Will Texas PPP Beneficiaries be Targeted for Loan Fraud Crack Down?

In an attempt to stem the economic impact of COVID-19, the Paycheck Protection Program (PPP), provided $525 billion in loans, distributed to approximately 5.2 million companies between April 3, and August 8, 2020. PPP, which was part of the CARES Act, was intended to provide small businesses with monetary relief and to incentivize them to maintain payroll thus limiting unemployment.

PPP Recipients Are Under Scrutiny

Many recipients of PPP loans are now finding themselves under scrutiny. Opportunities for fraud exist due to the swift design and implementation of the PPP program, including the rapidly put together approval process. Undoubtedly, many businesses exploited the system and received benefits to which they were not entitled. But there was also widespread misunderstanding about the program and its strictures and requirements. All of this in a time of national confusion and fear.

Will Your Business Be Held Accountable for PPP Fraud?

PPP beneficiaries may soon be asked to account for decisions made under overwhelming conditions. Indications are clear the Department of Justice will begin cracking down on alleged waste, fraud, and abuse. The Small Business Administration alongside the IRS is already auditing loans in excess of $2 million, and the Justice Department has to date filed criminal charges against 65 PPP beneficiaries.

Will Your Small Business be Targeted for an Audit?

The Justice Department has taken action to freeze or recover over $30 million to date. It is becoming clear that those most likely to be scrutinized are companies that were already substantially delinquent on taxes, companies that were established during the pandemic, and those that did not squarely fit the definition of a small business, that is, companies not falling under the 500-employee threshold. Other businesses that might be targeted are those that may be accused of hiring or retaining phantom employees or borrowers that were not strictly in need of the economic loan but took advantage of the program for personal financial gain.

Criminal charges have already been brought against some who have used their PPP funds for lavish items such as jewelry and cars, to pay off student loans and mortgages, or to engage in some form of money laundering. We can anticipate the states most likely to be targeted include Florida, Nevada, and Texas, all of which have been prominent areas on the receiving end of the program.

If you or someone you know might be facing allegations concerning their participation in the PPP program, please contact us for a consultation.

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