We have seen an uptick recently in enforcement activity regarding paycheck protection program (PPP) loan eligibility and forgiveness. The Small Business Administration (SBA) typically pursues the civil investigations, usually by denying a loan forgiveness application and forcing the borrower to pursue an administrative appeal and then possibly an appeal in court. On the criminal side, the Department of Justice (DOJ) pursues PPP fraud through traditional investigative means.
The Director for COVID-19 Fraud Enforcement overseeing DOJ’s criminal and civil investigations testified on June 14, 2022 before the House Select Subcommittee on the Coronavirus Crisis. He noted that approximately 1,500 defendants have already been charged with fraud and that an “incredible volume” of cases are in the investigative stages. The filed cases total more than $1.1 billion in losses as of March 2022 due to pandemic-related fraud.
In addition to DOJ’s request for a $41.2 million budget for pandemic fraud enforcement, it urged lawmakers to enact a 10-year statute of limitation (SOL) for pandemic-related fraud, including the PPP and the economic injury disaster loan (EIDL) programs. DOJ views the enlargement of the SOL as essential to providing it with enough time to investigate and to develop these cases. It is also establishing “strike force teams” that will focus on large-scale pandemic-related fraud cases committed by organized criminal networks.
On June 8, 2022, the House passed bills that would extend to 10 years the SOL for fraud charges relating to loans under the PPP and EIDL programs. This would allow 10 years for the DOJ to pursue fraud charges against borrowers under these programs. These bills are currently pending before the Senate Committee on Small Business and Entrepreneurship.