The Department of Justice is investigating and filing criminal charges for alleged loan fraud in connection with the Paycheck Protection Program (PPP). The DOJ announced the first PPP fraud federal charges in a press release issued on May 5, just a few short weeks after the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act was signed into law. In quickly arresting and criminally charging those suspected of PPP loan fraud, the DOJ is sending a strong message that it will aggressively pursue federal criminal charges against any person attempting to fraudulently seek forgivable loans guaranteed by the Small Business Administration (SBA). If you discover that you are the target of a PPP loan fraud investigation, you could be at risk for a PPP fraud federal indictment. For more information about PPP loan compliance or to retain the services of a knowledgeable PPP loan fraud defense attorney, contact our firm as soon as possible. Our legal team is committed to protecting the rights of individuals and business owners charged with PPP fraud and we can help you fight the criminal charges.
What is an Indictment?
Any person suspected of committing a federal felony offense like PPP loan fraud faces a risk of federal indictment. In the criminal justice system, an indictment is a formal accusation levied against one or more defendants who are accused of committing one or more criminal offenses. A federal indictment is the primary method by which a federal prosecutor initiates legal proceedings in a criminal case. However, a prosecutor cannot simply accuse someone of committing a crime and bring charges against them. A federal indictment can only be handed down (or “returned”) by a grand jury, which is a panel of 16 to 23 citizens authorized by the federal government to investigate alleged criminal activity and determine whether federal criminal charges should be brought.
The Federal Grand Jury Process
The grand jury process begins after a federal investigation has been initiated or after a federal complaint is filed by the arresting agency. The purpose of the grand jury is to hear evidence presented by the U.S. Attorney’s office and, based on that evidence, decide whether there is probable cause to believe that a criminal offense has been committed by a criminal suspect. The grand jury process is not overseen by a judge and unlike a regular criminal trial, the grand jury’s decision does not have to be unanimous. If the majority’s opinion is that the person being investigated by the federal government should be tried for the federal crime in question, the panel will hand down an indictment, also known as a “true bill.” A federal grand jury operates under the supervision of the U.S. Attorney’s office and hears evidence ex parte, meaning without the criminal suspect’s participation in the proceedings.
The federal government is required to use a grand jury for all federal felony offenses, to determine whether there is enough evidence to justify bringing the suspect to court to answer to the criminal charges. Unfortunately, because the criminal suspect in a federal investigation has no right to be present during the grand jury proceedings, or, in many cases, to be informed of the proceedings at all, the grand jury generally only hears from the government. The defense has no right to call witnesses and there is no defense attorney to object or present evidence that is favorable to the defendant. The prosecutor essentially controls what the grand jury sees and hears, and as such, a good prosecutor can often ensure indictment of the criminal suspect.
Due to the one-sided nature of a grand jury proceeding, which could easily result in a federal indictment for PPP loan fraud, it is imperative that you hire a skilled criminal defense attorney who specializes in federal legal matters as soon as possible after you become aware that a federal criminal investigation has been initiated. A knowledgeable defense lawyer whose practice includes PPP fraud defense will get to work assessing the extent of your possible criminal liability before a grand jury investigation begins or after a PPP fraud federal indictment has been handed down.
Federal Indictment vs. Federal Criminal Complaint
In some cases, instead of a federal indictment, the prosecutor may rely on a criminal complaint to formally initiate a criminal case. This typically occurs when the prosecution needs to make an arrest quickly, which may be the case with allegations of PPP loan fraud. In fact, the two Rhode Island businessmen charged with allegedly filing fraudulent loan applications seeking more than half a million dollars in PPP funds were charged by way of a federal criminal complaint. This case was the first to involve federal charges of PPP loan fraud. “As alleged, David Staveley and David Butziger tried to capitalize on the coronavirus crisis by conspiring to fraudulently obtain more than half a million dollars in forgivable loans that were intended to help small businesses teetering on the edge of financial ruin,” said Special Agent in Charge Joseph R. Bonavolonta of the FBI’s Boston Field Office in the DOJ’s May 5 press release. “Thankfully we were able to stop them before taxpayers were defrauded, but today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud.”
Your Rights When Facing a PPP Fraud Federal Indictment
If you are suspected of committing PPP loan fraud, the Fifth Amendment to the U.S. Constitution guarantees your right to a federal grand jury proceeding, the findings of which will determine whether the federal prosecutor has enough evidence to proceed with the case. If the grand jury returns a “true bill,” the case will go forward. As a suspect in a federal criminal investigation, you do not have to be notified of a grand jury proceeding. However, the Sixth Amendment to the Constitution guarantees your right to be “informed of the nature and cause of the accusation.” That means the federal indictment must contain enough information to inform you of the basis and the nature of the criminal charges you are facing.
How is an Indictment Used in Court?
An indictment for PPP fraud is not evidence that a crime has been committed. After all, the purpose of the grand jury is not to determine whether the criminal suspect is guilty or innocent of the alleged crime, only to determine whether there is sufficient evidence to try the case in federal court. That means jurors in a federal criminal case are not permitted to rely on an indictment alone to reach a verdict. Nevertheless, it is not uncommon for jurors to be swayed by the allegations contained in a federal indictment. For this reason, among others, it is in your best interest to consult a knowledgeable federal criminal defense attorney who can review the facts of your case and provide you with the best possible strategy based on your specific situation. An experienced PPP defense attorney may be able to challenge the indictment before the case even goes to trial, based on, for example, the prosecution’s failure to set forth a violation of the law, or failure to sufficiently inform you of the basis and the nature of the criminal charges.
Federal Criminal Charges for PPP Loan Fraud
A federal indictment for PPP loan fraud is a serious matter. Not only does it mean the prosecution believes it now has enough evidence to convict you of the crime you are accused of committing, there are other serious consequences that can result from the indictment itself, before the case even goes to trial. You could, for instance, lose your job, have your assets frozen and/or suffer irreparable damage to your reputation, in addition to dealing with the stress and anxiety of facing charges for a federal crime. The following are some examples of federal offenses you could be charged with in connection with PPP loan fraud:
- Bank fraud
- Wire fraud
- Making false statements to a financial institution
- Conspiracy to make false statements to the SBA
- Identity theft
- Making false statements to federal agents
Our Experienced PPP Attorneys Can Help
If you have been indicted for loan fraud involving the federal Paycheck Protection Program, it is crucial that you understand the difference between a federal indictment and a federal criminal conviction. Just because you have been indicted by a grand jury does not mean you will be found guilty at trial. After all, an indictment is merely an accusation, not a finding of guilt by the court. That being said, a federal indictment on its own can have devastating repercussions affecting your personal and professional life. An indictment for a federal crime like PPP fraud requires the expert handling of a reputable PPP attorney who specializes in federal criminal cases. Our knowledgeable defense lawyers know what it takes to put a criminal defendant in the best possible position for obtaining a successful outcome, whether that means responding to an indictment or possibly avoiding an indictment altogether. We can ensure that you understand the charges in your case, and we will fight for your rights at every stage of the federal legal process.