This article continues the series of Paycheck Protection Program (PPP) Loans. We are five years into PPP loan prosecutions, and the US Attorneys are still prosecuting egregious cases. President Biden extended the statute of limitations on the PPP loan fraud from 5 to 10 years to make it consistent with bank fraud cases. The extension has helped clean up the outstanding PPP prosecutions.

The prosecutions for PPP loans are initially front-end fraud cases caused by individuals using affirmative certifications and fraudulent means, including false PPP loan applications, false payroll documentation, fabricated tax documents, manipulated bank statements to deceive lenders and secure the loans. To obtain the loans, the businesses were required to use the loan proceeds for “certain permissible expenses,” including payroll costs, interest on mortgages, rents, and utilities within a designated period. The U.S. Small Business Administration Inspector General (SBA IG) estimated fraudsters took advantage of the self-reporting to steal $64 billion from PPP Loans and later the Economic Injury Disaster Loan Program (EIDL) $136 billion stolen in fraud. Initially, the enforcement of the PPP violation was handled by Special Agents of the IRS Criminal Investigation and Treasury Inspector General for Tax Administration OIG. (TIGTA) and SBA IG.  

One fraudster we are aware of purchased a marijuana farm in Oklahoma with a $1 million bounty from fraudulently obtained PPP loan proceeds. Others we know about purchased expensive cars, Rolex watches, and luxury yachts.

The designated period yielded loan forgiveness applications and back-end fraud cases for individuals who knowingly and willfully made false material statements in violation of 18 USC 1001. The fraudsters used falsification of documents, concealment of records, or cover-ups by tricky schemes and material facts. The FBI took over the enforcement of the back-end fraud for PPP and EIDL loans, and only in specific fraud cases was IRS CI involved. The back-end fraud case revolved around material fraud related to manufactured payroll documents, photoshopped business rent, and utility payments presented to the SBA.

The SBA rules for PPP and EIDL loans were complicated, but they did not give licenses to the tens of thousands of people who commit fraud and steal money through fraudulent means. If you have clients or know someone who enjoyed the short-term riches, they will be meeting with a Federal Judge and, more than likely, prison time. If this is the case, we can help.

If your clients require a forensic accountant as a consulting expert or a testifying expert witness regarding SBA PPP recordkeeping, tracing, or audit of PPP or EIDIL proceeds, contact Chief Investigator Edmond Martin of Sage Investigations, LLC at 512-659-3179 or email him at edmartin@sageinvestigations.com. We offer a free 20-minute consultation. Visit our website at www.Sageinvestigations.Com. Click to read about our team and their CVs.