For several months now, a number of agencies, including the Federal Bureau of Investigation (FBI), have been working diligently to identify businesses and individuals who may have committed alleged fraud through the Paycheck Protection Program (PPP). The PPP was a major component of the CARES Act, which approved $2.2 trillion in economic relief in response to the COVID-19 pandemic.

The PPP was intended to help struggling businesses navigate the effects of the pandemic by providing financial assistance to employers and their employees.

PPP loans required 60% of the loan amount cover payroll expenses, while the remaining 40% could be used for other related business expenses. It has become abundantly clear that some recipients of PPP loans took advantage of the available funds and used the loan proceeds for non-business purposes.  The SBA Inspector General estimates that 17% of PPP loans were distributed to businesses and individuals who committed fraud.

The U.S. Small Business Administration (SBA) is auditing all companies that received PPP loans of $2 million or greater, while the Department of Justice (DOJ) and other federal agencies are ramping up investigations and prosecutions of individuals that may have fraudulently obtained PPP loans.

Already thousands of investigations have been opened across the country targeting COVID-19 related fraud.  In addition, the DOJ has brought criminal charges against hundreds of individuals, and many more criminal cases are coming.

The SBA Inspector General has stated that PPP investigations will continue for more than a few years.  To allow time to identify and prosecute the fraudsters, Congress increased the statute of limitations for prosecution of PPP fraud to 10 years. Finally, the government has indicated that it will even look to investigate instances of fraud regarding PPP loans that have already been forgiven.

If you or your company receives a “target letter” or indictment from the government or are questioned by federal authorities regarding your business’ PPP loan, we advise you to take the appropriate action including contacting an experienced attorney to help you through the process.   The attorney will then engage other professionals, including CPA’s, to assist with your legal representation and to gather the required supporting documentation of your qualified and forgivable PPP loan.

Please reach out to your Wegner CPAs tax advisor if you have any follow up questions or concerns.