How to Report PPP Loan Fraud: Expert Guide

The COVID-19 pandemic was challenging for individuals and businesses alike. When lockdowns were announced in March 2020, many service industries were suddenly shuttered, and workers found themselves filing for unemployment.

While some companies successfully transitioned to remote work, the overall impact on the economy was substantial, resulting in commercial uncertainty. Businesses of all types faced the challenge of staying afloat and retaining employees during these trying times.

Fortunately, the government intervened to provide a variety of loan options, including the widely recognized Paycheck Protection Program (PPP), to assist with various expenses. This initiative has proved to be immensely beneficial for many.

Unfortunately, this offer of assistance was met with some unscrupulous practices by recipients. If you are aware of such practices, you might feel inclined to report the offending party. First, however, you need to know what constitutes illicit behavior and how to report PPP fraud.

What Constitutes PPP Fraud?

The PPP is a type of forgivable loan backed by the U.S. Small Business Administration (SBA )established during the COVID-19 pandemic as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. Between April 2020 and May 2022, nearly $800 billion was distributed to small businesses across the U.S.

Aside from the fact that they required no borrower guarantee or collateral, the major benefit of these loans was that they were eligible to be forgiven in full for borrowers who met specific criteria. To achieve complete forgiveness, borrowers were required to allocate loan funds towards specific purposes such as payroll, benefits, rent, utilities, and interest payments within a designated timeframe.

Additionally, the funds were required to cover essential expenses related to personnel and facilities. Moreover, they were allocated explicitly for utilization by companies with 500 employees or fewer (or businesses that meet the SBA’s industry-specific size criteria).

Because of how quickly the program rolled out and the amount of money offered, some businesses and individuals took advantage of it in fraudulent ways. Some submitted false documents like payroll, bank, and tax records to receive loans. Others used the loans for their own benefit rather than for prescribed purposes.

If you encounter any misuse of PPP funds, you might consider reporting it. Knowing how to report PPP fraud is the first step.

How to Report PPP Fraud

Before deciding to become a PPP fraud whistleblower, it’s important to carefully consider a few key factors. Firstly, ensure that you clearly understand whether your employer has indeed committed PPP fraud, and also contemplate the potential consequences of filing a report. Should you choose to move forward, it is crucial to engage the services of a qualified attorney who can provide you with a comprehensive explanation of your legal protections and expertly guide you through the entire process.

Check if Your Employer Committed PPP Fraud

Before becoming a PPP loan whistleblower, it is crucial to verify the presence of evidence of fraud. This could entail encountering application documents that contain false information, such as inaccurate bank statements, inflated headcount, or incorrect payroll amounts. It could also involve being knowledgeable about the misuse of funds.

To date, some people who decided to report PPP loan fraud schemes found egregious misuse of funds, with known fraud amounting to nearly $200 billion, or about a fourth of the money distributed. One loan recipient purchased a multi-million-dollar home in Nantucket. Another bought a Lamborghini.

Others paid off mortgages, purchased expensive personal items like cars, jewelry, and designer clothing, and used funds for private jet travel, vacations, and even plastic surgery. If you plan to blow the whistle on your employer for PPP fraud, you need more than allegations. You must have some proof to offer the authorities.

Consider Your Decision as a Whistleblower

The initial phase of the reporting process involves recognizing instances of employer misconduct and gathering evidence of fraudulent activities. From there, you need to consider the logistics of how to report PPP fraud. When you speak to a lawyer, can you report PPP loan fraud anonymous, or will you be called upon to testify in court, revealing your identity?

In certain instances, government agencies may protect whistleblowers, but there’s no guarantee, so you must consider potential risks if you choose to come forward. Retaliation is a very real concern. Even if you aren’t fired for blowing the whistle on fraud, it may become impossible to remain at your job.

Your employer may try to intimidate you to prevent you from testifying. Doing so is a criminal act known as witness tampering, and even if it’s unsuccessful, your employer could face additional charges for trying to silence you.

Remember, though, the law is on your side. If you have evidence of wrongdoing and come forward to report it, there are laws to protect you from different forms of retaliation.

Hire a Lawyer

Knowing when and how to report PPP loan frauds is easier when you have an experienced lawyer to guide you through the process, providing the legal support and services you need. A lawyer can help you determine whether you have a case, direct you on how to report fraud, ensure you understand what to expect when you file a PPP loan fraud report, and prioritize your best interests throughout the entire process.

Understand Your Protections

The major source of protection when you report PPP fraud is the False Claims Act. A provision of this act states that whistleblowers may be eligible for relief if an employer retaliates by demoting, discharging, or otherwise harassing or discriminating against them because of reported fraud.

In such cases, relief could come in the form of reinstatement to the position if you were fired, double back pay to cover lost wages, and compensation for special damages, which could include paying legal fees and other litigation costs you accrue. As noted above, there may also be criminal charges against an employer who engages in intimidation or witness tampering.

File a Claim

If you want to know how to report PPP fraud, it starts with understanding the False Claims Act. It states that anyone can become a whistleblower and file a lawsuit on behalf of the U.S. government, including U.S. citizens, non-citizens, and non-governmental organizations (NGOs).

Working with a qualified attorney, you’ll compile a complaint disclosing the information and evidence you’re presenting and file it with a federal district court in the district in which the complaint is brought. You are required to maintain confidentiality until the seal is lifted.

What is the PPP Loan Whistleblower Reward?

You might be surprised to learn that you may be eligible for a PPP loan whistleblower reward. Under the qui tam provision of the False Claims Act, whistleblowers could receive a reward of 15% to 30% of collected proceeds for confidentially disclosing fraud. That said, you must be the first to file. Only the first person to come forward with the information and allegations of fraud will qualify for compensation.

Hire a Whistleblower Lawyer at Audet & Partners

Once you understand how to report PPP fraud and you’ve gathered evidence to support your claim, it’s time to find a qualified whistleblower lawyer to protect your interests and guide you through the process. You need a lawyer with experience with such cases and who investigates thoroughly before taking your case to ensure the best chance for a favorable outcome.

If you’ve discovered evidence that your employer or another individual or entity has committed PPP fraud, the experienced professionals at Audet & Partners can help you understand your options. Contact us now to request a free consultation and learn more.

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