New Jersey Federal PPP Loan, EIDL & Government Benefits Fraud Lawyer

The COVID-19 pandemic produced the largest emergency spending programs in American history, and the largest wave of federal fraud investigations. The Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL) program and expanded pandemic unemployment insurance distributed hundreds of billions of dollars quickly, often with minimal verification. Years later, federal investigators are still working through those loans and claims, and Congress extended the statute of limitations for PPP and EIDL fraud to ten years. New Jersey business owners, accountants, loan brokers and individual applicants continue to receive subpoenas, target letters and visits from agents. At the same time, prosecutors continue to bring traditional government benefits cases involving Social Security, SNAP, housing assistance and other federal programs. If you are under investigation, a New Jersey federal PPP fraud lawyer can help you respond before a civil problem becomes a criminal one.

Keith Oliver Criminal Law represents individuals and business owners facing federal investigations involving pandemic relief programs and other government benefits throughout New Jersey.

PPP and EIDL Loan Fraud

PPP loans were made by private lenders, mostly banks, and guaranteed by the Small Business Administration. Borrowers certified the number of employees, average monthly payroll, the business’s operating status as of February 15, 2020, and that the funds would be used for payroll, rent, utilities and other permitted expenses. Loans could be forgiven based on further certifications about how the money was spent. EIDL loans and advances were made directly by the SBA based on applicants’ representations about the business’s revenue, cost of goods and number of employees.

Federal prosecutors charge PPP and EIDL cases under several statutes, including:

• Bank fraud, 18 U.S.C. § 1344, and false statements to a lender, 18 U.S.C. § 1014, both carrying up to 30 years, because PPP lenders were federally insured banks;
• Wire fraud, 18 U.S.C. § 1343, which carries up to 30 years when the fraud relates to benefits paid in connection with a presidentially declared emergency or major disaster;
• False statements to the SBA, 15 U.S.C. § 645, and 18 U.S.C. § 1001;
• Money laundering, 18 U.S.C. §§ 1956 and 1957, when loan proceeds were transferred or spent on cars, homes, jewelry, cryptocurrency or other personal items;
• Aggravated identity theft, 18 U.S.C. § 1028A, when applications used other people’s identities or fictitious employees.

Common allegations include inflating payroll or employee counts, submitting fabricated tax forms such as IRS Form 941 or Schedule C, applying on behalf of businesses that did not exist or were not operating, obtaining multiple loans for the same business, using proceeds for personal expenses, and making false forgiveness certifications. Loan brokers and preparers who submitted many applications for clients, sometimes for a percentage fee, have been a particular focus.

Pandemic Unemployment Insurance Fraud

Pandemic Unemployment Assistance and Federal Pandemic Unemployment Compensation were federally funded and administered by state workforce agencies, including the New Jersey Department of Labor and Workforce Development. Fraud cases include claims filed by people who were working, claims filed in other people’s names, claims filed in multiple states, and organized schemes that filed many claims with stolen identities. These can be prosecuted federally as wire fraud, theft of government funds, aggravated identity theft and conspiracy, and they are investigated primarily by the Department of Labor Office of Inspector General. New Jersey prosecutors also bring state charges for unemployment fraud.

Traditional Government Benefits Fraud

Theft of Government Funds – 18 U.S.C. § 641

Section 641 punishes embezzling, stealing, purloining or knowingly converting money or property of the United States, or receiving such property knowing it was stolen. If the value exceeds $1,000, the maximum is 10 years; otherwise, it is a misdemeanor punishable by up to one year. It is commonly used for continuing to receive benefits after becoming ineligible, cashing a deceased relative’s Social Security or VA checks, and receiving overpayments obtained by concealment.

Social Security and SSI Fraud – 42 U.S.C. § 408 and § 1383a

These statutes punish false statements in applications for Social Security benefits and concealment of events affecting eligibility, such as returning to work while receiving disability benefits, failing to report income or assets for SSI, or misrepresenting living arrangements. The maximum is five years. Cases are investigated by the Social Security Administration’s Office of Inspector General, often with surveillance video and social media evidence.

SNAP Fraud – 7 U.S.C. § 2024

Supplemental Nutrition Assistance Program fraud often involves store owners who “traffic” in benefits by exchanging EBT benefits for cash at a discount. When the value is $5,000 or more, the maximum penalty is 20 years. These cases are investigated by the U.S. Department of Agriculture OIG and frequently result in permanent disqualification of the store from the program.

Housing and Other Programs

Fraud involving Section 8 housing assistance, HUD-insured mortgages, federal student aid, VA benefits, FEMA disaster assistance (such as Superstorm Sandy relief in New Jersey) and federal grants can also be charged under § 641, § 1001, § 287 (false claims) and the fraud statutes.

Sentencing in Government Benefits Cases

Most program fraud is sentenced under U.S.S.G. § 2B1.1, where the loss amount drives the guideline range. In PPP cases, loss is often measured by the total amount of the loans obtained, sometimes including loans that were applied for but not funded as intended loss. Arguments that some portion of the funds was used for legitimate payroll, or that the business was eligible for a smaller loan, can reduce the loss figure. Courts frequently impose restitution of the full amount obtained, and forfeiture of property purchased with the proceeds. Additional enhancements may apply for sophisticated means, the number of victims, the use of stolen identities, and an aggravating role for brokers or organizers.

