The Paycheck Protection Program (PPP) was introduced to help small businesses and independent contractors in the United States continue to operate their businesses during the Coronavirus Pandemic and cover payroll costs. This program received almost $350 billion in federal funds. However, these funds ran out almost immediately, resulting in many eligible businesses being unable to apply for a PPP loan.

Because of this sudden depletion in funds and the essential collapse of the Payment Protection Program Loans to small businesses, the U.S. Treasury and Small Business Administration (SBA) have undertaken a campaign to investigate instances of PPP loan fraud.

If your business is under investigation or being audited by the federal government for your PPP loan eligibility or loan forgiveness, you should contact an experienced loan audit defense lawyer as soon as possible.

Ronald Arthur Stearns Sr. PLLC

When it comes to government investigations and audits, experience matters. Ronald Arthur Stearns Sr. PLLC has been representing Texan citizens for over 26 years in all matters related to tax, fraud, and audits. He has helped many clients navigate audits and investigations relating to Paycheck Protection Program Loans and he has the experience and skills necessary to help you with your case.

Throughout his years of practice, he has seen the difficulties faced by small businesses and independent contractors, particularly in recent years with the financial crisis. Because of this, he is extremely motivated to protect PPP loan borrowers’ rights and ensure that they are not treated unfairly by an unjust system.

Whether your PPP funds are being audited or you are facing criminal investigations, Ronald Arthur Stearns Sr. PLLC is the right audit defense lawyer for you.

What is The Paycheck Protection Program (PPP)?

Following the outbreak of the coronavirus pandemic, the federal government introduced the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which intended to help small businesses in America by providing loans and cash-flow assistance. The Paycheck Protection Program (PPP) is a loan program that came from the CARES Act and is supported by the Small Business Administration (SBA)

There have been a number of expansions and updates to the Paycheck Protection Program (PPP) since it was first introduced. The Paycheck Protection Program Flexibility Act made changes that intended to make it easier to get a PPP loan fully forgiven, and gave small businesses more time to spend PPP Loans they received. Following this, the Economic Aid Act allowed businesses to take out a second PPP loan if they had used up the funds from the first one under certain circumstances.

Since the PPP Loans system was introduced, many small businesses and independent contractors were able to use this support to continue operating their businesses and help them deal with the financial crisis. However, the Paycheck Protection Program ran out of funds not long after the program was introduced and businesses that originally met the eligibility requirements for PPP loans were no longer able to receive them.

Paycheck Protection Program Fraud

Because of the negative media that resulted from the depletion of PPP funds, the U.S. Treasury Department and PPP lenders began to audit and investigate businesses and financial institutions that received PPP loans. The huge monetary loss that resulted from false claims and large loan applications means that those who obtained funds unlawfully may be subject to serious criminal penalties.

Like similar federal loan programs, there are many different situations that could cause a business or person to be accused of federal fraud when it comes to the Paycheck Protection Program. These situations could be either intentional misrepresentations or inadvertent mistakes, which was the case for many people who took out a PPP loan. However, regardless of whether it was intentional or a genuine mistake, it is important that you protect your future and your funds by hiring an experienced audit lawyer.

Some of the following situations could give rise to PPP fraud allegations:

PPP Loans Application Fraud

Individuals who originally applied for a Payment Protection Program (PPP) loan had to fill out an application form and submit information relating to their business and finances. In some cases, companies filled out incorrect information in order to secure a loan, which they otherwise would not have been eligible for. If a person received a PPP loan because of false information submitted on the application, they could face prosecution for fraud.

Examples of what may give rise to PPP loan application fraud include:

  • Misrepresentation of payroll costs in order to receive more money.
  • Lying about the number of employees in your business, as the PPP loan program was available only to businesses with less than 500 employees.
  • Misrepresenting employees as independent contractors in order to reduce the official employee count of your business.

Loan Stacking

Under the terms of the PPP businesses and borrowers can only take out one loan from one lender. However, what happened in many cases is that businesses took out multiple loans from different lenders, which is referred to as “loan stacking”. This has become the main subject of federal government investigations for dealing with PPP fraud.

Using PPP Loan Funds For Ineligible Business Purposes

Payment Protection Program (PPP) loans were only allowed to be used by borrowers in four specific ways:

  • Covering payroll costs of their employees
  • Paying rent for their building
  • Paying interest on mortgage obligations
  • Paying for utilities

In some cases, however, businesses that were granted loans through the PPP used the loan amount for other purposes or misunderstood the terms of the PPP. For example, PPP loans could only be used to cover expenses that were pre-existing as of February 15, 2020. However, some companies used this loan to pay for expenses after this date, which is outside of the terms of the PPP.

It is important to ensure that you have documentation to demonstrate how and on what you spent your PPP loan. As such, if you are audited for PPP fraud, you will have the necessary supporting documentation to show your compliance. If not, you should contact Ronald Arthur Stearns Sr. PLLC to discuss your case and ensure that you are not convicted of fraud.

