SENTENCING OUTCOMES IN PPP LOAN FRAUD CASES
To date, the majority of Payroll Protection Program (PPP) and EIDL loan fraud sentencing decisions made by federal judges include prison time.
There have been frequent headlines about the Payment Protection Program (“PPP”) and the Economic Injury Support Loan (“EISL”) fraud since May 2020, when the government approved COVID-19 economic relief programs for small businesses.
As more cases move closer to the upcoming sentencing hearings, let’s take a look at the sentencing results thus far.
PPP LOAN FRAUD INVESTIGATIONS
Following the government’s May 2020 launch of the PPP loan program, federal law enforcement also started looking into claims of fraud. These investigations involved, among other things:
- Fraud in the PPP (and EISL) loan application process.
- Disbursement of loans to non-qualified individuals or businesses; and
- misuse of PPP loan proceeds, which were intended to pay for payroll and other business costs
Those early police investigations swiftly resulted in hundreds of people being detained and prosecuted. The government still files new cases of PPP loan fraud each week.
There are a ton of other PPP loan fraud cases pending, and the news stories about them will keep coming.
Additionally, as more recipients of PPP loans in the past 18 months submit applications for PPP loan forgiveness, the government will conduct additional audits of their initial loan applications and thoroughly review the data they provided. It is dangerous and may result in criminal charges to request PPP loan forgiveness when the original PPP loans contained false information.
SENTENCING OUTCOMES IN PPP FRAUD CASES
To date, defendants in the majority of PPP loan fraud (and related) cases have entered guilty pleas. Only one recorded PPP loan fraud jury trial is known to us. ).
The majority of cases are currently in a phase where, following a guilty plea, the defendants are wrapping up their pre-sentence investigations and getting ready to appear before the sentencing judge during a sentencing hearing.
Let’s examine the sentencing strategies used by federal judges and prosecutors for PPP loan fraud defendants. For instance, what is the average prison term, are most defendants going to prison or are many also being considered for probation, and is the loan amount the main factor?
The evidence is currently primarily anecdotal, but as more defendants are sentenced, we will keep a close eye on developments.
One common question on social media and the internet is, “Do people go to prison for a $20k PPP loan?” implying that jail or prison time may not be the result for a $20k PPP loan.
In actuality, people who commit $20,000 PPP loan fraud go to prison. Although sentencing judges consider each case individually when determining a defendant’s appropriate prison term, jail or prison time is always a possibility. In fact, recent cases indicate that prison time is a common punishment for PPP loan fraud.
The answer to the question, “How long do you go to jail (or prison) for PPP fraud of $20,000?” is that the amount of the PPP loan is a major consideration that is given a lot of weight during the sentencing process. The sentencing judge also takes into account the defendant’s prior criminal record, other specific case considerations, and the government’s capacity to recover the stolen money.
CURRENT DATA SHOWS MOST PPP LOAN FRAUD SENTENCES INCLUDE PRISON TERM
Federal sentencing judges base their decisions about a person’s prison sentence on a case-by-case analysis using the US Sentencing Guidelines.
*Pro-Tip: To better understand how the US Sentencing Guidelines generally apply in PPP loan fraud cases, click on this informative article from the Prison Professors blog: PPP Loan Fraud: A Case Study.
However, judges have imposed jail time in the great majority of sentencings that have been made public thus far. In only two cases so far, the defendants received probation. See Data Table below.
Defendants in PPP loan fraud cases may face prison sentences based on the number of loans involved—thousands, hundreds of thousands, or millions. People who have a $20,000 PPP loan may face jail time if there is proof of fraud, just like those who have a $100,000 or $1 million PPP loan.
As of November 15, 2021, we have not reviewed all of the sentences that federal courts have handed down in cases involving PPP loan fraud. However, there are anecdotal reports that courts frequently sentence these cases with jail time. That is not surprising, given the statutory penalties involved. See Table below.
STATUTORY PENALTIES FOR PPP LOAN FRAUD
The particular charges determine the applicable maximum prison sentences and statutory penalties for PPP loan fraud cases.
