Las Vegas PPP – SBA – EIDL Loan Fraud Lawyers
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Las Vegas PPP – SBA – EIDL Loan Fraud Lawyers
The COVID-19 pandemic led to unprecedented government assistance for businesses and individuals, including the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program administered by the Small Business Administration (SBA). While these programs provided a lifeline for many during an incredibly challenging time, some took advantage and committed fraud.
In Las Vegas and across Nevada, PPP and EIDL loan fraud is being aggressively prosecuted. If you or your business is being investigated or charged, it’s critical to consult with an experienced federal defense lawyer as soon as possible. Here’s an overview of these loan programs, common fraudulent activities, penalties, and defenses.
Paycheck Protection Program
The Paycheck Protection Program (PPP) was launched in April 2020 as part of the CARES Act. It authorized up to $349 billion in forgivable loans to small businesses to cover payroll, rent, utilities and other expenses. An additional $320 billion was approved by Congress in late April 2020. Loans are administered by the Small Business Administration (SBA) and issued by private lenders. The covered period for loan forgiveness originally ran 8-24 weeks after origination, but was later extended.
To be eligible, businesses had to have 500 or fewer employees, or meet SBA industry size standards. Applicants had to certify the loan was necessary to support ongoing operations given COVID-19’s economic impact. Loans would be forgiven if at least 60% went towards payroll, with the remainder for other operational expenses like rent, utilities, etc. Forgiveness amounts could be reduced if businesses cut jobs or salaries. Any unforgiven amounts converted to low interest (1%) loans repayable over 2-5 years.
Economic Injury Disaster Loan Program
The SBA’s Economic Injury Disaster Loan (EIDL) program provides low interest loans to businesses suffering substantial economic injury from declared disasters. EIDLs have repayment terms up to 30 years and provide vital economic support to help overcome lost revenue.
The CARES Act expanded the EIDL program to provide loans specifically for COVID-19 related losses. It authorized $10 billion in emergency EIDL grants of up to $10,000 within 3 days of applying to cover immediate operating expenses. The CARES Act also waived certain rules during the covered period from January 31, 2020 to December 31, 2021, including personal guarantees on loans below $200,000 and requirement to be in business for 1 year before the disaster.
Common Fraudulent Activities
With billions in government aid flowing rapidly to individuals and businesses, opportunities arose for abuse. Some common fraudulent activities involving PPP and EIDL loans include:
- Providing false employee, revenue or expense figures on applications to get larger loans. Many took advantage of limited upfront verification.
- Applying for multiple loans through different lenders. The rush to distribute aid meant lenders weren’t checking for duplicate applications.
- Using PPP funds for non-eligible expenses like buying luxury items or paying off debts. Some spent loans quickly before scrutiny increased.
- Lying about number of employees being retained to maximize forgiveness. Some laid off staff right after getting the loan.
- Falsifying records and documents to appear eligible. This includes fake tax returns, bank statements, and payroll records.
- Applying for EIDL grants and loans exceeding allowed amounts using multiple business identities.
- Spending EIDL funds for unauthorized purposes instead of working capital and normal operating expenses.
- Colluding with lenders for higher loans through kickbacks. Some lenders prioritized larger loans despite program limits.
- Stealing identities to fraudulently apply for loans or unemployment benefits in others’ names.
Penalties for PPP and EIDL Loan Fraud
PPP and EIDL loan fraud can lead to severe criminal and civil penalties. At the federal level, common charges include:
Wire fraud – Carries up to 20 years imprisonment for schemes to defraud others of money or property through interstate wires.
Bank fraud – Up to 30 years imprisonment for defrauding banks or financial institutions.
False statements – Up to 5 years imprisonment for knowingly making false statements to a government agency like the SBA.
Aggravated identity theft – Mandatory 2 year prison sentence consecutive to any other sentences for knowingly transferring or using another person’s means of identification.
Money laundering – Up to 20 years imprisonment for financial transactions involving illicit proceeds.
Defendants often face multiple charges that can lead to lengthy prison sentences. The government pursues forfeiture of any fraudulent obtained loan amounts or purchases made. Ongoing audits and investigations means those who committed fraud may be prosecuted years later.
Civil penalties include treble damages up to three times lost amounts, civil fines, and being barred from federal contracts. The SBA has clawback authority to recoup funds through administrative proceedings. Those convicted also commonly face heavy fines and restitution orders.
Defenses in PPP and EIDL Fraud Cases
Given severe penalties, building an effective defense is critical. Here are some common defenses our experienced attorneys use:
Lack of intent – No intentional deception or misrepresentations were made. Any issues were unintentional mistakes or misunderstandings.
No knowledge – Defendant was unaware of any fraudulent representations made by others in the loan application process.
Good faith – Defendant had a good faith belief that representations made were truthful and loan funds were used appropriately.
Compliance ambiguities – Given the rush, limited guidance led to reasonable confusion over compliance requirements that should not be criminalized.
Loan forgiveness – PPP loan was spent on eligible expenses and appropriate forgiveness documentation provided.
Audit errors – Any identified discrepancies arose from mistakes during government audits and reviews of records.
Lack of sophistication – Defendant lacked financial and legal sophistication to understand complex program requirements.
Weak evidence – Challenge strength of government’s evidence and credibility of witnesses.
An experienced federal fraud defense lawyer can carefully assess the facts of your case to build customized defenses. Defenses often involve digging into technical details and complex regulations not easily understood by prosecutors. Having an attorney who thoroughly understands these COVID relief programs is key.