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If an SBA Office of Inspector General agent, an FBI agent, or your lender has contacted you about a PPP loan, an EIDL loan, or another SBA loan, you are probably wondering how the government investigates these cases and what happens next. This article explains it from the defense side: what investigators look at, how a review becomes a criminal case, and what to do before you respond. The Law Office of Vikas Bajaj, APC represents clients in federal investigations and prosecutions across the United States. If you are trying to report suspected fraud, use the SBA OIG Hotline.
Two points matter at the outset. First, Congress gave prosecutors 10 years to bring fraud charges or civil enforcement actions alleging borrower fraud on PPP and COVID-19 EIDL loans (Public Law 117-166 and Public Law 117-165), so a 2020 or 2021 loan can still be investigated. Second, statements made to agents can become evidence, and a false statement to a federal agent is a separate crime under 18 U.S.C. § 1001. Our § 1001 false statements defense guide covers that statute. Talk to a lawyer before you talk to investigators. See our EIDL loan fraud defense page, or call (619) 525-7005.
What Is the Business for the Loan?
Under the CARES Act, the SBA guaranteed Paycheck Protection Program loans made under 15 U.S.C. § 636(a)(36) and made COVID-19 EIDL loans and advances during a “covered period” running from “January 31, 2020 and ending on December 31, 2021” (15 U.S.C. § 9009).
The speed of these programs also made them a target for fraud. Some criminal cases have involved people who claimed to own businesses that did not exist, or who spent loan money on personal luxuries. For PPP, a business generally qualified if it had no more than 500 employees or met SBA’s size standard for its industry (15 U.S.C. § 636(a)(36)(D)). Investigators compare what a borrower reported, such as employees, payroll, revenue, and when the business began operating, with tax filings, bank records, and other evidence.
How Is the Loan Being Used
Loan money had to be used for permitted purposes. PPP loans of up to $10 million (15 U.S.C. § 636(a)(36)(E)) could be used for payroll and certain other costs such as rent, mortgage interest, and utilities. PPP loans could be forgiven if at least 60% of the money went to payroll and the rest to other eligible costs; the forgiven amount could be reduced if the borrower cut staff or wages (15 U.S.C. § 636m). COVID-19 Economic Injury Disaster Loans (EIDL) were SBA loans for businesses suffering economic injury from the pandemic. EIDL loans were not forgivable, but an eligible applicant could receive an advance of up to $10,000 that did not have to be repaid. EIDL funds had to be used for the purposes allowed by SBA. For the EIDL advance, the law lists paid sick leave, payroll, increased material costs, rent or mortgage payments, and repaying obligations that could not be met because of revenue losses (15 U.S.C. § 9009(e)(4)). Federal investigators examine how loan money was actually spent.
Cares Act Investigations
The SBA Office of Inspector General investigates pandemic relief loans, often with the FBI. Borrowers certified their eligibility and intended use of funds. A knowingly false statement to the SBA or an insured lender can be charged under 18 U.S.C. § 1014 (“Whoever knowingly makes any false statement or report”) or 15 U.S.C. § 645(a) (“Whoever makes any statement knowing it to be false”).
Loan Repayment
Both § 1014 and § 645(a) require a statement made knowing it was false, so an inability to repay is not by itself a violation of either statute. In fraud cases, prosecutors can seek forfeiture of proceeds (18 U.S.C. § 981(a)(1)(C)) and restitution (18 U.S.C. § 3663A), along with fines and imprisonment.
Federal Cases Nationwide
Federal courts set their own admission rules. Where a court requires it, Vikas Bajaj appears together with local counsel or applies for admission pro hac vice. Procedure and local practice differ from district to district, and no particular result can be promised in any of them.
The Federal Statutes and Deadlines in PPP and EIDL Investigations
Investigators from the SBA Office of Inspector General, the FBI, and other federal agencies usually start with the loan file: the application, payroll and tax figures, bank statements showing where the money went, and any forgiveness application. Prosecutors then match that evidence to statutes such as § 1014 and § 1343.
