Paycheck Protection Program (PPP) Fraud

The Paycheck Protection Program (PPP) is part of the CARES Act that provides qualified small businesses with loan or grant money to pay certain expenses, such as payroll, mortgages, and rent. The first round of funds was quickly depleted when non-qualified, big businesses and publicly traded corporations.

The Small Business Administration (SBA) is overseeing the implementation of the PPP and will be conducting audits and enforcement of the eligibility requirements. Fraudsters have already been caught defrauding the program. Recently, two individuals in New England were criminally charged with conspiring to obtain PPP funds for nonexistent or failed businesses.

One important aspect of the PPP is that the loan may become 100% forgivable if the borrower uses the money for certain expenses. Borrowers using the loan for payroll and benefits costs, mortgages, rent, or utilities may obtain forgiveness for the loan.  The SBA provides additional guidelines for forgiveness eligibility.  Borrowers for the PPP must certify that they are eligible for the program and are required to maintain records to verify their eligibility.

Types of PPP Fraud

There are many ways that individuals and companies can commit fraud as it relates to PPP funds, including the following schemes:

  • Misrepresenting or falsifying qualification as a small business;
  • Using the money for purposes other than what is authorized by the PPP;
  • Falsely certifying the “necessity” of the PPP loan, including submitting an application for larger amounts of money than necessary; and
  • Overstating the number of employees.

While the SBA has recently determined that any borrower that received a PPP loan of less than $2 million will be deemed to have made the required “necessity” certification in good faith, all PPP loans in excess of $2 million are subject to full review.

The small business owners who are working hard and struggling to make it during this crisis should not be the victims of fraud. The PPP is intended to help keep these legitimate companies afloat. Those who defraud the program are taking money out of the pockets of these hard-working business owners.

Importance of Whistleblowers

Employees, auditors, and other individuals may become aware of information that indicates CARES or PPP fraud is taking place. Whistleblowers are vital in the prosecution of these cases. The False Claims Act is the statute that allows the government to recover damages from fraud.

Whistleblowers with information about fraud committed against the government can file a case in the name of the government and may be entitled to a portion of the recovery as a reward. If you have information about CARES or PPP fraud, you should contact a whistleblower attorney to learn more about your protections and rights.

Our Team

With over 30 years of experience in Qui Tam cases, the attorneys on Baron & Budd’s whistleblower representation team have represented some 70 clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of fraud involving the CARES Act or the Paycheck Protection Program.

Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower.  Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.

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