Philadelphia PPP – SBA – EIDL Loan Fraud Lawyers

The COVID-19 pandemic led to unprecedented government assistance for small businesses in Philadelphia and nationwide. However, the speed of relief program rollouts also created opportunities for fraud and abuse of Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loans (EIDL), and other Small Business Administration (SBA) funding meant to help firms survive pandemic shutdowns. This article examines legal issues around PPP and EIDL fraud accusations in Philadelphia, including potential defenses and implications for those under investigation.

Overview of COVID-19 Small Business Relief

The CARES Act in March 2020 authorized over $650 billion in PPP loans, which are forgivable if spent on payroll, rent, utilities and other approved costs. Another $20 billion went to the SBA’s EIDL program for working capital loans up to $2 million. While these programs threw a critical lifeline to millions of small businesses, the speed of funding meant limited vetting of eligibility and need.

The SBA Inspector General estimates over $200 billion in potentially fraudulent EIDL and PPP loans were distributed nationwide out of $1.2 trillion total approved, with hundreds of thousands of suspicious applications originating from Pennsylvania. Law enforcement is ramping up investigations and prosecutions for COVID relief fraud in Philadelphia and across the state.

Federal Laws on SBA Loan Fraud

Prosecutors typically charge PPP, EIDL and other SBA loan fraud under these federal statutes:

Wire fraud – using interstate wires to execute a scheme to defraud or obtain money falsely (18 U.S.C. § 1343)
Bank fraud – scheme to defraud a bank or obtain bank funds through false statements (18 U.S.C. § 1344)
False statements – falsifying or concealing material facts in a SBA or other federal agency matter (18 U.S.C. § 1001)
Aggravated identity theft – using someone else’s personal information during certain felony violations (18 U.S.C. § 1028A)

Potential penalties include up to 30 years in prison for wire and bank fraud, plus mandatory 2-year consecutive sentences for aggravated ID theft convictions.

Common Types of PPP and EIDL Fraud

Some typical COVID relief loan scams prosecuted in Philadelphia and elsewhere include:

Exaggerated payroll – inflating number of employees or salary expenses to maximize loan amount
Forged documents – creating fake tax returns, bank statements to support lies on applications
Stolen identities – using someone else’s personal information to apply for fraudulent disaster loans
Loan stacking – illegally obtaining multiple PPP loans from different lenders for the same business
Ineligible recipients – government entities, publicly traded firms, and other unqualified applicants
Misuse of funds – spending loan proceeds on personal expenses instead of approved costs like payroll

The alleged fraud amounts range from $100,000 into the millions for individual cases being prosecuted in the Philadelphia area and statewide.

Defenses to PPP and EIDL Fraud Charges

Despite the potential for abuse, these emergency loan programs still helped many legitimate Philadelphia businesses survive the pandemic. Possible defenses include:

Lack of intent – the government must prove you knowingly devised a scheme to defraud the SBA or lenders.
Good faith errors – inaccurate information provided unintentionally due to the crisis circumstances.
Authorized use of funds – demonstrating loan proceeds were properly spent on approved costs like payroll, rent, utilities.
Minimal misstatements – small mistakes unlikely to have impacted loan approval or amount.
Identity theft/false accusations – proving you did not actually submit an application or receive loan funds.

An experienced federal fraud defense attorney can help analyze the prosecution’s evidence and build the strongest defense for your specific situation.

Penalties for PPP and EIDL Fraud Convictions in Philadelphia

Potential consequences of a conviction on federal COVID relief fraud charges include:

Up to 30 years in prison for wire or bank fraud.
Mandatory minimum 2-year consecutive sentence for aggravated identity theft.
Fines up to $1 million for individuals, higher for corporations.
Full restitution of all funds obtained by fraud.
Treble civil damages under the False Claims Act.
Debarment from federal contracts and loans.

Sentences are based on federal guidelines factoring in the fraud amount, sophistication, criminal history and other circumstances.

Collateral Consequences

Beyond direct penalties, a conviction can also lead to:

Reputational damage, loss of customers, contracts, licenses.
Exclusion from future COVID-19 relief programs.
Ineligibility for other SBA loans, grants, contracts.
Potential suspension of professional licenses.

These collateral consequences demonstrate the importance of retaining an experienced white collar defense attorney if you are facing accusations of PPP, EIDL or other SBA loan fraud in the Philadelphia area.