Paycheck Protection Program Fraud Attorneys

In March 2020, the federal government established the federal Payroll Protection Program (PPP) to help businesses effected by the COVID-19 pandemic to keep their staff employed. Almost immediately, the Attorney General directed all U.S. Attorneys’ Offices to prioritize the detection and aggressive prosecution of PPP fraud. Two years after the scheme’s inception, prosecutors describe PPP Loan Fraud as the “largest fraud in US history”.

While the media focuses on “big fish” fraudsters who took out millions of dollars in fraudulent loans, there are also small business owners who took out more modest amounts under investigation.

The federal government looks for business owners who violated the terms of the PPP loan by:

  • Overestimating the amount of staff. More staff equals more money. Business owners who reported more staff than they actually employ could be charged for PPP fraud.
  • Underestimating number of employees. Small Businesses with less than 500 employees are entitled to addition loans and loan forgiveness. Some “large” business owners underestimate their employees to take advantage of these programs
  • Loan Stacking. The terms of the PPP do not allow businesses to “double dip”. A business owner cannot ask for PPP loans from several different loan providers.
  • Improperly spending the PPP loan. The terms of the PPP loan narrowly define what a business may spend the money on, including payroll, utilities, mortgage, or rent/leasing space for the business. Spending the money on personal credit card debts or expensive cars is not permitted.
  • Submitting false certification of PPP Loan forgiveness. 
  • Providing untruthful statements to federal agents or agencies during an audit or investigation. 

There is no discrete federal statute for PPP fraud. The U.S. Attorney’s Office has been charging Defendants with one or more of the following counts: Wire Fraud, Identity Theft, Bank Fraud, False Statement, and Conspiracy.

Finding yourself as the subject of a PPP loan fraud investigation can be frightening. If you suspect that you could be subject to one, consult with an attorney well versed in financial crimes and federal statutes. They can help you navigate Small Business Bureau Safe Harbor Provisions, audits, and with speaking to Government agents.

Arizona PPP Loan Fraud News

In March 2022, President Biden announced new steps to crack down on Payroll Protection Program (PPP) Fraud. These steps include the DOJ appointing a new prosecutor, enhanced penalties, and new directives to combat identity theft. Even before this new initiative, several Arizona residents were feeling the heat when they came under investigation for PPP loan fraud.

A new PPP loan scam rocked the Valley this week. Colby Benson, a 21-year-old Maricopa county resident, was arrested on charges of identity theft and fraud. Benson would contact people on social media for their Society Security numbers and other identifying information. He would use this information to apply for fraudulent loans. Benson admits to receiving over $500,000 in fraudulent loans. This type of scam has been recognized by the AARP to disproportionately target older people.

This is not the only scam taking advantage of Arizonans. A federal case involving over 20 defendants is unfolding at the U.S. Attorney’s Office in Downtown Phoenix. Prosecutors allege that the Defendants coached people to take out fraudulent loans or to create companies to receive pandemic relief. US Attorney Frank Bordeaux, Jr. warns Arizonans that if “If someone approaches you with the idea that you can take out one of these loans to make money, you’re at risk of putting yourself in jail.”

Police Officer Toni Richardson was arrested in December 2021 for receiving over $1.2 million in fraudulently requested PPP loans. Richardson alleged these funds would cover payroll expenses for her 85 employees at the “Lotto Club” in Glendale, Arizona. Upon further investigation, authorities discovered that the Lotto Club is a social group with no active employees.

In December 2021, nine Valley residents were indicted for PPP fraud. Prosecutors allege that the Defendants used nearly $23 million ill-gotten funds to pay for luxury vehicles and personal expenses.

If you are the target of an investigation or fell victim to one of these social media PPP scams you may want to consult with an experienced attorney. As a former US Attorney, Ashley Adams is seasoned litigator experienced in all facets of white collar crime.

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