The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) were two government programs designed to help small businesses stay afloat during the COVID-19 pandemic. Unfortunately, whether people realized it or not, these loans were often not used as intended. While some business owners may have knowingly committed fraud, many genuinely did not understand the loan requirements. As a result, the federal government has spent significant resources in tracking down these business owners to convict them for criminal charges or have the funds returned.
Regardless of anyone’s intentions, if you are under investigation for PPP or EIDL loan fraud, it’s important to speak to an attorney as soon as possible. You have rights, and an attorney can help you protect yourself and your business.
How Loan Fraud Is Determined
There are a few markers that will appear suspicious to investigators when determining whether or not an EIDL or PPP loan may be fraudulent. These include:
- The business did not have any employees or payroll before the pandemic.
- The business applied for a loan that was much larger than its actual needs.
- The business used the loan money for personal expenses instead of business expenses.
- The business owner has a history of fraud or financial problems.
What to Do If You Are Investigated for Loan Fraud
If you are contacted by law enforcement about EIDL or PPP loan fraud investigation, it’s important to invoke your right to remain silent. You don’t have to answer any questions without an attorney present. However, it may not be immediately obvious that you’re under investigation. For example, at this stage, it’s possible that your loan preparer, CPA, or tax specialist may call out of the blue to discuss your loan(s). It’s not advisable to talk about the loan, regardless of whether it was obtained in good faith with anyone other than an attorney that has experience defending borrowers from EIDL or PPP loan fraud. The caller could be under investigation themselves or are working with law enforcement to tap into the conversation and listen for potentially incriminating information.
Once the loan has been approved and the funds are dispersed, there shouldn’t be much to discuss years later. If this happens, you should gather relevant information about your loan, such as the application materials, the loan documents, and any financial records related to the loan, and bring them to your attorney for consultation. This information will be helpful to your attorney in the event that they need to defend you against charges.
If you are charged with loan fraud, you will likely be facing a criminal trial. However, the government will have to prove beyond a reasonable doubt that you knowingly and willingly committed fraud. Regardless of the evidence they claim to have against you, working with your attorney early in the process will be your best chance at a positive outcome.
Potential penalties for conviction may include heavy fines greater than the cost of your loan, imprisonment, and restitution to the government. Although EIDL and PPP loan fraud is a serious crime, you still have options if you are under investigation.
Working With an AttorneyIn the event that there is already an investigation underway, there’s no need to panic. Don’t destroy any documents or discuss the case with the media. It’s important to cooperate with the investigation, but only through the strategic advisory of your attorney. At The Snow Legal Group, PLLC, we use our extensive experience defending against fraud allegations to protect your rights and fight for your freedoms. Although the Department Of Justice is tackling obvious instances of fraud, businesses should also be aware that criminal and civil enforcement authorities are likely to verify certifications made by companies regarding their need for PPP funds. If that happens, reach out to our firm and call (704) 358.0026 for a consultation today.