In 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed as a way to provide benefits to individuals and companies suffering because of the Covid-19 pandemic.

A central part of the CARES Act was the Paycheck Protection Program (PPP), which provided financial relief to small and medium-sized businesses that were under financial strain because of the pandemic. Thousands of businesses and independent contractors used this much-needed support. However, PPP very soon ran out of funds, and many businesses that were eligible for the funds were unable to receive them.

Now, the U.S. Treasury and Small Business Administration (SBA) have launched a campaign to investigate any instances of possible fraud. This is because of the extraordinary rate at which hundreds of billions of dollars were depleted from the PPP.

If your loan eligibility or forgiveness application is being scrutinized by a PPP loan audit, then know that you are not alone. If you fail to act, you could be found guilty of PPP loan fraud and expected to pay back your loan, as well as other penalties.

To prevent this from happening, you should contact Attorney Ronald Arthur Stearns Sr. immediately.

Ronald Arthur Stearns Sr. PLLC in Houston, TX – Houston PPP Loan Audit Defense Lawyer

If you benefitted from PPP loan funds and are now facing an audit, it is crucial that you hire a Houston PPP loan audit defense lawyer. If not, you risk being found guilty of PPP loan fraud.

With a deep understanding of Texas tax law and 26 years of impressive experience, Ronald Arthur Stearns Sr. is the best attorney for you. He has helped many clients who were facing criminal charges of PPP loan fraud, and he is more than capable of helping you too.

Attorney Stearns has devoted his career to litigation and tax resolution, meaning he has the wisdom and resources needed to fight for your loan forgiveness. His deep understanding of Texas tax law and the PPP loan program, paired with his dedicated approach to the attorney-client relationship, means that working with Attorney Stearns will be stress free, and you won’t have to worry about navigating the complex legal process.

With several honors under his belt and professional associations with the American Bar Association and the State Bar of Texas, you can trust that by working with Attorney Stearns, you’ll be giving yourself the best chance at securing a positive outcome.

Whatever your situation is, Attorney Ronald A. Stearns Sr. will be able to help. So call our Houston law office today at 210-853-2135.

What Is Classed as Paycheck Protection Program (PPP) Loan Fraud?

All federal programs are at risk of fraud. There are various acts and omissions that can lead to allegations of federal fraud, including intentional misrepresentations (which can ultimately result in criminal fraud charges) and also accidental mistakes, which still resulted in the improper obtainment of federal funds.

Explained below are all possible allegations of fraud regarding the PPP program:

PPP Loan Application Fraud

When completing the PPP loan applications, applicants had to conform to an eligibility criteria. Companies that lied on their applications in order to pass the eligibility criteria and receive the funds could face prosecution.

Some examples of misrepresenting information include:

  • To be eligible for the loan, most companies were required to have less than 500 employees. Some companies lied about the number of employees, either outright or by misclassifying employees as independent contractors.
  • Companies were only eligible to receive loans equal to two months of their average monthly payroll costs from the previous year, plus an additional 25%. Some companies misrepresented their company payroll expenses so that they would receive more money.

Fraudulent Loan Certification

PPP loan applicants were required to certify some facts during the application process. Any PPP applicants that were found to have given false information have the potential to face PPP fraud charges.

Some of the certifications that had to be made in order to secure PPP loans include the following:

  • The current economic uncertainty created by the pandemic meant that the loan was needed to support your company’s ongoing operations
  • The funds would be used to retain workers and maintain payroll costs or to pay mortgage, lease, and utility payments
  • You haven’t and won’t receive another PPP loan
  • All the information that was provided in your application and supporting documents is true and accurate

Loan Stacking

One type of potential fraud is loan stacking. This is where an applicant receives PPP loans from more than one lender.

The federal authorities will be focusing on this type of fraud and will be tracking the distribution of all funds from the PPP to determine which companies received loans from multiple lenders. They will become the first targets in the federal government’s attempts to prosecute PPP fraud.

PPP Funds – Fraudulent Purposes

It is stated by the U.S. Treasury Department’s Paycheck Protection Program that there is no personal guarantee requirement under the PPP loan, but if the proceeds are used for fraudulent purposes, the U.S. government will carry out a criminal investigation against you.

This shows that the government not only intends to prosecute companies that committed loan fraud via wrongly obtaining PPP loans but also to prosecute individuals who were involved in the fraudulent activities.

As stated in the False Claims Act, individuals found guilty of PPP fraud charges will face tens of thousands of dollars in fines and up to five years of federal imprisonment. If prosecutors pursue charges for multiple federal crimes (which is likely in a significant PPP loan fraud case), company owners could be at risk of receiving penalties of hundreds of millions of dollars in fines and decades of jail time.

