Houston PPP Loan Fraud Defense Attorney

To curb the economic impact of the coronavirus pandemic, the United States government established the Paycheck Protection Program (PPP) to help small businesses stay afloat. By providing loans to continue paying employees, hire back employees who were laid off, and to pay interest on overhead expenses like rent and utilities, this program was a valuable lifeline for many small business owners. Like any other loan, Paycheck Protection Program loans come with requirements that must be met in order to receive funds. It is fraudulent – and therefore illegal – to misrepresent your business when applying for PPP loans.

At the Law Office of Nathaniel Pitoniak, we defend individuals who are accused of crimes, including Paycheck Protection Program loan fraud. With the federal government intensifying their investigations into fraudulent activity related to PPP loans, it is more important than ever to protect your rights and your business. Do not wait until it is too late. Our team of experienced PPP loan fraud defense attorneys are available at (832) 315-6283 to discuss your situation today.

Who Can Receive a Paycheck Protection Program Loan?

Administered by the Small Business Administration, the Paycheck Protection Program was designed to keep employees on payroll during the economic fallout of the COVID-19 pandemic. As a result, several different types of entities are able to receive a PPP loan, including:

  • Small businesses that meet the SBA’s thresholds, dependent on industry size standards
  • Sole proprietors, self-employed individuals, and independent contractors
  • Any business, 501(c)3 nonprofit organization, 501(c)(19) veterans’ organization, or tribal business concern with over 500 employees
  • All businesses in Accommodations and Food Services that have more than one physical location with less than 500 employees per location

While a business or entity may qualify for a PPP loan due to their size and structure, they must utilize the loan to pay for specific costs. They cannot be used to pay for personal expenses or for the personal benefit of the business owner, for example. The primary goal of the Paycheck Protection Program is to retain employees and handle payroll expenses.

What Are PPP Payroll Expenses?

Since the Paycheck Protection Program was created to provide for specific payroll-related expenses, it is important to understand exactly what is covered by these loans and what is not. PPP loans can be used to cover the following payroll expenses:

  • Salary
  • Wages
  • Commissions
  • Bonuses and tips
  • Paid leave
  • Housing allowance
  • Severance compensation
  • Insurance and retirement benefits
  • Group health benefits

The remaining 40% of the PPP loan can be spent on overhead expenses such as:

  • Mortgage interest payments
  • Rent and lease payments
  • Utilities
  • Property damage costs
  • Worker protection expenditures for COVID-10 compliance
  • Operations expenditures

Payroll expenses must make up at least 60% of the PPP loan spending, while other expenses can be covered using the remaining 40%. This means that if a business seeks a $50,000 PPP loan, then at least $30,000 of that loan must be spent on the previously mentioned payroll expenses. The remaining $20,000, however, can be dedicated to other costs like rent and utilities.

Moreover, payroll costs cannot exceed a $100,000 dollar limit per employee, on an annualized basis. This means that if an employee on payroll earned an annual salary of $150,000 in 2019 or 2020, for example, then a business owner can only claim $100,000 and nothing more. If that business owner dedicates more than the $100,000 limit for a single employee, the federal government will consider that fraudulent.

Understanding the breakdown of expenses is absolutely essential, as failing to adhere to requirements can result in loan fraud. When completing the application, a business owner will be asked to certify that the funds will be spent appropriately, according to the 60/40 breakdown. If they abide by these requirements, it is possible to have the loan fully forgiven.

A PPP loan fraud defense attorney at the Law Office of Nathaniel Pitoniak can help you better understand how these thresholds work and can defend your business against claims of fraudulent spending.

What Expenses Are Not Covered by a PPP Loan?

Some expenses are not covered by PPP loans. For instance, payments to independent contractors cannot be made using a PPP loan. Additionally, S corps and C corps owners who are not on payroll cannot be paid using these loans, since shareholders’ distributions are not covered. A PPP loan fraud defense attorney can help provide better insight regarding which expenses are covered through these loans and which are not.

What is PPP Loan Fraud?

Fraud occurs when a person uses deception for the purposes to achieve financial or personal gain. Most commonly, fraud is committed by misrepresenting facts or withholding relevant and important information. In the context of PPP loans, fraud occurs when an individual purposely deceives the federal government by misrepresenting information about their business or entity or when they provide false information regarding how the loan was spent.

Genuine misunderstandings of the program can occur, but the federal government’s primary focus is outright, intentional fraud. In an effort to stop fraud from occurring, the Department of Justice is conducting full investigations and audits of businesses that received funding under the Paycheck Protection Program. Fraudulent activity is already being discovered, like in the case of three men who falsified business information to receive over $2 million in relief.

Fraud can occur at any stage of the PPP loan process, from application all the way to allocation of funds. If a business is not entirely honest when filling out the application, or when they fail to report changes in status or structure after the application is submitted, this is considered fraud. Similarly, if the funds are misappropriated or if the business fails to respond properly to government audits, this may be considered fraud as well.

Under this light, it is easy to understand how a business or other entity may easily fall into PPP loan fraud. Given the urgency of the program, errors can occur when providing documentation or other information. To avoid claims of fraud, it is important to ensure that courts and regulators do not perceive any dishonesty. Appearing to have taken advantage of the PPP loan program by spending funds excessively or greedily can spell bad news for a business owner.

How PPP Loan Fraud Defense Attorneys at the Law Office of Nathaniel Pitoniak Can Help

Even the most thorough and diligent of business owners can find themselves under a federal government investigation for fraud. If you received a loan under the Payment Protection Program and you are concerned about claims of fraud, an experienced PPP loan defense attorney can help navigate these issues and keep your business out of legal trouble. For more information or to speak with an attorney about your situation, considering contacting the Law Office of Nathaniel Pitoniak today at (832) 315-6283 for a free consultation.