In July 2021, 22 people were arraigned on charges of fraudulent schemes to obtain more than $11 million in loans from the (PPP) Paycheck Protection Program. Individuals used loan proceeds to buy jewelry, luxury vehicles, and other personal items. This article will discuss PPP Loans and how to Report PPP Loan Fraud.
Report PPP Loan Fraud
PPP is a loan program from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Initially valued at $350 billion, CARES had intended to provide cash flow help to American businesses for eight weeks.
On April 2k20, the Paycheck Protection Program and the Health Care Enactment Act expanded the program, injecting $310 billion worth of funding.
The PPP Flexibility Act had later drafted to make some critical amendments to the original Act. It gave personnel and businesses more time to spend funds and made it easier to write off loans.
In December 2020, Congress approved a second stimulus package that counted $285 billion worth of funding to the PPP. Businesses that have run out of funds from the initial Paycheck Protection Program loan they received or have seen revenue decline by 25% or more can also apply for another round of funding.
On May 4th, 2021, the Small Business Administration (SBA) stopped accepting PPP loan applications. However, any lender designated as a Community Financial Institution (CFI) can still access the funds.
What is PPP Loan Fraud?
So far, we have looked at PPP loans and guidelines for what the loan can use. If a business or individual submits wrong or inaccurate data or documentation in their application or verification, it constitutes PPP loan fraud.
Even if a business fulfills the eligibility criteria but fails to adhere to pre-defined restrictions and requirements on how those funds can use, it is also considered loan fraud.
A PPP loan fraud investigation ultimately determines whether an individual will charge for violating one or more of the procedures provided in the program.
Violation includes, but is not limited to:
- Applying for a loan waiver by submitting a false certificate
- Cheating agents during PPP loan inquiry or audit
- Loan Stacking – Applying for numerous PPP loans from different lenders
- Making false statements on the loan application
- Use of loan funds for unauthorized or improper use
Report PPP Loan Fraud for Penalty
Before reporting PPP Loan Fraud, we should know about penalties. A person guilty of PPP loan fraud faces severe civil and criminal penalties. At the same time, a single loan scam case may involve several criminal statutes. Below is a detailed view of the most common fees and their associated penalties.
Wire fraud:
It invokes 18 USC Sec. 1343 and uses the phone or the Internet to defraud another party by making false promises or statements. The penalty depends on the amount of cash stolen and can be up to 20 years in prison.
Bank fraud:
It invokes 18 USC Sec. 1344 and is similar to wire fraud; only in this case, it involves making wrong statements to a financial institution, such as a bank. A person convicted of bank fraud faces a maximum jail term of 30 years.
False statements to a financial institution:
It invokes 18 USC Sec. 1014, and lying to an economic institution such as a bank is a federal crime. It includes providing false statements on the loan application form or false information in the documents submitted to the bank to permit the loan. Any person convicted of violating this law faces up to 30 years in prison.
Conspiracy to defraud:
It invokes 18 USC Sec. 1349. The statute makes it a felony offense to conspire with others to violate or attempt to violate federal fraud laws, whether the person in question obtains money, falsifies documents, or makes any false statement.
The penalty depends on the offense of fraud committed by the person involved in the conspiracy. For example, conspiracy to commit wire fraud is punishable by up to 20 years. And bank scam is punishable by up to 30 years.
How to Report PPP Loan Fraud?
A business or person who commits PPP loan fraud violates the False Claims Act of 1863. The Act was designed to prevent individuals from committing fraud against the government. And encourage the public to report fraudulent activities.
The Act encourages private citizens to report instances of fraud against the government in what is known as a “qui tam” action.
The False Claims Act doctrine allows a whistleblower with evidence of fraud to file a civil suit against a company or individual and receive a percentage of the recovery amount. The amount they can recover depends on whether the government intervenes in the suit.
Provisions of the Financial Institutions Reform, Recovery, and Enforcement Act authorize the Attorney General to prosecute fraud in cases involving federally insured financial organizations.
A FIRREA whistleblower can obtain up to $1.6 million for information on PPP violations those results in the successful recovery of stolen funds.
Whistleblower protection laws protect employees who report PPP loan fraud against employer retaliation. They cannot fire, demoted, or harassed for PPP whistleblowing to disclose their employer’s fraudulent actions against the government.
PPP fraud denies eligible small firms the funding they need to sustain their businesses. With that, in a sense, the US Department of Justice (DOJ) has launched a “See Something, Say Something” process to help them identify instances of PPP fraud.
To report PPP loan fraud and financial injury disaster loan fraud, you can:
- Contact National Center for Disaster Fraud Hotline: 1-866-720-5721
- Fill out the web complaint form on the DOJ website
- File a protest with the SBA Office of Inspector General
FAQs
You can report PPP loan fraud anonymously under the False Claims Act by contacting the Department of Justice (DOJ). Or the Small Business Administration (SBA) Office of Inspector General (OIG).
PPP loan fraud is any illegal or fraudulent activity related to the Paycheck Protection Program (PPP)—a government-funded loan program designed to help small businesses during the COVID-19 pandemic.
Whistleblowers can report PPP fraud anonymously to the Office of the Inspector General. But those who do so are not eligible for financial compensation under the False Claims Act.
Whistleblowers are essential to uncovering Paycheck Protection Program fraud because they have inside information on their employers that the government cannot trace.