How Borrowing Money Can Turn into a White-Collar Crime

COVID-19 AND THE PAYCHECK PROTECTION PROGRAM

The COVID-19 pandemic has led to a number of financial programs being offered by the federal government in an attempt to keep the economy afloat until life can return to some semblance of normal. One major program passed by congress was the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. A portion of the CARES Act was designated to help small businesses keep employees paid even though they may have had limited or no work due to the COVID-19 pandemic. The CARES Act added additional ways that small business owners could borrow fully forgivable business loans if all criteria are met regarding how the loan is used. The Paycheck Protection Program (PPP) states that a loan will be fully forgiven if the money borrowed is used within a certain time period for payroll costs, mortgage interest, rent and utilities. Loans given under the PPP have a 1% interest rate and the first payment is deferred for six months.



FRAUDULENT USE OF FUNDS LEAD TO CRIMINAL CHARGES

Just because this money might be available to you, does not mean it is legal to use it however you wish. PPP loans are required to be used for payroll costs, mortgage interest, and rent and utilities. If you make false statements to financial institutions about what the money from a PPP loan is used for, then you could be facing a federal charge for a white-collar crime. Recently, a Houston man was charged with making false statements to a financial institution, wire fraud, bank fraud, and engaging in unlawful money transactions for allegedly taking over $1.1 million in PPP loan money and using it to buy cryptocurrency and pay personal expenses. He allegedly filed for two PPP loans to cover payroll expenses for employees in two different businesses that did not exist. The federal government has authorized over $600 billion in PPP loans to help small businesses survive during the COVID-19 pandemic. It is wise to expect that the focus of federal white-collar crime investigations in the near future will turn to those who are suspected of defrauding the government to obtain PPP loans.

HOW DOES THIS AFFECT ME?

If you have taken a Paycheck Protection Program loan (PPP) through the Small Business Administration (SBA) as part of the CARES Act, then you might be at risk. The federal government is not going to turn a blind eye to who it suspects of fraudulently obtaining PPP loans to use the money for unapproved reasons. Cases like the one above will only increase in frequency as the federal government continues to monitor and investigate those who receive PPP loan money. The rules and regulations that come with PPP loans can be confusing and hard to follow. It is wise to seek the advice of an experienced federal white-collar criminal defense attorney if you have any questions about your PPP loan and its approved uses. Even unintentional conduct can result in federal criminal charges if certain factors are present. The unprecedented amount of money that the federal government has distributed to the American people has unfortunately also served as a big trap for many who did not take the necessary precautions and care in applying for and using these funds. It is your responsibility to understand the law and how it applies to you. Ignorance of the rules surrounding PPP loans is not a defense to related criminal charges as financial institutions have sought to make it clear what the allowed uses of PPP money are.