PPP, EIDL & CARES Act Loan Fraud Defense

Many Paycheck Protection Program and Economic Injury Disaster Loan cases surface years after the money was received: a lender asks for documents, the Small Business Administration reviews a forgiveness application, agents call about a 2020 or 2021 loan, or a grand jury subpoena arrives for bank records, payroll filings, or tax returns.

In 2022, Congress extended the statute of limitations for PPP and EIDL fraud to ten years. By the time a borrower hears from the government, investigators may have checked the application against tax, payroll, and bank records and spoken with the lender or preparer.

Bedi & Singer represents business owners, executives, and others in federal investigations and prosecutions involving PPP loans, EIDL loans, and other CARES Act programs, nationwide and before and after charges are filed.

Pandemic loan cases usually turn on what an application said and how the money was used. Common allegations include:

• Overstating payroll, headcount, or revenue
• Applying for a business that was not operating
• Submitting false tax forms or payroll records
• Obtaining loans the business was not eligible to receive
• False certifications about eligibility, ownership, or criminal history
• Spending proceeds on personal expenses rather than permitted business costs

Prosecutors typically charge bank fraud (18 U.S.C. § 1344), false statements to a lender (18 U.S.C. § 1014), wire fraud, and false statements to a federal agency. Bank fraud and false statements to a lender each carry up to 30 years in prison. When another person’s identity is involved, aggravated identity theft (18 U.S.C. § 1028A) carries a mandatory two-year sentence that runs consecutively. Money laundering charges can follow the movement of loan proceeds.

Someone may need counsel after:

• A lender or the SBA requests loan documents
• Loan forgiveness is denied or placed under review
• A grand jury subpoena or target letter arrives
• FBI, SBA-OIG, IRS, or Secret Service agents make contact
• An accountant, preparer, or employee is interviewed

Early counsel can help determine whether the matter is a civil repayment issue, a False Claims Act case, or a criminal investigation, and guide decisions about repayment, documents, and interviews. Repaying a loan does not by itself end criminal exposure, but how and when it happens can matter.

The PPP was built in a matter of days, and SBA and Treasury Department guidance on basic questions, such as how self-employed borrowers should calculate payroll, changed throughout 2020 and 2021. Many applications went through lenders, accountants, and loan agents, some paid based on the loan, and a borrower may not have known what a preparer put on the form.

Fraud requires intent. A mistaken calculation, reliance on a preparer, or a reasonable reading of guidance that later changed is not a scheme to defraud. The defense may ask:

• What did the rules and guidance require on the date the application was submitted?
• Who prepared the application, and what did the client review?
• Do other records support the payroll and revenue figures?
• How were the loan proceeds actually spent?
• Does the government’s loss figure account for repayment, forgiveness, and legitimate expenses?
• Can statements to agents or lenders be challenged?

Loss amount drives sentencing, and restitution and forfeiture are central to how these cases resolve. Bedi & Singer evaluates those numbers from the start while preparing the case as though it will be tried.

Jonathan Bedi and Dena Singer work on Bedi & Singer’s cases together, drawing on associates where it helps the defense. Clients are told not only what the lawyers are doing but why.

Jonathan Bedi has defended federal prosecutions involving wire fraud, mail fraud, mortgage fraud, and bribery. Dena Singer has substantial experience defending complex white-collar matters involving financial fraud, wire fraud, and conspiracy.