PPP loan fraud: Investigators to expand scrutiny

| Oct 22, 2020 | Regulatory Issues (SEC, FINRA)

Millions of businesses have been able to survive during the pandemic with the help of the CARES Act’s Paycheck Protection Program (PPP), which has provided 5.2 million loans totaling about $525 billion.

However, since the CARES Act was passed in March, the Justice Department has filed PPP loan fraud charges against dozens of borrowers who are now accused of fraudulently obtaining loans ranging from $30,000 to $24 million. According to recent analysis, about $4 billion in loans have been red-flagged.

Many More Loans to Face Scrutiny

PPP loan fraud charges are on the rise, and federal investigators plan to cast a wider net in the months to come. Most of the criminal cases up to now involve allegations of what the Justice Department considers egregious examples of fraud: for example, using PPP loans for personal use and claiming nonexistent employees.

Now investigators intend to focus on more subtle instances of possible fraud: for example, eligibility for loans, expenditure of loan proceeds and applications for loan forgiveness.

Loans of More Than $2 Million to Be Audited

The Small Business Administration has said that it plans to audit all PPP loans that exceed $2 million. Additionally, Congress can be expected to further scrutinize the PPP loan program. All of this means that borrowers will need careful legal guidance in applying for loan forgiveness, as well as in properly obtaining any future loans if they are made available.

If you have questions or concerns about PPP loans or an anticipated audit, speak with a finance and regulatory law attorney as soon as possible. The attorneys at Ford O’Brien have assisted clients in obtaining loans properly and applying for forgiveness in accordance with the laws.

Source: Westlaw Insider, “$4 billion in PPP loans already red flagged,” Oct. 6, 2020

Source: The Wall Street Journal, “Applying for PPP Forgiveness? Here Are Some Things to Know,” Oct. 21, 2020