Helping Small Businesses Navigate PPP and EIDL Investigations in Minnesota

When the COVID pandemic hit in early 2020, the government created new loan programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) to help businesses and workers financially harmed by the economic fallout. These programs threw a lifeline to many companies and people. But now, allegations of fraud have emerged about some PPP and EIDL loans issued in Minnesota and other states. In this article, we’ll overview the fraud issues in a helpful way. We won’t use pretentious legal language. We’ll look at the investigations happening, the types of fraud alleged, potential penalties businesses could face, and strategies a lawyer could suggest if accused. With billions given out through PPP and EIDL, it's no surprise fraud concerns are rising for agencies like the Department of Justice (DOJ).

The Backdrop of PPP and EIDL Fraud Investigations

Will PPP loan fraud be investigated?

Soon after the CARES Act created the PPP and expanded EIDL in March 2020, warnings came up about possible widespread fraud. With hundreds of billions going out fast, oversight and checking eligibility were limited at first. This left the door open for abuse. According to a New York Times article, an internal Small Business Administration (SBA) memo estimated $243 million of PPP loans through one bank went to potentially fake businesses. A Washington Post analysis found over $1 billion went to some companies that got multiple PPP loans. In Minnesota, PPP and EIDL fraud made news recently too. In July 2022, federal prosecutors charged two Twin Cities women, Shauntel Solomon and Lashon Hughes, with allegedly stealing $2.25 million in COVID relief funds through bogus loan applications. Per the charges, they faked payroll and tax records and used the money for personal purchases. With huge sums flowing from pandemic relief programs, investigators have been working hard to find fraud. In September 2021, the DOJ formed the COVID-19 Fraud Enforcement Task Force to bring agencies together to collaborate. The Secret Service, FBI, IRS Criminal Division and several U.S. Attorney’s Offices are among those now looking into PPP and EIDL cases.

Types of PPP and EIDL Fraud Under Review

How to prove PPP loan fraud?

Prosecutors are looking at many schemes and tricks used to try to wrongly get or misuse PPP and EIDL loan funds. Some main fraudulent activities the DOJ is making top priorities to investigate include:

Faking payroll, tax and other loan application documents.
Requesting multiple loans through different lenders.
Using loan money for unauthorized personal purchases.
Applying for loans for pretend or inactive businesses.
Seeking loans far above a business's real payroll needs.
Lying about number of employees and payroll totals.
Saying an established business existed to qualify for EIDL when there wasn't one.
Not disclosing criminal history or pending charges.

These are just some of the concerning patterns investigators are finding. Basically any intentional material lie or misuse of PPP or EIDL funds could potentially be treated as fraud.

Potential Criminal Penalties and Charges

Those found guilty of fraud related to COVID relief loans face severe criminal penalties. Prosecutors have been charging defendants with federal crimes like:

Wire fraud - Up to 20 years in prison.
Bank fraud - Up to 30 years in prison.
Making false statements - Up to 5 years in prison.
Money laundering - Up to 20 years in prison.
Aggravated identity theft - Minimum 2 years in prison.

Prosecutors often bring multiple charges that can lead to long prison terms if convicted. For example, in one California PPP fraud case, the defendant faced over 70 years maximum based on eight counts.

Potential Civil Liability Risks

In addition to criminal prosecution, those accused of PPP or EIDL fraud may face civil lawsuits and administrative impacts. Even if no criminal charges are filed, the government can still seek civil fines and triple damages under the False Claims Act for wrongly getting program funds. The government can also take administrative actions like barring someone from federal contracts, requiring loan repayment with interest, and blocking access to other SBA loan programs. For small businesses, being cut off from future SBA loans could be devastating. Having an experienced attorney to help carefully navigate PPP or EIDL fraud accusations is crucial. They understand the complex laws in this area and can protect your rights and interests.

Help Is Available from Experienced Attorneys

If your business in Minnesota is facing allegations of PPP or EIDL fraud, the stakes are high. But you don't have to go it alone. Connect with a knowledgeable lawyer right away to discuss your situation and start building a strong defense. There are options to explore and proactive steps to take for the best possible outcome. With an empathetic legal expert on your side guiding you through the process, you can move forward with more confidence. Don't wait to get the legal help you deserve.