Colorado PPP and EIDL Loan Fraud: What You Need to Know

The COVID-19 pandemic led to the creation of several federal loan programs intended to provide financial relief to struggling businesses and individuals. Two of the most widely used programs were the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program, both administered by the Small Business Administration (SBA). While these programs offered a lifeline to many, they also became prime targets for fraudsters looking to take advantage of the rushed roll-out and limited oversight. In Colorado, PPP and EIDL fraud charges have been on the rise. Prosecutors treat these cases very seriously, with potentially severe penalties for those convicted. The allegations typically center around falsifying information on loan applications to receive funds the applicant wasn't entitled to. Let's take a closer look at how these schemes work and what defenses may be available if you find yourself under investigation.

Common PPP and EIDL Fraud Schemes

Some of the most common schemes used to defraud the PPP and EIDL programs include:

• Claiming more employees or higher payroll expenses than the business truly had in order to qualify for larger PPP loans.
• Using stolen personal information or creating fake businesses to apply for loans.
• Lying about having an established business that suffered pandemic-related losses to qualify for EIDL funds.
• Applying for and receiving multiple PPP loans by submitting applications for the same business to different lenders.
• Using PPP funds for personal purchases instead of approved business expenses like payroll and rent.
• Making false statements about criminal history to qualify for loans that would otherwise be denied.

While some cases may involve outright fraud from the start, others arise when struggling business owners make desperation-driven mistakes on their applications. Prosecutors often treat these situations similarly despite the differences in intent.

Penalties for PPP and EIDL Fraud

Is PPP loan fraud a felony?

The potential penalties for PPP or EIDL fraud depend on the specific charges brought, but commonly include:

• Up to 30 years in prison for major fraud against the government under 18 U.S. Code § 1031.
• Up to 5 years for each count of wire fraud under 18 U.S. Code § 1343, if electronic communications were used.
• Up to 2 years for each count of false statements under 18 U.S. Code § 1001.
• Restitution of all loan funds received.
• Large fines and asset forfeiture.

These penalties add up quickly, with many defendants facing decades behind bars and financial ruin if convicted. It's critical to retain experienced legal counsel early in the process to mitigate risks.

Defenses in PPP and EIDL Fraud Cases

While the government often pursues PPP and EIDL fraud cases aggressively, viable defenses exist in many scenarios. Some potential defenses include:

• No intent - Claiming the defendant made a mistake or misunderstood program rules rather than intentionally defrauding.
• Entrapment - Arguing government agents improperly induced the defendant into committing fraud.
• Duress - Asserting the defendant only engaged in fraud due to threats or coercion.
• Good faith - Establishing the defendant reasonably believed their actions complied with program rules.
• Free speech - Challenging criminalization of false statements under the First Amendment.

An experienced attorney can review the specifics of your case and determine if any of these defenses may apply. The law contains nuances that a skilled lawyer can exploit to undermine the prosecution's arguments.

Avoiding Trouble from the Start

The best way to avoid PPP or EIDL fraud allegations is to follow all program rules meticulously from the beginning. When applying, be sure to:

• Provide accurate employee, revenue, and cost information.
• Use loan funds only for approved expenses.
• Maintain thorough records of spending to account for the money.
• Seek clarification from qualified professionals if unsure of any requirements.
• Avoid misrepresenting information or cutting corners on forms.

Ensuring complete compliance upfront makes it much harder for the government to claim fraud occurred later on. If you do receive a subpoena or find yourself under investigation, don't panic. Consult with a lawyer right away about the best path forward.

Colorado PPP and EIDL Fraud Lawyers Can Help

Who to contact for PPP loan fraud?

Dealing with PPP or EIDL fraud accusations can be an incredibly stressful and damaging experience. The risks of conviction are severe, with both freedom and finances on the line. You shouldn't have to face this alone. The attorneys at Spodek Law Group have extensive experience defending complex white collar cases in Colorado and nationwide. We offer a free consultation to review your situation and provide expert guidance. Don't wait to call (212) 300-5196 - help is a phone call away.