Adobe Stock
The news has highlighted the most egregious cases of fraud that were committed during the pandemic, in particular with regard to the Paycheck Protection Program — better known as PPP. However, the federal government is not only aggressively investigating these extreme criminal cases but also focusing on many other pandemic-era loans, whether forgiven or not. Considering the government could potentially recover three times the amount of the loan, plus interest and penalties that alone may exceed the loan itself.
If you receive an investigation notice, you should contact legal counsel.
You will be notified of an investigation in writing — not via telephone, text, or email. Unscrupulous people utilized the pandemic to commit fraud, and they continue to do so with threats of arrest and prosecution for nonrepayment of pandemic era loans.
Your attorney will confirm whether the investigation is legitimate or not. Do not assume the “investigation is fraudulent” and can be ignored, even if a governmental email address or telephone number is incorrect.
Most investigative notices require a response within 20 days, and by statute, responding is mandatory. As a result, once your attorney has confirmed the investigation notice is legitimate, an extension to respond should be requested, which is usually granted. Then make sure your leadership team and counsel are in lockstep. Your attorney should be familiar with the production of documents in federal investigations or federal courts, considering the likely voluminous nature of the documents that will need to be electronically searched and reviewed to fully respond to the requests.
While your lender may tangentially be involved, your internal bookkeeper and your accountant will be crucial to proving financial responses to the government. For example, the initial PPP loan only required your business to have a legitimate concern due to economic uncertainty, but the second PPP loan required an actual financial loss. Additionally, your internal nonfinancial recordkeeping will be significant. You may be asked to produce internal texts, emails, and other contemporaneous documentation reflecting your business situation at the time of your loan application. Also, if your IT is not handled internally, you will likely need to contract with third parties to search and download emails and texts into a searchable form.
Once all of the potential responsive documents have been located, they should be uploaded to a searchable database so your attorney can determine which documents are responsive to which requests by searching key words. Once the responsive documents have been coded to each corresponding request, they can then be transferred to the government via a link database. The investigator may have additional unanswered questions, which you may or may not be able to answer or provide responsive documents. However, even if that is the case, if you have good recordkeeping policies and are diligent in your responses, the investigation, while likely expensive, should be resolved uneventfully.
While you are unlikely to ever receive formal notice that the investigation is closed or not being pursued further, in our experience these pre-investigation requests are not an after-the-fact claw back. Instead, they are legitimate investigations by the U.S. Attorney’s Office to root out fraud.
Prichard Bevis represents businesses of all sizes and structures from the formation of business entities, operations, expansion, sale, and dissolution. He advises owners, officers, and management in legal matters including statutes and legislation relevant to the business sector. He is a stockholder in the law firm of Decker Jones P.C, the second oldest law firm in Fort Worth.