North Carolina Launches Program to Catch PPP Loan Fraud
At the height of the COVID-19 pandemic, one of many measures the government instituted to keep the economy going was the “Paycheck Protection Program”, also known as PPP loans. These funds were supposed to be allocated as small business loans to mainly cover payroll costs and other expenses such as mortgage interest, rent, and utilities while the pandemic caused businesses to temporarily close or reduce operations. Due to the program being created rather hastily in the midst of a crisis, some people and businesses have used obtained and used these loans outside of their intended purpose, thus committing PPP Loan Fraud.
Almost as quickly as the money went out, federal prosecutors started going after individuals who were clearly abusing loopholes, lying on applications, and not using funds for intended purposes. The news at the time was rife with stories of individuals who had been arrested and charged with PPP Loan Fraud, but overtime news stories of fraud died down. By mid to late 2021, it may have seemed like the government had given up on going after any remaining acts of PPP Loan Fraud. Now, in mid February of 2022, the North Carolina branch of the U.S. Attorney’s Office announced a program to catch remaining people who defrauded the government using PPP Loans in Eastern North Carolina.
U.S Attorney Launches New Task Force
U.S Attorney Michael Frances Easley Jr. announced the launch of a new federal task force to go after PPP Loan fraudsters who were trying to recoup cash under false pretenses. This task-force is limited to businesses within the Eastern District of North Carolina, which includes Wake County.
So far, Easley said his office is investigating dozens of potential PPP Loan fraud cases. Some examples provided include a Garner man who plead guilty to filing 14 fraudulent PPP applications, seeking $6.1 million in total. Another example was a Durham-based attorney who plead guilty to fraud for filing 10 loan applications and lying about the number of employees at her firm, then using the more than $1 million in relief to purchase 6 properties.
Easley claimed that there were “networks” of criminals sharing ways to defraud the system. He claimed many would submit fraudulent applications for established businesses that don’t have any operations or employees. He believes part of the benefit to this task force is to deter others from lying to the government for money.
Who is Being Investigated?
While Easley claims that his office is investigating dozens of cases currently, it’s not entirely clear what information and leads they are using or view as suspicious. What Easley had discussed publicly appeared to be low-hanging fruit, including people applying for loans under businesses that never reported having employees or meaningful operations, or people clearly using money loaned to them for enormous personal transactions. While perhaps the task force is limiting itself to only the more egregious cases where large sums of money were provided to obvious fraudsters, this investigation may include people who took smaller loans and didn’t engage in extremely suspicious activity.
What to do if Your Company is Targeted by an Investigation
The burden of proof is on the federal government to show that you were acting in bad faith when applying for PPP loans or forgiveness certification or using the loan funds. It is in your best interest that you hire experienced fraud defense attorneys who can defend your innocence and work diligently to eliminate the many charges the federal government can file against you. You will also need the protection and guidance of legal experts when dealing with federal agencies that are looking to find any issues in the statements you give them.
Additionally, maintaining a thorough trail of your loan application process and spending of PPP loan funds will aid in defending your case. Keeping an ongoing record and demonstrating that you were trying to diligently follow program requirements will help show that you were acting in good faith.