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7 Allegations that Can Lead to Prosecution for COVID-19 Pandemic Fraud (PPP or ERC Fraud)

News, Offshore Account Update

Posted in on September 29, 2023

With federal authorities continuing to investigate COVID-19 pandemic fraud in 2023, businesses that obtained Paycheck Protection Program (PPP) loans or claimed the Employee Retention Credit (ERC) are under the microscope. Authorities including IRS Criminal Investigation (IRS CI) are aggressively targeting businesses (and business owners and executives) in PPP fraud and ERC fraud investigations—and these investigations are leading to criminal indictments in some cases.

Due to the substantial risks involved, businesses and individuals targeted in these investigations need to defend themselves by all means available. This starts with engaging a Virginia tax attorney to identify the specific allegations at issue and identify all viable defense strategies.

Common Allegations in COVID-19 Pandemic Fraud Investigations

What are the allegations that can lead to prosecution for PPP fraud or ERC fraud? Here are seven common allegations in COVID-19 pandemic fraud investigations in 2023:

  • Submitting a Fraudulent PPP Loan Application – IRS CI and other federal authorities are targeting both successful and unsuccessful PPP loan applicants. Regardless of whether a business’s application resulted in the disbursement of funds if the application contained false or fraudulent information, it can expose the business and its owners to prosecution.
  • Fraudulently Claiming the ERC – Fraudulently claiming the ERC can expose businesses and their owners to prosecution as well. The ERC was subject to strict eligibility criteria that changed over time, and this resulted in many ineligible businesses receiving refunds for which they did not qualify.
  • Improperly Calculating the ERC – Along with fraudulently claiming the ERC, improperly calculating the amount of a business’s refundable credit can lead to fraud allegations as well. While inadvertent calculation errors may trigger civil liability, willfully overstating a business’s credit eligibility can lead to criminal charges.
  • Using PPP Loan Proceeds for Unauthorized Purposes – Businesses that received PPP loans were only allowed to use their loan proceeds for authorized business purposes. Using loan proceeds for unauthorized purposes (including personal expenses) can expose business owners and executives to PPP loan fraud allegations.
  • Fraudulently Certifying for PPP Loan Forgiveness – Many recent PPP loan fraud investigations have focused on businesses’ loan forgiveness certifications. Certifying for loan forgiveness when a business is ineligible to do so can lead to civil or criminal fraud charges depending on the circumstances involved.
  • Attempting to Mislead Federal Agents or Investigators – Attempting to mislead federal agents or investigators during an audit or investigation can lead to charges regardless of the merits of the underlying inquiry. Making false statements or concealing information from federal authorities is a stand-alone federal crime under 18 U.S.C. Section 1001.
  • Falsifying Business Records to Substantiate Fraudulent Claims – Falsifying business records to substantiate fraudulent claims can lead to criminal charges as well. This includes both falsifying records when submitting a PPP loan application or tax return and falsifying records when facing federal scrutiny.

Schedule a Confidential Consultation with Virginia Tax Attorney Kevin E. Thorn

Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, represents businesses and individuals in PPP fraud and ERC fraud matters. To request a confidential consultation, please call 703-752-3752 or contact us confidentially online today.

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