- False statements on a loan application, 18 U.S.C. § 1014. Knowingly making a false statement or report to influence the action of a listed lender, including any FDIC-insured bank and federal or insured credit unions, is punishable by up to 30 years and a $1,000,000 fine. Many PPP loans were made through such lenders. The government must prove the statement was false, that the person knew it, and that it was made for the purpose of influencing the lender.
- Wire fraud, 18 U.S.C. § 1343. Online applications and electronic transfers make wire fraud a common charge. The maximum is 20 years, or 30 years and a $1,000,000 fine if the offense involves benefits paid in connection with a presidentially declared emergency or affects a financial institution.
- Conspiracy and false statements. Conspiracy to commit wire or bank fraud carries the same penalties as the underlying offense (18 U.S.C. § 1349), and a materially false statement to an investigating agent can be a separate five-year felony (18 U.S.C. § 1001).
Why the Statute of Limitations Is Ten Years
The general federal limitations period is five years (18 U.S.C. § 3282). For pandemic loans, Congress set a longer period in 2022: any criminal charge or civil enforcement action alleging that a borrower engaged in fraud with respect to a PPP loan must be filed within 10 years after the offense (15 U.S.C. § 636(a)(36)(W) and (a)(37)(P)). The same 10-year rule applies to COVID-19 EIDL loans (15 U.S.C. § 636(b)(16)) and EIDL advances (15 U.S.C. § 9009). Separately, § 1014 offenses, and wire fraud affecting a financial institution, already carried a 10-year period (18 U.S.C. § 3293). Practically, a 2020 or 2021 loan can still be investigated and charged into 2030 and 2031.
Common Issues the Defense Examines
- Intent versus error. § 1014 reaches a person who “knowingly” makes a false statement. Whether a wrong payroll figure or employee count was a knowing lie, an accountant’s error, or a preparer’s work the borrower did not review goes to that element.
- Who filled out the application. Many applications were prepared by third-party “loan agents.” A person who “willfully causes an act to be done” is punishable as a principal (18 U.S.C. § 2(b)), so who entered which figure, and what the borrower was told, bears on intent.
- Use of the funds. PPP proceeds could be used for payroll costs, rent, utilities and other uses listed in 15 U.S.C. § 636(a)(36)(F). Under the Guidelines, loss is reduced by value returned or services rendered before the offense was detected (USSG §2B1.1, comment. (n.3)).
- Loss for sentencing. Under U.S. Sentencing Guidelines §2B1.1, loss is the greater of actual or intended loss, and it drives the offense level. Repayment and forgiveness status can bear on that calculation and on restitution.
Vikas Bajaj has practiced criminal defense in California since 2001 and handles federal cases in San Diego and elsewhere. Related pages: white-collar crimes defense, federal crimes defense, and can you go to jail for SBA loan fraud?
PPP, SBA and EIDL fraud: statutes, penalties and process, with sources
Sources are linked inline to the statute, rule, court or agency that states each point.
- 18 U.S.C. § 1014 covers anyone who “knowingly makes any false statement or report” to influence specified federal agencies and lenders.
- 18 U.S.C. § 1343 (wire fraud): up to 20 years; up to 30 years and $1,000,000 when the offense “affects a financial institution” or involves benefits paid “in connection with, a presidentially declared major disaster or emergency.”
- 18 U.S.C. § 1001: a “materially false, fictitious, or fraudulent statement” made “knowingly and willfully”; up to 5 years.
- Limitations: 18 U.S.C. § 3293 provides 10 years for § 1014 and for § 1343 “if the offense affects a financial institution.”
- Guidelines: USSG §2B1.1, base level 7 for offenses with a 20-year-or-higher maximum, 6 otherwise (2026 Guidelines Manual).
How the case moves in the Southern District of California
The procedural path of a PPP or EIDL fraud case in the Southern District of California (Fed. R. Crim. P. 5) is the same one every federal felony follows, and it is set out step by step on our federal criminal defense page for San Diego.
Contact An Attorney
Contact the office to talk with Vikas Bajaj about a PPP, SBA or EIDL loan investigation, or call (619) 525-7005.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney-client relationship. Every case turns on its own facts, and no particular outcome can be promised. Consult qualified counsel about your specific situation.