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.
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.