PPP Funds – Ineligible Purposes

The PPP loans were intended to be used in very specific ways, limited to the following:

  • Cover payroll costs, including benefits
  • Pay interest on mortgage obligations
  • Pay rent
  • Pay for utilities

PPP loans were only allowed to be used to cover the above expenses that were pre-existing as of February 15, 2020. If a company used the funds for any other purpose, then this could lead to federal charges of fraud.

Unfortunately, it hasn’t been made clear how companies can prove that they complied with this requirement. At the very least, companies that received a PPP loan should document the source of payment for all eligible and non-eligible expenses, so they can show their compliance in case they face a PPP fraud audit.

Fraudulent Loan Forgiveness Certification

Despite the Paycheck Protection Program only having a low 1% interest rate, many companies may be eligible for loan forgiveness, which is where you do not have to pay back all or a portion of your loan.

To request loan forgiveness, companies must be able to provide documentation that they’ve met every single eligibility criteria and that they used their PPP loan for only authorized expenses. According to the U.S. Treasury Department’s office, companies must also certify that the documents are true and that they used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

Misrepresenting or Hiding Information During a PPP Audit

If you have received PPP loans, then you may face an audit or investigation, conducted by the Federal Bureau of Investigation (FBI), U.S. Department of Justice (DOJ), or various other federal agencies and task forces that have been specifically formed to target PPP loan fraud.

If your company faces an audit or investigation, then you need to be careful to avoid sharing any information that could harm your case. You should also ensure that you avoid making any misrepresentations. If you make false statements or withhold information, then that in itself is a form of fraud, and you could face a separate prosecution for making false statements to the federal law enforcement agents.

What Will The PPP Audit Look Into?

Amongst many things, the U.S. Small Business Administration (SBA) will review the economic necessity of the PPP loan you obtained. However, the guidelines for “economic necessity” are unclear, which allows the SBA to look into a wide range of factors when working out the eligibility of a loan recipient.

A PPP loan audit will likely scrutinize the following:

  • If the loan recipient was eligible to participate in the Paycheck Protection Program
  • If the amount of the PPP loan was accurately calculated and distributed
  • If the loan proceeds were spent on eligible purposes
  • If the loan recipient is eligible for loan forgiveness

It is very likely that an audit will thoroughly investigate your company and your PPP loan process. It is critical that you do not attempt to represent yourself during the audit or in federal courts, as without a deep understanding of Texas tax law, it’s unlikely that you’ll be successful in your case.

Therefore, if you are contacted by the SBA regarding a PPP loan audit, you need to contact an experienced and skilled lawyer such as Ronald A. Stearns Sr. With his help, you’ll know your rights and interests are protected throughout the entire investigation.

How a Houston Tax Attorney Can Help You

Tax law is incredibly complex to navigate through, so it is important to have an attorney like Ronald Arthur Stearns Sr. PLLC on your side. A skilled tax attorney can guide you through the legal process. He will be able to scrutinize the case on your behalf, communicate with the federal authorities, and build a strong PPP loan fraud defense.

Your tax lawyer will do everything possible to prove that you acquired the PPP loan lawfully because you had a genuine need for the funds. They will gather evidence and use their extensive knowledge and resources to ensure that you have the best chance at winning your case. They will specially tailor a defense based on your specific case and what options will be available for you, and thus determine the best course of action.

They are also prepared to file and prosecute your case in court if you have been treated unfairly.

However, if you are facing a PPP loan fraud audit, then it is advisable that you get in touch with a skilled tax attorney like Ronald A. Stearns Sr. immediately. This will give him and his team plenty of time to build a solid defense on your behalf, and ensure that you have every possible option available to you.

Regardless of the specifics surrounding your case, there is always some way that Attorney Stearns will be able to help you.

Speak to a Houston Tax Lawyer Today

If you are facing federal investigations regarding your PPP loan, you should get in touch with Ronald A. Stearns Sr. as soon as possible.

Unfortunately, the consequences of being found guilty of PPP fraud can be devastating, so you should not delay in speaking to a tax attorney. If you do, you could be putting your case at risk and limiting your chances of securing the best outcome for you and your company.

Ronald A. Stearns Sr. has experience, knowledge, and tenacity – everything that’s needed to fight on your behalf. After spending 26 years helping clients facing tax law, you’ll know that Attorney Stearns will be able to provide you with intelligent solutions and effective push back against the PPP audit.

To protect yourself and your company, contact Ronald Arthur Stearns Sr. PLLC at  210-853-2135 today. Do not hesitate any longer!