Widespread scrutiny of the Paycheck Protection Program (PPP) has prompted a flood of PPP loan fraud investigations by the US Department of Justice (DOJ) in coordination with a number of other federal investigative agencies, such as the IRS and FBI. At the same time, the U.S. Small Business Administration (SBA) has announced that borrowers who received $2 million or more in PPP funds will automatically be subject to an audit, as will some borrowers who received smaller loans, as part of an ongoing effort to identify any potential abuses of the federal loan program. If you are a small business owner and you applied for or obtained a loan through the PPP, you could be at risk for an SBA audit or a federal investigation, which could lead to criminal charges.

One recent example is Lee Price a Houston man who was convicted of fraudulently obtaining more than $1.6 million in PPP loans.  He plead guilty and was sentenced to just over 9 years for wire fraud and money laundering. Price submitted fraudulent PPP loan applications to two different lenders on behalf of three entities: 713 Construction LLC, Price Enterprises Holdings LLC and Price Logistic Services LLC.

Through these loan applications, Price requested over $2.6 million, and ended up obtaining around $1.6 million in PPP loan funds. Price represented he had more than 50 employees and had monthly salaries if $375,000, neither of which was true.

Since the inception of the CARES Act, the DOJ’s Fraud Section has prosecuted over 150 defendants in more than 95 criminal cases and has seized over $75 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds.

Another interesting aspect of the criminal charges being sought by the federal government is the use of whistleblowers making qui tam claims under the Federal False Claims Act.  The qui tam provisions allow whistleblowers who have knowledge of fraudulently obtained PPP loans to file suit and claim part of the money which is recovered by the federal government.   It is expected that in the next year the number of people who will be audited and possibly charged with fraudulent contact will increase.

The attorneys in our Austin and Dallas office are available answer any questions you may have. You may contact us at info@gstexlaw.com.

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