Federal Criminal Charges for SBA Small Business Administration Loan Fraud
The SBA is a federal agency that aims to help American businesses with loans. Fraud or misrepresentation on the application, or in the inducement of such a loan, or receipt of the funds, is a federal crime.
As with all federal crimes, the government will have its choice of how to charge you. There are at least 7 ways to charge someone for lying to the federal government on an SBA loan application:
- 18 U.S.C. § 1001– Making a False Statement
- 15 U.S.C. § 645 – False Statements, Commerce Fraud
- 18 U.S.C. § 1014 – False Statement to a Bank
- 18 U.S.C. § 371 – Conspiracy to Make False Statement to Influence the SBA
- 18 U.S.C. § 1349 – Conspiracy to Commit Bank Fraud
- 18 U.S.C. § 1344 – Bank Fraud
- 18 U.S.C. §1343 – Wire Fraud
But feds like to get creative, so an indictment for even more charges is certainly plausible. There are MANY federal laws on the books to protect government interests.
PPP Loan Borrowers
The coronavirus Paycheck Protection Program is run by the Small Business Administration and the Treasury Department. The Paycheck Protection Program allows loans of as much as $10 million that can be become grants if proceeds are spent mostly on the payroll for two months after they are received. It’s meant to keep workers employed and firms ready to reopen when state coronavirus stay-at-home orders are lifted.
When you apply for a PPP loan, you sign to acknowledge a statement that states:
I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.
To be eligible for a PPP loan, a borrower must employ no more than 500 employees and must certify in good faith that the loans will be used for payroll and other permissible business purposes. Borrowers must also certify that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.”
Criminal violators can expect to be charged.
PPP loans over the amount of $2 million can expect to be audited, the federal government announced. Criminal violators can expect to be charged. Nonetheless, all PPP borrowers are subject to audit and federal criminal charges.
The first federal charges for PPP loan fraud have already been brought in the District of Rhode Island in U.S. v. Staveley, a first in the country. The accused allegedly filed a PPP application for a company he did not own and obtained a loan for salaries of employees he did not have.