Pandemic-era PPP and EIDL loan fraud cases are charged under 18 U.S.C. § 1343 (wire fraud), § 1344 (bank fraud), § 1014 (false statements to a financial institution), § 1956 (money laundering), and § 1028A (aggravated identity theft — 2-year mandatory consecutive). The DOJ has prosecuted thousands of cases since 2020 with sentences ranging from probation to 20+ years.
Texas has been a major hub for COVID-era loan fraud prosecutions. The Department of Justice formed a dedicated Pandemic Response Accountability Committee (PRAC), and the Northern and Eastern Districts of Texas have charged hundreds of cases. The Sentencing Guidelines exposure is severe because PPP fraud often involves multiple loan applications, each treated as a separate count.
How Cases Are Made
The DOJ uses several detection tools:
- SBA Inspector General data analytics — comparing PPP applications to IRS records, state employment data, and bank records;
- Whistleblowers — employees, family members, accountants, and bank staff;
- Bank suspicious activity reports — banks noticed suspiciously round-number loans and immediate transfers;
- Cross-referencing with prior business returns — applications claiming employees not on prior W-2 reports;
- Loan forgiveness applications — many fraudsters were caught in the forgiveness phase when documentation was required.
The Charges Stack
Wire Fraud — § 1343
Each electronic submission of a false PPP or EIDL application is a separate wire fraud count — 20 years per count. Most cases are charged with multiple counts.
Bank Fraud — § 1344
When a federally insured bank is involved (most PPP loans were funded through participating banks), bank fraud also applies — 30 years per count.
False Statements — § 1001 / § 1014
False statements on the application itself — the Schedule B affirmation, payroll certifications, etc. § 1001 carries 5 years; § 1014 carries 30.
Money Laundering — § 1956 / § 1957
Once the loan funds were received, transfers to other accounts to disguise origin support money laundering charges. § 1956 carries 20 years; § 1957 (transactions in criminally derived property over $10,000) carries 10.
Aggravated Identity Theft — § 1028A
If the application used another person's identifying information (Social Security number, driver's license), § 1028A applies — 2 years mandatory consecutive to any other sentence. This is the single most dangerous count in PPP fraud cases.
Sentencing Guidelines Calculation
Federal sentencing in PPP cases is driven by USSG § 2B1.1 (fraud guideline):
- Base offense level: 7;
- Loss enhancement: large — $50,000 = +6 levels; $250,000 = +12; $1.5 million = +16; $9.5 million = +20;
- Sophisticated means (false documents, multiple shell entities): +2;
- Number of victims (multiple banks defrauded): +2 to +6;
- Role enhancement (organizer): +2 to +4.
A typical $1 million PPP fraud case with sophisticated means produces an offense level of 23-25 — meaning 46-78 months for first-time offender, plus the mandatory 24 months for any aggravated identity theft count.
Common Defenses
Lack of Knowledge / Materiality
Many PPP applications were filled out by accountants, lenders, or assistants. The defendant may not have known specific entries were false.
Reliance on Lender or Advisor
SBA lender employees sometimes encouraged borderline applications. Reliance on a lender's "you qualify" can negate intent.
Use of Funds for Authorized Purposes
While not a complete defense, demonstrating that loan proceeds were used for legitimate business purposes (payroll, rent, utilities) reduces sentencing exposure.
Statute of Limitations
5 years under 18 U.S.C. § 3282; 10 years for bank fraud under § 3293. Most PPP cases are still well within limitations.
Challenging Identity Theft Predicate
The 2-year § 1028A mandatory minimum requires that the defendant used another person's identifying information "during and in relation to" the underlying fraud. Defending the "during and in relation to" element can defeat the mandatory minimum.
Cooperation and Plea Strategy
Most PPP cases resolve by plea. Strategic considerations:
- Substantial assistance under USSG § 5K1.1 — cooperation against larger schemes can reduce sentence below the Guidelines range;
- Acceptance of responsibility — 2-3 levels off if defendant pleads early and pays restitution;
- Avoiding § 1028A — primary plea negotiation goal due to the mandatory consecutive 2 years;
- Loss amount challenges — defense can sometimes reduce the loss-enhancement number through restitution offsets and intended-loss arguments.
Restitution and Asset Forfeiture
PPP cases routinely involve:
- Mandatory restitution under the Mandatory Victims Restitution Act — full repayment of loan funds;
- Asset forfeiture under 18 U.S.C. § 981 — seizure of luxury vehicles, real estate, jewelry, and accounts purchased with loan proceeds;
- Civil False Claims Act exposure under 31 U.S.C. § 3729 — treble damages and per-claim civil penalties.
What to Do If You Are Under Investigation or Charged
- Do not speak with IRS Criminal Investigation (CI) agents without an attorney — even informally. Special agents are not auditors; they investigate crimes.
- Do not destroy or alter records — destruction can become obstruction under 18 U.S.C. § 1519 with a 20-year maximum.
- Locate and preserve all bank records, returns, ledgers, emails, and accountant correspondence.
- Discontinue the conduct — but do not amend returns or take corrective action without counsel; both can be used against you.
- Engage federal tax defense counsel immediately — call L and L Law Group at (214) 466-1398, available 24/7.
Frequently Asked Questions
Can I be prosecuted for PPP fraud after I paid back the loan?
Yes. Repayment is a sentencing factor but does not bar prosecution. The fraud was complete when the false application was submitted.
What is the mandatory sentence for aggravated identity theft in a PPP case?
2 years, mandatory and consecutive to any other sentence under 18 U.S.C. § 1028A. This is on top of any wire/bank fraud time.
Can I avoid prison if my PPP fraud was small?
Sometimes. Cases under $40,000 in loss with first-time offenders sometimes receive probation or home confinement, but the Sentencing Guidelines push toward custody for larger cases.
Will the DOJ ever stop charging COVID-era fraud cases?
No imminent end. The PRAC committee remains active, the SBA OIG continues data analytics, and Congress has appropriated funds specifically for pandemic fraud prosecution. Cases are still being charged in 2026.
Is there a voluntary disclosure program for PPP fraud?
No formal program. Some defendants have negotiated pre-indictment resolutions, but cooperation must be coordinated through experienced federal defense counsel.
Speak With a Frisco Criminal Defense Attorney
If you or a loved one is facing federal tax crimes charges in Frisco, Collin County, or anywhere in the Dallas-Fort Worth metroplex, the time to act is now. L and L Law Group attorneys are available 24 hours a day, 7 days a week. Call (214) 466-1398 for a free, confidential consultation, or submit your case online and a licensed attorney will contact you directly.
This article is general information, not legal advice. Texas and federal criminal law are complex and fact-specific — please consult a licensed attorney about your particular situation. Past results do not guarantee future outcomes.