FEDERAL CRIMINAL STATUTES AVAILABLE IN PPP LOAN FRAUD CASES
| United States Code | Description | Maximum Sentence | Maximum Fine |
| 18 USC § 1344 | Bank fraud | 30 years in prison | $1,000,000 in fines |
| 18 USC § 1956 | Money laundering | 20 years for each violation | Fines of up to $500,000 or double the amount of property involved, whichever is greater |
| 18 USC § 1343 | Wire fraud | 20 years (or 30 years) | Maximum fine of $1,000,000, if the violation affects a financial institution or involves any benefit associated with a presidentially declared major disaster or emergency |
| 18 USC § 1341 | Mail fraud | 20 years (or 30 years) | Maximum fine of $1,000,000, if the violation affects a financial institution or involves any benefit associated with a presidentially declared major disaster or emergency |
| 18 USC § 1014 | Making false statements to the SBA or a financial institution | 30 years | $1,000,000 in fines |
| 18 USC § 1028A | Aggravated identity theft | A 2-year term of imprisonment, to be served in addition to the penalty for the underlying felony offense | |
| 18 USC § 1349 | Attempt and conspiracy | Any attempt or conspiracy to commit fraud is punishable by the same penalties as the actual fraud offense. | |
| 18 U.S.C. § 1001 | Making false statements to federal agents | 5 years in prison | |
| 18 USC § 371 | Conspiracy to defraud the government | A fine and/or a term of imprisonment of up to 5 years | |
| 26 USC § 7201 | Tax evasion | a term of imprisonment of up to 5 years, or both | A fine of up to $100,000 (for an individual) or $500,000 (for a business) |
Prosecutors are focusing on fraudulent PPP loans of all sizes, even though the million-dollar PPP loans garner the most attention. They haven’t officially declared that if the PPP loan fraud is less than a certain threshold, they won’t pursue legal action or seek jail time. There are anecdotal reports of raids and arrests related to PPP loan fraud cases involving $10,000, $15,000, and $20,000.
The amount of resources the DOJ will use to investigate fraud cases involving smaller loan amounts is still unknown.
Click here for a CARES Act Fraud Tracker including all filed PPP loan fraud cases, published by Arnold & Porter: CARES Act Fraud Tracker.
The issue still exists that sentencing judges and prosecutors frequently seek to make an example of anyone involved in PPP loan fraud for cases involving smaller loan amounts.
The FBI and its federal partners will look into anyone who diverts federal emergency assistance intended for businesses that need it to survive. We won’t put up with anyone who is motivated by personal greed to keep American taxpayer money that should be going to those in need, as an FBI official stated in a recent case. Prison sentences for PPP loan fraud ”.
Additionally, Acting US Attorney Nicholas Ganjei gave the following justification for his vigorous pursuit of PPP loan fraud:
“The very definition of stealing from the less fortunate is stealing limited COVID relief funds. Every dollar that was stolen and lavishly spent… was one less dollar that went to a failing company that was having trouble paying its staff. The Department of Justice and its allies will exert every effort to look into and bring charges against anyone who would dare embezzle these meager resources and impede the country’s efforts to recover. ”.
Regardless of the loan amount, anyone who took part in purportedly fraudulent PPP loans may find this sentiment concerning.
A JUDGE’S APPROACH TO A PPP LOAN FRAUD SENTENCING
For federal judges, sentencing a criminal defendant is never an easy task. At sentencing, they have to consider many factors. One of them in a PPP loan fraud case is the loan amount. Another is the government’s ability to recover the ill-gotten gains.
*Pro-Tip: Click on this recent article (and the internal links within) from the Prison Professor’s blog to better understand the federal sentencing process. A PPP Loan Fraud Case Study.
Ganell Tubbs, a woman who entered a guilty plea to PPP loan fraud involving $2 million, was sentenced to 41 months in prison by the sentencing judge. Judge Brian Miller’s remarks during the sentencing hearing shed light on how a judge might consider a PPP loan fraud defendant’s particular circumstances or mitigating factors.
The judge acknowledged that it was challenging for him to determine Tubbs’ punishment, which included a $1 million fine and a maximum sentence of 30 years in prison. Tubbs submitted nearly $2 million in PPP loan claims for ineligible businesses. Tubbs paid off his personal debts, his student loans, and a variety of goods and services with the money he received from the loan.
Judge Miller stated that the government swiftly discovered the fraud and was able to retrieve all of the loan funds except for $14,000. Nevertheless, he was unable to fully excuse Tubbs for this.
Judge Miller questioned aloud, “Should Miss Tubbs get the benefit of the government figuring it out quickly?” She questioned why the bank had provided Tubbs with the loans with little to no supporting documentation.
Judge Miller stated, “On the other side of that equation, she walked in and defrauded them.” “It was a serious scam, but she entered the room and carried it out.” ”.
The Judge took Tubbs’s absence from criminal history into consideration. “She is not someone who has been robbing people for the last ten years,” he remarked. For some people, three years in prison is equivalent to twenty years. Some people can serve their time in prison and come out of it without any problems. Miss Tubbs finds herself in a very harsh environment. ”.
The Tubbs case demonstrates how a federal sentencing judge weighs various considerations before determining a sentence in a case involving PPP loan fraud.
