Recent investigations and audit by the SBA shows that some of the PPP loans have been red flagged due to certain dubious means. The Paycheck Protection Program was created in March 2020 to support small businesses in order to survive the economic downturn during COVID-19 pandemic.
This program created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act was a resourceful one but unfortunately, there have been flagged PPP loans (loan frauds). Other took advantage of this aid and relief COVID-19 package with false information as well as multi applications.
Also, some companies wrongly used the funds for other expenses instead of what its main purpose (preserving their employees on payroll, rent and utilities). They might have used it for their personal benefits as well.
Findings by several researchers concluded that the PPP loans had fraudulent activities attached to it and there was also mismanagement of funds by companies. Paycheck Protection Program was a good initiative that the federal government used to prevent small companies from laying off their employees and closing down their businesses.
However, its main purpose wasn’t fully met since there was loan fraud in the application and receiving process which flagged the PPP loans.
Why do we have flagged PPP loans?
Some PPP loans have been red flagged or regard as loan fraud because of certain bad activities associated to it. Below are the reasons why there have been red flag on the PPP loans application;
- Some companies or business submitted multiple PPP loan applications to different lenders.
- Other business submitted a fraudulent loan application for a PPP.
- They submitted a PPP loan application that was not understandable. With some providing wrong information about their businesses.
- Unauthorized expenditures were made with PPP loan monies. Companies used the PPP loan money for other expenses.
- Made a fraudulent certification to be eligible for PPP loan forgiveness. They provided wrong documents for the loan application.
- Some people created new business entities and entered into debt obligations in order to secure the PPP loans.
Affected business will receive a subpoena to investigate your loan application. During the investigation period, hire a PPP loan fraud defend lawyer who will be guiding you through the process.
Individual found guilty for this act could face serious penalties as they could be charged for bank fraud, fake documentation and others.
What to do when you notice you receive PPP loan fraud alert
Individual or companies who have been hit with loan fraud from the PPP loans must have available the necessary documents and personal record in relation to that. Also, get an attorney who is much knowledgeable in the field of the PPP loans for assistance and advice.
Fraudulent PPP Loan Penalties
The penalties are dependent on the type PPP loan fraud you engaged in. The Federal law has established several punishments or fines based on the kind of PPP loan fraud. There are fines and there are jail terms.
For each false claim that is submitted to the government, the False Claims Act imposes civil penalties of up to $11,000. Also, treble damages, which triple the losses the government incurs as a result of the false claims, are imposed by the False Claims Act.
There is a maximum jail sentence for businesses that engaged in the wire fraud and mail fraud provisions is 20 years, and the maximum fine is $250,000.
Penalties for state PPP loan fraud differ from state to state. PPP loan fraud is specifically forbidden by law in some places. False claims cannot be submitted to state government under legislation in other states.
Depending on the exact fraud crime you are accused of, there may be a different penalty for state PPP loan fraud. In some state, PPP loan fraud carries criminal sanctions while other states apply civil sanctions.
