How To Know If Your PPP Application Is Being Investigated.
The Department of Justice (DOJ) is investigating and prosecuting PPP fraud cases all over the country. Some people have already been convicted, while others are being secretly investigated. The Biden Administration has poured millions of dollars towards resources to ensure that investigations take place and the stolen money is recovered. They are working through various agencies such as the FBI and the IRS. It will be difficult for your business to walk away free if you fraudulently obtained any of the Covid relief money meant for struggling businesses. Therefore, start looking for any PPP red flags in your applications (for the first and second rounds).
What are PPP fraud investigators looking for?
Investigators are looking for information about facilitating institutions, such as banks, and borrowers of the Paycheck Protection Program (PPP). The investigations also include the Economic Injury Disaster Loan (EIDL) applications facilitated by the SBA. There is a consensus that not all safety precautions were taken during applications. Not many steps were taken to prevent fraud when these relief programs were introduced via the CARES Act. Fraudsters knew about this, and they pounced.
But now that the new administration is on the prowl for PPP fraudsters, what are they looking for? Investigators will ask the following.
- Whether you properly spent the borrowed funds – for the PPP, at least 60% of the funds were to be used on payroll-related costs. But some small business owners diverted this money to their personal expenses.
- Did you even qualify for the funds in the first place? – PPP funds were mainly to cover payroll costs. Some business owners lied about the size of their payroll costs to obtain hefty payments from the program.
- Did you apply through multiple lenders under false pretense? This move is called “loan stacking”. If they find you did this, you will be charged.
- Did you apply using falsified tax documents?
- Did you create a fake company to apply for the PPP loan?
- Did you use a company that stopped operating long back to apply? – using a defunct company is also a crime because no one works there anymore.
- Did you apply using a stolen identity? – a stolen identity must also result in the original owner of the identity being questioned. But investigations will eventually lead to the real culprit. No one is safe.
How to know if you are being investigated for PPP fraud?
Any PPP fraud scheme is likely going to be unearthed. Perpetrators will be punished. If you applied using false information in the first round, but you corrected it in your application for the second round, your name will likely be called next. Why? The inconsistency in both your applications serves as an indication that you, somehow, lied. It actually makes it easy for investigators to single your name out.
However, in case you have not been notified yet, it is easy to start asking yourself whether your name might be investigated next, or not. To do it, simply go back to the above list, where I listed a couple of things that the investigators are looking for. Improperly spending the PPP money is a red flag. If you know that you used yours to buy an expensive boat or gift for your lover, then they could be coming for you. Or, if you know that you applied using a defunct company, it is another red flag that must tell you that they could be coming for you next.
What should I do if my PPP is being investigated?
Finally, if your PPP or EIDL application is being investigated, they may send you a notification requesting evidence surrounding your applications and how you spent the money. This could be done in a friendly manner, or they could throw a subpoena in your face, forcefully gaining access to every document in your company. That could be hectic and traumatizing.
Nevertheless, if you receive a request for more information about your company and PPP or EIDL loan applications, you know it has officially begun. At that moment, you need to think soberly before making any move. Below are some of the steps to take as soon as you receive that request.
- Immediately contact your lawyer.
- Alert your employees and let them look for any supporting documents relating to the PPP or EIDL applications. Also, gather all receipts or evidence of how you spent the money.
- Tell your financial partners about the investigation, especially those who handled any of this money. This is important in case the government raises money laundering charges on you.
People have also asked the following questions
- Are PPP loans under investigation?
Yes. Many government agencies are investigating PPP loans. This includes the FBI, Secret Service, the IRS, and the Small Business Administration (SBA), which is the primary agency disbursing PPP loans. The SBA is also the lead investigator in many cases.
- Why is my bank investigating PPP loans?
Banks, even though they were guaranteed protection regarding some false information submitted, they do have a duty to uphold good financial conduct among their clients. They should be able to prevent fraudulent applications from going through to any government agency. As such, the SBA is holding them to this fiduciary duty. And many of them have been subpoenaed to provide access to thousands of PPP applications that raise a red flag.
- What happens if you fraudulently get a PPP loan?
You will be investigated and go to jail. They will also ask you to return the money that you stole.
- Will PPP loans be audited?
All PPP loans above $2 million will be audited, according to the SBA.
- How do you know if your PPP loan was approved?
PPP loans were applied through various financial institutions. Therefore, to know if yours was approved, simply contact your bank or the SBA.
