage interest, lease or utility payments

PPP Loan Fraud Investigations

Early confusion over PPP loan qualifications led to some large entities securing PPP loans who did not qualify, such as tech companies and companies backed by Private Equity firms. Approximately $30 billion in PPP loans was returned without penalty by businesses who found they were ineligible, thus avoiding PPP loan fraud charges. Individuals and companies who obtained PPP funds fraudulently and chose to retain them are the target of legal investigations.

Anticipating PPP loan fraud, legislators created a Pandemic Response Accountability Committee and an Inspector General for Pandemic Recovery as part of the CARES Act. A number of existing federal agencies are also involved in PPP loan fraud investigations and prosecution, including the Government Accountability Office, the SBA, the IRS, the U.S. Postal Inspection Service, the FBI, and the Federal Reserve.

Let Our PPP Loan Fraud Lawyers Help You

Our attorneys specialize in rooting out fraud and negligence on behalf of the American people. Our utmost goal is to ensure our clients reporting PPP loan fraud receive the utmost protections and maximum compensation allowable by federal and state law. Let us help you today.

PPP Loan Fraud Cases

If you are privy to information proving an individual or business has engaged in PPP loan fraud, filing a claim is the most effective means to hold the company accountable while receiving protections for yourself and your family. Whistleblowers are compensated for this act of bravery and have the satisfaction of exposing waste and abuse. Contact us today for a confidential, no-cost consultation.