DATA TABLE: SAMPLING OF PPP LOAN FRAUD PRISON TERMS TO DATE (November 17, 2021)
| Person | Location | Loan Amount | Sentence |
| Joseph Cherry | Virginia | $200,000 | 51 months |
| Tarik Jaafar | Virginia | $6.6 million | 12 months |
| Nadine Consuelo Jackson | Ohio | $2.5 million | 24 months |
| Gannel Tubbs | Arkansas | $2 million | 41 months |
| Dennes Garcia | Florida | $285,742 | 18 months |
| Fahad Shah | Texas | $3.3 million | 31 months |
| David Adler Staveley | Mass. | $543,000 | 48 months |
| Richard Ayvazyan | California | $20 million+ Conspiracy | 17 years |
| Marietta Terabelian | California | $20 million+ conspiracy | 72 months/6 years |
| Artur Ayvazyan | California | $20 million+ conspiracy | 5 years |
| David T. Hines | Florida | $3.9 million | 6 years+ |
| Andre Clark | Andre Clark | $7.2 million | 33 months |
| Maurice Fayne | Georgia | $3.7 million | 17 years |
| Mukund Mohan | Washington | $5.5 million | 24 months/2 years |
| Matthew Jason Welch | Montana | $35,000 | 90 Days Time-Served/5 years Probation |
| Cindi Denton | California | $491,310 | 6 months in prison/12 months home confinement |
| Thomas Smith | Wisconsin | $1.2 million | 57 months |
| Andrew Tenza | Virginia | $350,000 | 18 months |
| Manuk Grigoryan | California | $20+ million | 6 years |
| Edvard Paronyan | California | $20+ million | 30 months |
| Vahe Dadyan | California | $20+ million | 1 year and a day months |
| Arman Hayrapetyan | California | $20+ million | 10 months probation |
| Sam Fiedler | Arizona | $638,000 | 8 months |
| Miranda Devlin | California | $368,000 | 18 months |
SHOULD THERE BE NO PRISON TIME FOR $10k or $20k PPP LOAN FRAUD?
First, it is important to emphasize that nobody, save a sentencing judge, can assure a defendant charged with $10k or $20k PPP loan fraud that they will not serve time in jail. The relevant statutes call for incarceration as a possible penalty.
However, a lot of seasoned attorneys and sentencing mitigation specialists think they can argue that in situations where the loss amount is lower, they can argue for little to no jail or prison time.
Remember that, based on data available online, a significant portion of PPP loans are for less than $50,000 (see chart below). However, it is still unknown how much of the DOJ’s resources will be used to pursue PPP loan fraud cases that are less than $50,000.
When the PPP loan amount is $10,000 or $20,000, the case for little to no jail time is not new and is predicated on the amount of the loss. The amount of loss will be one of the most significant and determining factors at sentencing in fraud cases.
The “intended loss” or “loss amount” is used by the federal Sentencing Guidelines to suggest a sentence. If someone applied for a $1 million PPP loan and did not receive it because they intended to take $1 million, they could still be sentenced based on that amount due to intended loss.
The Sentencing Guidelines are based on a sliding scale, and for more serious loan fraud amounts, they typically recommend longer sentences. Therefore, in situations where the intended loss due to PPP loan fraud is “only” $10,000 or $20,000, legal counsel would request that the defendant be sentenced to probation instead of jail time. It is not an implausible argument.
There are currently no documented instances of defendants avoiding jail time due to a small fraudulent loan. For example, even though a person has a long criminal history and the PPP loan fraud amount is $20k, the Sentencing Guidelines may recommend a prison sentence for them.
People should speak with their own legal counsel to determine the likely sentencing outcome in their specific case, regardless of the intended loss in their PPP loan case. Sentencing judges consider a wide range of factors, each of which is unique in their decision.
FAQ
Can you go to jail for a 20k PPP loan?
For instance, in the event that a defendant is accused of bank fraud pertaining to PPP loans, under U S. Code 18 U. S. C. 1344, there is a maximum fine of $1 million and a maximum sentence of 30 years in federal prison. Financial institution fraud carries a potential jail sentence even for first-time offenders.
Can you be prosecuted for a forgiven PPP loan?
A number of criminal statutes, such as the following, allow borrowers to face federal fraud charges for obtaining or requesting forgiveness of PPP loans fraudulently: Bank fraud Wire fraud.
What happens if you receive too much PPP money?
Any unforgiven amount owed on a PPP loan must be repaid by the borrower. 4 Lenders must promptly notify both the borrower and SBA through the SBA Paycheck Protection Platform if they find an excess loan amount error after SBA has made a final loan forgiveness decision and remitted payment.
What is the maximum PPP loan amount?
Your maximum PPP loan amount will be 2. Up to $10 million, five times your monthly payroll expenses on average Since you can only get one PPP loan, you might want to apply for the highest amount you are qualified for when you do so.
Read More :
https://www.lawinfo.com/resources/criminal-defense/criminal-fraud/can-you-go-to-jail-for-ppp-fraud.html
https://www.whitecollaradvice.com/ppp-fraud-sentencing-outcomes/