How Does the Federal Government Investigate PPP, SBA, and EIDL Loan Fraud?

Fraud schemes are more complex than ever. The sole reason for major fraudulent crimes involving small businesses or individual activity is purely monetary. Whether it’s to protect assets like property, secure finances, or increase advantage, financial gain is the main motive behind these acts of embezzlement. Unfortunately, business owners partaking in illegal actions find themselves at the dismay of the federal government. Scams such as these can destroy corporations and families leaving individuals with the burden of bankruptcy or penalized for crimes they took no part in. The FBI takes SBA, PPP, and EIDL loan fraud very seriously. Any discovered false statements or deceitful intentions on these applications cause a violation of trust between the borrower and the lender. The federal government investigates simple and complex cases, partnering with organizations such as the IRS, law enforcement agencies, the treasury department, and more to narrow down on illegal crimes. 

What Is the Business for the Loan? 

Due to the complexities of the pandemic, the federal government disbursed loan funds to provide immediate relief for business owners who applied for an SBA, PPP, or EIDL loan. 

The unprecedented circumstances made it easier to secure these funds faster than the duration of a traditional business loan. Recent criminal cases involved groups or individuals claiming they owned a business, yet used the funds to buy expensive lavish objects for personal gain. The Small Business Administration (SBA) classifies a small business based on a size standard of 500 employees or less. Business endeavors are categorized based on production, yearly revenue, communication, wholesale, transportation, inventory, and more. Using these factors as a foundation to determine a legitimate business, the FBI investigates heavily into scams and schemes from patrons attempting to take advantage of government capital. 

How Is the Loan Being Used

Individuals who attempt to file for these loans must allocate the funds for the necessities, such as paying employees, bills, or covering rent. Certain SBA loans like the Paycheck Protection Program (PPP) allow executives to borrow up to $10 million in funding that is forgivable on the conditions that they do not lay off any employees and also re-hire ones that were laid off in the past. It can be used for salaries, debt, utilities, and more. Economic Injury Disaster Loan (EIDL) is designed to salvage businesses experiencing revenue loss due to natural disasters like hurricanes, floods, or the coronavirus. Administrations filing for an EIDL loan may borrow up to $2 million in funds with certain loan amounts requiring minimal interest or zero dollar repayment fees. EIDL loans do not have forgiveness programs but an applicant can receive an advance up to $10,000 that does not need to be repaid if they qualify. EIDL loans are strictly disposable towards lease payments, business mortgages, or payroll. The federal government thoroughly investigates each aspect of a business and what the loan is allocated towards. Honest business owners that use the assets for their intended purposes, avoiding illegal or conniving activity have nothing to fear if an audit arises. 

Cares Act Investigations

In recent weeks, individuals who received public funding through the Cares Act or other economic relief programs have undergone investigations through the U.S. government cracking down on preparators attempting to swipe capital. At least 39 PPP fraud cases have surfaced with over $100 million stolen from federal aid. An example is a property manager from Walmart who received over $4million in PPP financing, stating that he had over 200 employees and his business began operation around February 15, 2020, which were one of the conditions to obtain the loan. An in-depth federal government investigation into the manager’s email records indicated false allegations about the employees and the date in which he set up the company. The stipulations of the Cares Act PPP states that borrowers must certify what the loan is intended for, the use and the repayment methods set in place. Funds are required to retain workers and continue business operations smoothly. The terms of the agreement certify that any unauthorized transactions for the loans will result in criminal prosecution. 

Loan Repayment

SBA, PPP, and EIDL loans filed under false pretenses run the risk of criminal investigations. If your business receives a subpoena or government order, gathering all the required documents and strategizing a response is the best option. Following up with the information provided demonstrates accountability and may even lessen the penalties for fraudulent suspicion perceived by the federal government. If the borrower cannot repay the amount lent, the government can forcibly seize your business capital. Fines, asset liquidation, or imprisonment are all possibilities for SBA criminal punishment.  

Contact An Attorney 

Filing for a business loan is not as simple as it seems. With so many conditions and terms, any small mistake can pose a major threat to a borrower’s personal finances or business. If you are in a legal battle with the federal government over a PPP, SBA, or EIDL loan, contact the law offices of Vika Bajaj located in San Diego. Our attorneys are skilled at fighting federal cases and can assist you with beneficial options for your criminal case. Get in touch with one of our attorneys via initial consultation today.


Federal Crimes