Civil and Administrative Exposure

Not every PPP or benefits case is criminal. The government has numerous civil and administrative tools, including civil False Claims Act lawsuits with treble damages and per-claim penalties, administrative recovery of overpayments, SBA demands for loan repayment and denial of forgiveness, and debarment from government programs. Whistleblower lawsuits filed under seal by employees, competitors or lenders also drive many PPP investigations. An early, well-documented response to a civil inquiry, including repayment where appropriate, can sometimes resolve a matter without criminal charges. But statements in a civil response can also be used in a criminal case, so counsel experienced in criminal defense should guide that response.

Defenses in PPP and Benefits Fraud Cases

• No intent to defraud. The PPP rules changed repeatedly in 2020, and many borrowers made good-faith mistakes about payroll calculations, eligibility, use of funds and forgiveness.
• Reliance on professionals. Borrowers who provided accurate information to accountants or brokers, who then submitted inaccurate applications, may lack criminal intent.
• Eligibility in fact. Some businesses that prosecutors view as ineligible, such as sole proprietors and independent contractors, were in fact eligible under SBA rules.
• Legitimate use of funds. Documentation that proceeds were used for payroll, rent and other permitted expenses can defeat or reduce charges and loss figures.
• Identity theft by others. Applications filed in a person’s name without their knowledge are common, and the named individual may be a victim rather than a perpetrator.
• Benefits eligibility disputes. In Social Security and SSI cases, whether a change in work activity or income actually affected eligibility, and whether it was reported, often decides the case.

What to Do If You Receive a Letter or Visit

If you receive a letter from the SBA OIG, a lender’s fraud department, a target letter from the U.S. Attorney’s Office, or a visit from agents with the SBA OIG, Treasury Inspector General for Tax Administration, Department of Labor OIG, Social Security OIG, IRS Criminal Investigation, the FBI or the Secret Service, do not answer questions or provide documents before speaking with counsel. Do not alter records or create documents after the fact to support your application. Gather your original records, including payroll reports, tax returns, bank statements and communications with any preparer or lender, and bring them to your attorney.

Related pages: bank fraud, wire fraud, identity theft, money laundering and false statements.

Why PPP Cases Are Still Being Brought

Many business owners assume that because years have passed since they received a PPP or EIDL loan, the risk has passed too. It has not. In 2022, Congress enacted the PPP and Bank Fraud Enforcement Harmonization Act and the COVID-19 EIDL Fraud Statute of Limitations Act, which gave the government ten years to bring criminal charges and civil enforcement actions for fraud in these programs. Federal agencies have also built sophisticated data analytics programs that compare PPP applications against IRS payroll filings, state wage records, business registrations and bank data to flag loans for review. A loan that has already been forgiven can still be investigated, and forgiveness does not prevent the government from seeking repayment or prosecution.

In addition, lenders and loan processors have continued reviewing their own portfolios and referring suspicious loans to the SBA OIG. Loan brokers and preparers who are charged frequently cooperate with prosecutors and identify the clients whose applications they handled, which leads to a new round of investigations of individual borrowers. If you obtained a PPP or EIDL loan and are concerned that your application contained inaccurate information, a confidential consultation can help you assess the risk, consider whether repayment or correction makes sense, and decide how to respond if you are contacted. Acting before the government reaches out often provides options that disappear once an investigation is underway.

For individuals receiving Social Security, SSI, SNAP or housing benefits, the same principle applies. An overpayment notice or a request to complete a redetermination interview can be the first sign that an agency suspects concealment. Answer those inquiries carefully and accurately, keep copies of everything you submit, and speak with a lawyer before attending any interview with an Inspector General agent. Prompt, honest correction of unreported work, income or household changes can often keep a benefits issue in the administrative system rather than the criminal one.

Related Federal Defense Guides

• Federal embezzlement and theft of government funds
• Federal wire fraud
• Federal bank fraud
• Federal investigations, target letters and grand jury subpoenas

Frequently Asked Questions

How long can the government wait to charge PPP or EIDL fraud?

Ten years. In 2022 Congress passed laws extending the statute of limitations for PPP and COVID-19 EIDL fraud to ten years, so loans obtained in 2020 and 2021 can be prosecuted into the 2030s.

If I repay my PPP loan, can I still be prosecuted?

Yes. Repayment does not erase a crime that was already completed, but it is meaningful mitigation, it reduces restitution and it can influence whether prosecutors pursue criminal charges rather than civil remedies.

Is it a crime if my accountant prepared my PPP application with mistakes?

Not if you did not know the information was false. Criminal liability requires knowledge and intent. Reliance on a professional to whom you provided accurate information can be a strong defense, though the facts must be examined carefully.

Can pandemic unemployment fraud be prosecuted federally?

Yes. Pandemic unemployment programs were federally funded, so claims filed with the New Jersey Department of Labor using false information can be charged federally as wire fraud, theft of government funds or identity theft, in addition to state charges.

What is the difference between civil and criminal PPP enforcement?

The government can pursue civil remedies under the False Claims Act, including treble damages and penalties, without proving criminal intent beyond a reasonable doubt. Criminal prosecution requires proof of knowing fraud and can result in prison.

Talk to a New Jersey Federal Defense Lawyer Today

Federal cases are won or lost early, often before an indictment is ever filed. If an agent has contacted you, a search warrant has been executed, or you have received a target letter or grand jury subpoena, call Keith Oliver Criminal Law at (732) 858-6959 or contact us online for a confidential consultation. We defend clients throughout New Jersey in the U.S. District Court in Newark, Trenton and Camden, with offices in Monmouth, Mercer and Somerset Counties and Jersey City. Learn more about our federal criminal defense practice and attorney Keith G. Oliver.