Using PPP Loan Funds For Fraudulent Purposes

The terms of the PPP specifically state that individuals or companies who receive funds through the loan program and use it for fraudulent purposes can be charged criminally for fraud. PPP lenders can bring claims against allegedly fraudulent borrowers under the False Claims Act, where they may be subject to five years of federal imprisonment and tens of thousands of dollars in fines.

In cases where company owners and borrowers engaged in significant fraud, federal prosecutors have the ability to charge individuals for multiple statutory offenses. If convicted of statutory criminal charges for fraud, you could be imprisoned for a significant amount of time and risk paying millions of dollars in fines.

Fraudulent PPP Loans Certification

Businesses that applied to the PPP were required to make some fact certifications, which had to be done in good faith. Some mandatory certifications that loan applicants were required to make to secure a PPP loan include:

  • “The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.”
  • “Current economic uncertainty makes the loan necessary to support your ongoing operations.”
  • “You haven’t and won’t receive another PPP loan.”
  • “All the information you provided in your application and all supporting documents and forms [are] true and accurate.”

In the event that a loan applicant made a fraudulent loan certification, by falsely certifying facts, or by acting in bad faith, they could potentially face charges for fraud.

Fraudulent Loan Forgiveness Certification

A unique element of the Paycheck Protection Program (PPP) was that it allowed for loan forgiveness. This meant that if the PPP borrower used up 75% of their funds for payroll, their loan would be forgiven and they would not have to pay it back. However, in the event that the loan is not forgiven, it has a 1% interest rate with a maturity of two years.

To get a PPP loan forgiven, the borrower has to submit a forgiveness application that demonstrates that they have met all eligibility criteria for the loan and that all funds were used for authorized expenses. In addition, companies must get their documents certified and clearly show that the money was used to pay for employees, rent, utility payments, and mortgage interest.

If a business owner submitted a forgiveness application with false information or uncertified documentation, their loan may be the subject of an audit and they could be charged with fraud.

My Company is Being Investigated For PPP Loan Fraud, What Should I Do?

If your company is the subject of an audit by the federal government in relation to a PPP loan you were granted, loan applications, or loan forgiveness applications, the first thing that you should do is contact an audit defense lawyer. The Payment Protection Program was originally set up to help small businesses by providing coronavirus aid and relief, however, due to the confusing terms and redaction of funding, it has now caused many businesses a significant amount of stress and fear of being audited.

If you are the subject of an audit, you will need to ensure that you have all of the necessary documentation to prove that your loan was in fact legit and that you dealt with the funds as permitted by the PPP requirements. Your loan audit defense lawyer will be able to help you get your documentation in order and communicate with the federal authorities to ensure that you are not charged with fraud.

In the event that you do face criminal charges for fraud, your attorney will have to build a strong PPP loan fraud defense on your behalf to ensure that you are not sentenced to federal prison and forced to pay huge fines. Coming up against federal authorities can be quite difficult, and trying to defend criminal fraud charges alone will be stressful. As such, you will need to hire an attorney that has significant experience with PPP cases that can negotiate and fight on your behalf.

PPP Loan Audit Defense Lawyer Ronald Arthur Stearns Sr. PLLC

Ronald Arthur Stearns Sr. PLLC has a wide range of experience handling fraud cases and investigations and has helped many clients prove that their PPP loans were lawful and based on a genuine need for funds. He has the experience and skills necessary to guide you through the legal process, investigate the case on your behalf, ensure that you have the correct documentation, and build a defense for your case if necessary.

If you have been treated unfairly by the Treasury Department or borrowers bringing claims against you under the False Claims Act, he can help you file a case in court for unfair treatment. Ronald Arthur Stearns Sr. PLLC prioritizes the rights of taxpayers and small businesses, and he is dedicated to fighting against false claims of fraud and mistreatment by the government and the Internal Revenue Service (IRS).

Contact Our Law Firm Today!

Being found guilty of PPP loan fraud can have severe consequences. You could risk losing your business, having to pay huge fines to the government, spending time in federal prison, and ruining your reputation. The government is cracking down on all business owners who may have defrauded the PPP loan system and is ensuring that those who did not abide by the terms are punished.

If you are the subject of an audit or a criminal investigation for PPP fraud, it is vital that you contact an attorney as soon as possible. Ronald Arthur Stearns Sr. PLLC has been helping clients navigate the tax legal system for over 26 years and has represented clients with PPC audits, bank fraud, unpaid tax problems, and much more.

When it comes to PPC fraud cases, Ronald Arthur Stearns Sr. PLLC will proactively assist clients with gathering documentation for their audits and ensuring that they are compliant with future PPP audits if relevant. His priority is protecting the rights of taxpayers and small businesses and ensuring that they get a positive outcome in their case.

Call today to schedule a consultation at 210-853-2135.