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Am I Still at Risk if My PPP Loan Application was Unsuccessful?

News, Offshore Account Update

Posted in on July 31, 2023

If you filed a Paycheck Protection Program (PPP) loan application, you are at risk of facing federal scrutiny. With reports suggesting that at least 10 percent of the roughly $800 billion disbursed under the program went to applicants that didn’t qualify, IRS Criminal Investigation (IRS CI) and the U.S. Department of Justice (DOJ) are continuing to investigate and prosecute PPP loan fraud in 2023.

IRS CI and the DOJ Are Targeting Successful and Unsuccessful PPP Loan Applicants in Virginia

While many of the investigations to date have focused on PPP loan recipients, IRS CI and the DOJ are also targeting unsuccessful loan applicants. This effort appears to be intended, at least in part, to prevent a similar situation in the future. By targeting both successful and unsuccessful loan applicants, IRS CI and the DOJ hope to send a clear message that attempts to defraud federal programs like the PPP will not be tolerated.

But, while these enforcement efforts may or may not have their intended deterrent effect, they can have immediate—and severe—consequences for the individuals targeted. Under federal law, unsuccessfully submitting a fraudulent PPP loan application can have the same criminal consequences as fraudulently obtaining a PPP loan. As a result, unsuccessful PPP loan applicants who have concerns about facing fraud allegations (or that are currently facing fraud allegations) need to be very careful, and this starts with engaging experienced legal counsel.

What Are the Risks of Submitting a Fraudulent PPP Loan Application?

In press releases announcing its PPP fraud enforcement efforts, IRS CI has highlighted several practices that present risks for federal prosecution in cases involving unsuccessful loan applications. These include submitting falsified payroll records, falsifying tax returns and submitting multiple loan applications on behalf of the same business entity. In several cases, IRS CI has targeted individuals who submitted applications on behalf of shell companies or newly formed entities that had no revenue loss or eligible expenses.

These allegations (among others) have led to several different federal charges. Based on IRS CI’s and the DOJ’s enforcement actions to date, some examples of potential charges in unsuccessful fraudulent PPP loan application cases include:

  • Wire fraud (18 U.S.C. Section 1343)
  • Bank fraud (18 U.S.C. Section 1344)
  • Attempt and conspiracy (18 U.S.C. Section 1349)

These are all serious federal offenses that carry substantial fines and prison time. They are also all offenses that do not require evidence of a “successful” fraudulent scheme. While unsuccessful PPP loan applicants may have a variety of defenses available, asserting these defenses successfully will require effective representation.

Contact Kevin E. Thorn, Managing Partner of Thorn Law Group in Virginia

If you need legal advice or representation regarding a PPP loan application, we encourage you to contact us promptly for more information. To request a consultation with Kevin E. Thorn, Managing Partner of Thorn Law Group in Virginia, call 703-752-3752 or contact us confidentially online now.

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