NYS Coronavirus Relief Fraud & Theft Crimes: SBA’s Paycheck Protection Program

On the heals of the COVID-19 pandemic, the Small Business Administration offered numerous loans and grants by way of the Paycheck Protection Program and other initiatives. Despite its invaluable intentions, the PPP was not immune to fraud, theft, and other criminal schemes. While some apparent criminal or wrongful taking was unfortunately expected, you might find yourself arrested and charged with Grand Larceny, Forgery, Offering a False Instrument, or any one of a number of offenses in a New York City, Westchester, Rockland or other municipal court. Whether your fraud defense lawyer can properly articulate your honest mistake or misunderstanding, or your attorney must contend with some other misappropriation, you can be sure that the District Attorneys will aggressively pursue those who allegedly or in fact stole these funds that were aimed at assisting business and employees during this unprecedented time.

In addition to the SBA Economic Injury Disaster Loans and Advances, aka, the EIDLA, this is another low-interest, no fee loan up to $10 million for small business or even self-employed individuals to help with cash flow and employee retention. The benefit of this program is that if the monies are used as required by statute for payroll and you keep your employees employed through the crisis, a portion of the dollars will be forgiven and will not have to be repaid. This can be even more enticing for a proprietor than other forms of disaster relief loans, given the potential for debt forgiveness.

Of the many different crimes and criminal statutes that could be applicable to fraud involved in taking out a loan under the Paycheck Protection Plan program, perhaps the most obviously applicable charges would be Grand Larceny, Forgery and Offering a False Instrument for Filing. All of these offenses, and the particular statutes that fall under these general categories, involve crimes that, if convicted, would result in a permanent record with life-changing ramifications. Not just any offense, all of Penal Law violations in fact are or would be prosecuted as felonies punishable by time in state prison, depending on the degree. Essentially, these crimes amount to filing a written instrument with a public offense that contains false information (Offering a False Instrument for Filing), general theft of money or property with a value in excess of $1,000 (Grand Larceny), and altering or forging documents – the kinds of documents that would be submitted along with a fraudulent application to the SBA for a PPP loan.

The severity of the punishment associated with these kinds of arrests, indictments and convictions depend on the degree of the particular statute for which a person has been convicted. For example, Grand Larceny in the Fourth Degree, Penal Law 155.30, is a felony and punishable by up to one and one third to four years in state prison, assuming no prior felony convictions, while Grand Larceny in the Second Degree, Penal Law 155.40, is a higher degree felony, a class C felony, which is therefore punishable by the greater term of up to five to fifteen years in state prison. The monetary threshold for the application of this much more severe Second Degree charge and punishment is the relatively low amount of $50,000. When examined in the context of billions of dollars provided to countless businesses and the maximum allowable loan of $10 million, breaching $50,000 will likely be far from atypical.

Similarly, Forgery in the Second Degree, Penal Law 170.10, is punishable by as much as seven years in prison and Offering a False Instrument for Filing, Penal Law 175.35, is punishable by incarceration for as lengthy as four years.

Given the inherent nature of the Paycheck Protection Program being a forgivable loan, there will doubtlessly be a greater degree of reporting and oversight necessary in order for people to take advantage of those kinds of benefits this plan offers. This also means that there can be even more potential pitfalls than with other, more finite programs such as one-time grants offered by the SBA that never need to be repaid. The potential for fraud-related charges and accusations doesn't stop at the application. Instead, it obviously continues throughout the reporting period and when it comes time to submit necessary documentation for loan forgiveness. A brutally obvious example might be if a business owner applies for a PPP loan, immediately lays off half of their employees, and then in 9 months hires back the same number of employees, perhaps at a much lower salary given the impact of COVID-19 on the economy, and then submits the necessary paperwork for debt forgiveness showing that the number of employees has not changed. Similarly, supplying false information about the number of employees or doctoring the supporting tax materials to misrepresent salaries, for example, would run afoul of the law. Simply, it is easy to see how, depending on the terms of the program and loan agreement, this might be viewed not only as an abuse, but outright fraud resulting in extremely serious criminal charges.

If you find yourself standing in front of a judge with your criminal lawyer facing accusations relating to an alleged theft of tens of thousands or even millions of dollars, it is too late to stop the criminal justice process from moving forward, but not too late to implement the best defense. If is crucial to be prepared for the kind of inevitable fallout from allegations of abuse from emergency programs and the chaos and confusion caused by the coronavirus. Whether you were already arrested or you are now being questioned by the NYPD, the Attorney General’s Office, or a prosecutor’s anywhere in New York, do justice for yourself. Whatever strategy you implement, there is no substitute for the experience, knowledgeable and advocacy of the attorneys and former Manhattan prosecutors at Saland Law.

Call the New York theft lawyers and former Manhattan prosecutors at 212.312.7129 or contact us online today.