Fraud and Other Borrower and Lender Concerns in PPP and Other CARES Act Lending Programs

Description

Two primary components of emergency COVID-19 relief legislation are the PPP and EIDL loan programs administered by the Small Business Administration (SBA), which have supported millions of forgivable and low-interest loans to eligible businesses and nonprofits. Lenders and borrowers who participate in these loan programs must comply with numerous rules and restrictions or face potential investigation and enforcement action.

For instance, a small business owner who inflates average monthly payroll costs or employee headcount to qualify for a larger PPP loan or loan forgiveness could face criminal liability under the Small Business Act, the False Claims Act, and other federal fraud statutes. Similarly, a business owner or executive who falsely certifies that a business meets the SBA's applicable size and affiliation rules to qualify for a PPP loan could face criminal liability. Likewise, a lender that fails to monitor for and report suspicious activity connected with emergency loans could face civil and criminal liability under the Bank Secrecy Act.

Loans awarded through the PPP and EIDL fall under the investigative authority of the SBA Office of Inspector General. The CARES Act also established new investigative bodies, including the Special Inspector General for Pandemic Recovery (SIGPR) and the Pandemic Response Accountability Committee (PRAC), responsible for investigating possible fraud and abuse associated with the various federal COVID-19 relief programs. Moreover, anyone who extends or receives financing through a federal COVID-19 relief program should be aware that the U.S. Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) have indicated they will prioritize the investigation and prosecution of all criminal conduct relating to the COVID-19 pandemic.

Listen as our authoritative panel discusses the potential liabilities for borrowers and lenders in applying for or processing PPP and other emergency funding, and the unique pitfalls in applying for loan forgiveness. The panel will also discuss the new investigative bodies created under the CARES Act.