Our Law Firm Can Help You to Report Paycheck Protection Program (PPP) Fraud
Do you have insider knowledge of fraud against the SBA's Paycheck Protection Program?
- Are you an executive whose company misrepresented its payroll numbers in order to get a PPP loan, for instance?
- Or can you show that your employer has misused SBA-guaranteed loans — by devoting more than 40 percent to non-payroll expenses, as an example?
- Have you been warned to stay quiet about such fraudulent practices?
If you're a PPP whistleblower, the law is on your side.
Federal laws prohibit retaliation against truth-tellers who blow the whistle on employers who defraud the Paycheck Protection Program administered by the Small Business Administration (SBA). And some statutes offer monetary rewards for turning in wrongdoers. Under the False Claims Act (FCA), for instance, the government may reward a PPP whistleblower with up to 30 percent of the recovered funds.
The Paycheck Protection Program was created to help small businesses keep workers employed during the COVID-19 pandemic, offering bank-mediated, SBA-guaranteed loans that may be forgiven later. Some unscrupulous companies have applied for PPP loans even though they don't qualify, often by making false certifications in their applications, misrepresenting ownership, miscounting employees, and hiding their true corporate structure. The SBA program is not intended for major corporations, yet some of these employers have sucked up capital that is desperately needed by true small businesses.
If you've witnessed PPP fraud and want to speak up, there are laws that may protect and even reward you.
The Employment Law Group® law firm is experienced in representing employees who blow the whistle on procurement fraud. Our attorneys have represented salespeople, project managers, accountants, accounting clerks, administrators, and other employees in their whistleblower claims. We have SBA loan fraud cases currently in progress.
In September 2019, TELG client Kevin Manieri — an experienced sales professional — was awarded more than $12 million for reporting that a drug company made false certifications to government insurance programs. In March 2016, our client Joseph Ting was awarded more than $7 million for revealing fraudulent certification of medical necessity by 21st Century Oncology, a large cancer-treatment company.
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The False Claims Act makes it illegal to apply for SBA PPP funds under false pretenses - by misstating a recipient's number of employees, for instance, or the intended use of federal money. The law provides a financial incentive for whistleblowers to report such wrongdoing by filing a lawsuit on behalf of taxpayers. This "qui tam" provision allows prevailing whistleblowers to receive up to 30% of the money returned to the U.S. Treasury.
If a whistleblower gets fired for reporting fraud on the SBA, or suffers other retaliation, the FCA requires that the harm be reversed entirely: Successful plaintiffs may get their jobs back - and may receive damages including double back-pay, attorney fees and payment for emotional distress.
As with all legal claims, deadlines are crucial. If you have been punished for objecting to your company's misuse of PPP funds, or for protesting your employer's initial false application to the SBA, you must file a retaliation claim under the FCA within three years. The statute of limitations for the underlying fraud generally is six years under the FCA — or 10 years in a few situations.
Frequently Asked Questions
Can I get a reward for reporting PPP fraud?
Perhaps. As an incentive for blowing the whistle on fraud against taxpayer-funded programs such as the SBA’s PPP, the False Claims Act allows successful whistleblowers to receive up to 30 percent of any money the U.S. government recovers as a result of their litigation. As concern rises about large corporations misappropriating funds and crowding out the intended small-business recipients, the FCA provides a sizable reward for whistleblowers who reveal large-scale fraud.
What does PPP fraud look like?
Congress created the Payroll Protection Program to help small businesses retain their employees during the disruption caused by the COVID-19 pandemic. Companies that apply for PPP funds, which the SBA funnels through banks and other lenders, must certify that the money is necessary to support ongoing operations. Without the help of PPP, in other words, an employer would need to lay off employees or scale back business.
Companies can qualify as a small business eligible for a PPP loan if they pass one of three tests. Either they have less than 500 employees; or they meet requirements according to their NAICS code; or they pass a two-prong test, which requires less than $15 million in tangible assets and that the two preceding years have less than $5 million in taxable revenue after all deductions.
PPP applicants also must certify the number of their full-time employees and the size of their payroll when they seek these emergency funds. If a company misrepresents these facts in order to qualify, it commits fraud on the federal government and harms the local communities for which the SBA funds were intended.
What are some common flavors of PPP fraud?
If you work for a company that has applied for PPP funds, you may have inside knowledge of some of these practices:
- False certification on a PPP application: Understating a company’s true number of employees, which should include U.S. and foreign employees, in order to qualify for a loan is illegal, as is obfuscating a company’s franchise status, misrepresenting the immediate need for the PPP funds, and applying for multiple PPP loans (“stacking”).
- Improper use of funds: PPP recipients cannot use more than 40 percent of their loaned funds for non-payroll costs — or use the money to pay big bonuses or executive incentive compensation.
- False certification on a loan forgiveness application: The SBA will eventually forgive PPP loans — turning them into grants, in essence — but only if the recipients follow program rules. It is improper, in most cases, for an employer to seek loan forgiveness if it has made layoffs or furloughs.
How do I report Paycheck Protection Program fraud?
Small-scale fraud against the Small Business Administration can reported to the SBA’s Office of Inspector General. If you are aware of more serious fraud — in the millions of dollars, say — or if you face retaliation for opposing such fraud, you may want to file a whistleblower lawsuit under the False Claims Act (FCA). There are strict standards for such suits: You must supply important information that the government doesn’t already know, and you shouldn’t be a participant in the fraud yourself. In addition, non-attorneys cannot file an FCA case by themselves — you will need a lawyer’s help.
Blowing the whistle on SBA fraud isn’t a trivial matter. If you would like to have an experienced law firm on your side, please contact us.
What information do I need to report PPP fraud?
Typically, you need some type of insider information. This information is needed to establish the false statement the company put on its application, the truth that contradicts the falsity, and what actually happened to the loan money.
You don’t need physical proof for initial consultations, but if your case continues, you will need documentation and/or witnesses who can corroborate.
Will my employer know I reported the fraud?
Eventually, they will, but it won’t be any time soon.
These cases are filed under seal for at least 60 days. In the vast majority of cases, the government requests at least a six-month extension of the seal. While the case is under seal, your employer doesn’t know about it.
At some point, the case will come out from under seal, but you will have advanced notice. We will talk with you beforehand about what that means, what to expect, and how to respond.
