1. PPP Eligibility and Forgiveness Certifications under Review
Eligibility and spending certifications may be questioned. The loan draw and dates control.
First Draw and Second Draw Eligibility
First Draw generally used a 500-employee or qualifying industry-size standard. Second Draw generally required no more than 300 employees, a 25% decline in gross receipts under permitted 2019–2020 comparisons, and use of all First Draw proceeds for authorized purposes by Second Draw disbursement.
Affiliation rules can count foreign and domestic employees; exceptions cover some franchises, NAICS 72 locations, and SBIC-backed firms.
On October 8, 2026, DOJ announced Prefere Melamines' $1,247,744 civil False Claims Act settlement over Second Draw eligibility and affiliate employees, not a criminal conviction.
Forgiveness Certifications and Questioned Expenses
The original 75% payroll threshold fell to 60% for full forgiveness; eligible nonpayroll costs could reach 40%. Less payroll spending could allow partial forgiveness. Apply rules effective for the covered period.
SBA Form 3508S simplified forgiveness for loans of $150,000 or less. Second Draw borrowers lacking revenue-reduction proof at application generally needed it by forgiveness, unless an accepted SBA COVID Revenue Reduction Score sufficed. Recordkeeping and audit duties remained.
2. Reconstructing Payroll and Loan Spending from SBA Records
Trace application, disbursement, spending, and forgiveness. Compare records used for each certification.
| Record | Defense Issue |
|---|---|
| SBA Forms 2483 / 2483-SD | Application statements |
| Forms 941, W-2, Schedule C | Payroll and owner income |
| Tax returns and payroll ledgers | Financial calculations |
| Bank statements and invoices | Use of proceeds |
| Forms 3508 / 3508EZ / 3508S | Forgiveness certifications |
| Accountant and broker emails | Who prepared or approved entries |
SBA Forms 2483 / 2483-SD
- Defense IssueApplication statements
Forms 941, W-2, Schedule C
- Defense IssuePayroll and owner income
Tax returns and payroll ledgers
- Defense IssueFinancial calculations
Bank statements and invoices
- Defense IssueUse of proceeds
Forms 3508 / 3508EZ / 3508S
- Defense IssueForgiveness certifications
Accountant and broker emails
- Defense IssueWho prepared or approved entries
Payroll, Tax Returns, and Bank Activity
Lender worksheets and tax filings may differ by payroll period or eligible-cost rules. Recheck calculations before inferring fraud.
Accountants, Brokers, and Borrower Certifications
Drafts, emails, and portal logs show who entered or approved figures. A third party's error alone neither proves nor disproves borrower intent.
3. Federal Charges and Civil Claims over PPP Certifications
Criminal charges, civil claims, and SBA recovery have different requirements.
Wire Fraud, Bank Fraud, and False Statements
Wire fraud (18 U.S.C. § 1343) requires a fraudulent scheme, intent, and qualifying wires. Bank fraud (§ 1344) requires a covered financial-institution nexus. Section 1014 covers knowingly false statements intended to influence the SBA or a covered lender.
On October 9, 2026, DOJ reported Darren Carlyle Sadler's 42-month wire fraud sentence over false PPP payroll and employee figures. It predicts no other case's outcome. Related charges may require wire fraud defense.
Civil False Claims Act Exposure
Under 31 U.S.C. § 3729, knowledge includes deliberate ignorance and reckless disregard. Civil penalties and up to treble damages can apply separately from criminal charges. False Claims Act defense addresses these distinct standards.
4. SBA Review Decisions and Federal Investigative Demands
A lender denial, final SBA decision, FBI interview, and subpoena carry different procedures and deadlines.
SBA OHA Appeals after a Final Decision
Borrowers have 30 calendar days after receiving a final SBA loan review decision to appeal through SBA's OHA portal. Individual owners of a borrowing entity lack separate standing; lender decisions are not appealable to OHA.
To extend deferment until OHA's decision is final, borrowers must give the lender a copy of the appeal. This notice is separate from timely filing.
Reserving Records and Responding before Charges
Preserve applications, payroll, bank records, and messages. Do not alter old worksheets. Check a subpoena's scope and deadline. Owners and companies may need separate attorneys. Related federal investigations can produce parallel demands.
5. PPP Loan Fraud Faqs
How long can the government pursue PPP loan fraud?
Under 15 U.S.C. § 636(a)(36)(W) and (a)(37)(P), criminal charges and civil enforcement actions alleging borrower fraud involving First or Second Draw PPP loans generally face a ten-year filing limit. Other conduct, defendants, dates, and exceptions require separate analysis.
Can an accountant's mistake lead to PPP fraud charges?
An error may prompt inquiry. Criminal liability depends on the charged offense and what the borrower knew, approved, or did.
Does repaying a PPP loan prevent prosecution?
No. Repayment may affect financial consequences but does not erase an earlier fraudulent certification.
13 Oct, 2026
