The Department of Justice (DOJ) recently announced its first settlement involving fraud allegations related to the Paycheck Protection Program (PPP)...
The Department of Justice (DOJ) recently announced its first settlement involving fraud allegations related to the Paycheck Protection Program (PPP). SlideBelts Inc., along with the company’s president and CEO, have agreed to pay a combined $100,000 in damages and penalties to resolve allegations that they committed fraud in connection with a $350,000 PPP loan. SlideBelts also repaid the PPP funds it received.
“The defendants made false statements to multiple banks in order to obtain a Paycheck Protection Program loan that should have been disbursed to an honest small business suffering financially from the economic effects of the COVID-19 pandemic,” U.S. Attorney McGregor W. Scott said in a press statement. “The Department of Justice and our partners at the SBA will use all tools at our disposal, including civil fraud statutes, to aggressively pursue those who exploit federal programs intended to help those in need during this national emergency.”
Allegations of PPP Fraud
As part of the settlement, Taylor and SlideBelts admitted that they made false statements to federally insured banks that SlideBelts was not in bankruptcy in order to influence those banks to approve, and the Small Business Administration (SBA) to guarantee, a PPP loan to SlideBelts. As a result of their false statements, SlideBelts received a PPP loan for $350,000. Months later, in response to demands by the federal government, SlideBelts returned the funds to the lender. Taylor and SlideBelts also admitted that their statements caused false claims to be made to the SBA in connection with the PPP loan.
The resulting DOJ civil enforcement action alleged that Taylor’s and SlideBelts’ misconduct violated the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The FCA allows the government to recover damages and penalties for the presentation of false claims for payment to the United States. Meanwhile, FIRREA allows the government to impose civil penalties for violations of enumerated federal criminal statutes, including those that affect federally-insured financial institutions.
Lessons for PPP Borrowers
The DOJ, SBA, and other federal agencies are aggressively policing COVID-19 relief programs for potential fraud, and the recent settlement is likely just one of many to come, particularly given that the PPP has reopened to disperse another round of loans. In January, the DOJ stated that in the nine months since the PPP began, its Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. It has also seized more than $60 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds.
If your business is participating in PPP or other COVID-19 relief program, be prepared for your application and your expenditures to be closely scrutinized for compliance with the program’s requirements, particularly with regard to loan eligibility and loan forgiveness. As highlighted by the recent DOJ settlement, misrepresentations on applications, certifications, or other program documents may give rise to a criminal fraud investigation or FCA violations. Since even inadvertent misstatements can lead to a costly and embarrassing investigation, it is essential to verify the accuracy of all information submitted, memorialize decision making in connection with the application process in writing, and keep detailed records of how the funds are expended. In addition, knowingly making false statements to federal law enforcement agents constitutes a crime punishable by a term of imprisonment. The DOJ has stated that it will not pursue businesses that have acted in good faith. However, should the DOJ uncover misconduct, the consequences can be significant. As demonstrated by the SlideBelts settlement, it may not be enough to simply repay the PPP loan. Borrowers may also have to pay damages and/or penalties, and executive officers could face personal liability. If you suspect that you or your business may be the subject of a criminal investigation, it imperative to contact an experienced white-collar criminal defense lawyer as soon as possible and certainly before meeting with state or federal law enforcement agents.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Bob Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
Monmouth County's Next Development Wave: What Developers and Investors Need to Know
Monmouth County is entering a significant new phase of development. For those looking to acquire property or undertake a new project, understanding the market opportunity is only the beginning. The more important question is whether a particular property can actually be developed as contemplated and what approvals, agreements, and other conditions will be required to […]
Are Your Conversations with AI Shielded from Discovery? Courts Are Split
Whether a client’s prompts to a generative AI tool and the documents it produces are protected from disclosure depends on the case type, who claims protection, and whether counsel was involved. In United States v. Heppner, a New York federal judge ruled that a criminal defendant’s communications with an AI platform were protected by neither […]
Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs
When a family member can no longer make important decisions for themself, the question is often not whether the family will step in, but whether they have the legal authority to do so. A spouse may manage household finances, or an adult child may arrange medical care and pay bills. Still, informal assistance does not […]
New Jersey’s Revised UHAC Regulations: What Residential Developers Need to Know About Affordable Housing Commitments
New Jersey residential developers with affordable housing obligations should carefully review their existing approvals, development agreements, and proposed deed restrictions in light of the State’s revised UHAC regulations (Uniform Housing Affordability Controls). The regulations, which took effect on November 6, 2025, significantly change the administration and physical requirements for affordable housing units. For developers with […]
“No Comment” Culture: Why Silence Is Often the Riskiest Legal Strategy
A “no comment” response is sometimes the right call when a legal problem arises. As a blanket policy, however, it lets allegations go unanswered, deadlines pass, evidence disappear, and manageable disputes grow into expensive litigation. The businesses that fare best are usually the ones that say little publicly while acting decisively behind the scenes. When […]
Utility-Scale Battery Storage Projects: A Legal Roadmap for Developers, Property Owners and Other Stakeholders
Utility-scale battery energy storage systems (BESS) are becoming an increasingly important component of the electric grid throughout New Jersey, New York, and Pennsylvania. As renewable generation expands, electricity demand increases and grid operators seek greater flexibility, battery storage can help balance supply and demand while providing additional capacity and reliability. For developers, battery storage presents […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
