The coronavirus pandemic hit most businesses, including small and large companies, negatively. With the virus’s arrival, most enterprises couldn’t sustain themselves, making it essential to have the Coronavirus Aid, Relief, and Economic Security – CARES act, signed into law on March 27th, 2020. The essential item on this act was the Paycheck Protection Program (PPP), which provided aid and relief to businesses, both small and medium-sized, which felt the impact of the COVID-19 pandemic.
Unfortunately, the kit didn’t last long as it was overwhelmed by applications, which made it run out of funds without catering to the needs of many. However, not all companies qualified for this PPP loan, which left undeserving companies to enjoy the kit while leaving others out. The PPP Loan program, being termed partly as fraud, will have many companies scrutinized to establish if they genuinely received the PPP kit. With this occurrence, the U.S. Treasury Department’s Office of the Comptroller of the Currency – OCC finds ways to avoid future frauds of such programs. It’s also trying to find ways to look at what conspired during the program rollout. They will try as much to check on how the fraud got in, find culprits, and get better ways to prevent such from happening in the future.
With the U.S. Treasury Department looking for better ways to offer these programs in the future to avoid frauds, other agencies are digging deep to find the companies involved in the PPP fraud. Once found, these companies might go into prosecution as the scam has attracted parties due to its negative publicity. To avoid being prosecuted and avoid penalties that come with these prosecutions, the affected companies should seek federal counsel to mitigate the risks involved.

Factors that compose the PPP Loan Fraud

Most of the factors that compose the PPP loan fraud include misrepresenting information and inadvertent mistakes that led the companies to enjoy the loan program unlawfully, without following the set rules and guidelines. Some of the possible allegations of PPP fraud include the below.

1. Loan Stacking

Loan Stacking refers to the company accessing the PPP loan from multiple lenders. According to the OCC website’s information, the officials will first start targeting companies that received this loan through numerous financial institutions. The companies that received the loan through this system will be the first and an easy target since the agency will use the available information to get these companies. Any company involved through this type of lending will soon face the charges and penalties involved.

2. PPP Loan Application Fraud

To get the PPP loan funds, companies had to meet all the guidelines on the application forms. Unfortunately, some companies did not meet these criteria. This situation led to them misrepresenting the information that led them to get the loan fraudulently. Some of the information which got misrepresented includes:

• Juggling the number of employees: For a company to fit in the program, it should have less than 500 employees.
• Classifying the employees as independent contractors: Most companies put their employees as independent contractors to reduce their companies’ numbers.
• Large companies with over 500 employees at the time of application made applications as small or medium-sized companies with less than 500 employees.
• Providing false information on the company’s payroll cost to enable it to get PPP loan funds: Companies were supposed to get up to two months of the previous year’s average payroll costs with an additional 25% on a maximum loan limit of $10 million.

3. Fraudulent Loan Certification

Other than the eligibility criteria listed above, companies were supposed to certify individual facts before getting the loan. Although most of these facts were in good faith, some companies failed to provide the right information. Some of the mandatory certifications required to get the PPI loan include:

• Proving the company has been affected negatively by the pandemic, which makes the loan necessary.
• Declaring that the PPP loan funds will entirely be used to retain workers, pay their salaries, and pay for the business mortgages, utility bills, and lease.
• Affirm that you haven’t received, and you have no intention of receiving another PPP loan.
• Conforming that all the information provided in the form is true and accurate and represents the company’s actual position.

4. Using PPP Loan Funds for other Ineligible purposes

Companies that used the PPI loan funds for other uses other than those stated. PPI loan funds are supposed to pay for rents, wages, and utilities and cater to the mortgage interests. Any other use will lead to prosecution for fraud. Companies that received the funds will have to prove how they complied with the requirement.

5. Using the Funds for Fraudulent Purposes

Companies that used the loads for fraudulent purposes will also face criminal charges, as stated in the law. The government will charge companies and its owners for fraudulently obtaining the PPP loan and using it the same way. Such can lead to fines or federal imprisonment for unlawful getting and using the funds.

6. Having Fraudulent Loan Forgiveness Certification

Due to some circumstances, the state scraps off the loan to some companies. For the company to qualify for this, it has to prove that it was eligible for the loan and that it used it as required. Providing false information to get forgiveness will lead to a fraud case.

7. Giving false information or holding important information during audit or investigation

Companies suspicious of engaging in the PPP loan Fraud will undergo investigation and audit. Concealing or giving false information to auditors will lead to new charges against the company and its owners.

Steps to take when your company gets targeted in the PPP Loan Fraud?

If you feel that your company never met the PPP loan criteria and got the loan fraudulently or is a fraud target, all you can do is consult the PPP fraud lawyers immediately. They will help you avoid fraud charges and penalties that come with the fraud case.