Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in March 2020. A primary component of the CARES Act is the Paycheck Protection Program (PPP), which is designed to provide financial assistance to small businesses that have been impacted by the pandemic. The $349 billion that was set aside to assist small businesses was quickly depleted.
Under guidelines of the program, a company was able to borrow up to 2.5 times its average monthly payroll costs over the last 12 months or $10 million, whichever is lower. The loan can be forgiven if certain conditions are met, including spending at least 75% of the loan on payroll (for employees who make less than $100,000 annually).
As with any government program that distributes money, the potential for fraud is a chief concern. Federal authorities made the first arrests involving PPP loan fraud in May. Department of Justice officials continue to be on the lookout for any fraudulent activity involving CARES Act funds.
In their zeal to clamp down on PPP loan fraud, officials may be too aggressive in charging business owners and executives with crimes. The penalties are severe, just as they are with other white collar criminal acts. A conviction may result in substantial fines, jail time or home detention. Because it is a crime of moral turpitude, noncitizens convicted of COVID-19 fraud may be subject to deportation.
If you face federal criminal charges related to COVID-19 fraud, it is important to enlist the assistance of a knowledgeable white collar criminal defense lawyer immediately. Charges may include bank fraud or making false statements to the Small Business Administration. Your freedom and your professional future may be on the line. William Mauzy, Attorney at Law, can protect your rights and defend you against these and other criminal charges.
As with other fraud charges, prosecutors must prove the alleged perpetrators acted with intent. The PPP loan guidelines are complex, and an applicant may have mistakenly provided incorrect information. By showing there was no intent to defraud the government, it may be possible to have charges dismissed.
Government officials have made it clear they will not only be bringing charges against those who they feel fraudulently obtained loans, but also prosecute loan recipients who do not adhere to the restrictions regarding how the money can be used. Under the guidelines, PPP funds can be used for any of four costs: to cover payroll costs (including benefits), to pay rent, to pay interest on mortgage obligations and to pay for utilities.
If your company is audited or investigated, it is important to disclose all information and not misrepresent anything. You could face fraud charges for presenting false information to federal authorities.
