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Results of The Recent PPP Sentencing

Results of Recent PPP Sentencing | Heath Hyde

Table of Contents

Decisions of The Recent PPP Sentencing

PPP Sentencing: The majority of Payroll Protection Program (PPP) and EIDL loan fraud sentences handed down by federal judges to date have included prison time.

The COVID-19 economic relief programs for small enterprises were approved by the government in May 2020. Since then, fraud involving the Payment Protection Program (PPP) and the Economic Injury Support Loan (EISL) has dominated the news. 

Fraudulent PPP Loan Investigations

In May 2020, when the government launched the PPP loan program, federal law enforcement also started looking into fraud claims. Among the things these probes looked into were:

  • Fraud in the loan application process for PPP (including EISL).
  • Loans being given to people or businesses who are not eligible; and
  • Misuse of PPP loan proceeds intended to pay for salaries and other company expenditures

Following the first police investigations, hundreds of people were detained and charged with crimes. The government still documents new PPP loan fraud instances each week.

There are many more upcoming PPP loan fraud instances, and they will continue to make headlines.

Additionally, as more PPP loan recipients seek for loan forgiveness over the next 18 months, new government audits and thorough reviews of the original application’s data will be prompted by their initial loan applications. It is hazardous and may result in criminal charges to request PPP loan forgiveness when the initial PPP loans contained fraudulent information.

Verdicts of Sentences in PPP Fraud Cases

So far, defendants have entered guilty pleas in the majority of PPP loan fraud (and related) cases. (We are only aware of one reported jury trial involving PPP loan fraud.)

After entering a guilty plea, defendants in the majority of instances are now finishing their pre-sentence investigations and getting ready to appear before the sentencing judge for a sentencing hearing.

Let’s examine how federal judges and prosecutors approach PPP loan fraud defendants’ sentencing. Is the loan amount, for instance, the main factor? Do the majority of offenders receive prison sentences, or are many also eligible for probation? What is the typical sentence to prison?

The evidence is currently more anecdotal than not, but when more individuals are sentenced, we will closely watch developments.

The issue “Do people go to prison for a $20k PPP loan?” is one that is frequently posed on the internet and in social media. expressing doubt that receiving a $20k PPP loan may result in jail or prison time.

In actuality, fraud on a $20,000 PPP loan results in imprisonment. Time in jail or prison is a possibility, even though sentencing judges decide each defendant’s prison sentence individually. In fact, recent examples demonstrate that prison term is typically part of PPP loan fraud punishments.

How long do you spend in jail (or prison) for committing a $20,000 PPP fraud? The PPP loan amount is a crucial aspect that is heavily considered during sentencing, is the answer.

During sentencing, the sentencing judge also takes into account the defendant’s criminal history, the government’s capacity to recover the stolen assets, and other specific case facts.

Most PPP loan fraud sentences, according to recent data, include prison time.

Federal sentencing judges make individual decisions on a person’s jail time based on the US Sentencing Guidelines.

*Pro-Tip: Click on this insightful post from the Prison Professors blog, “PPP Loan Fraud: A Case Study,” to learn more about how the US Sentencing Guidelines typically apply in PPP loan fraud cases.

However, judges have imposed prison sentences in the vast majority of sentencings that have been reported so far. So far, the defendants have only been given probation in two cases. Review the data table below.

Defendants in PPP loan fraud cases, whether they involve thousands, hundreds of thousands, or millions of dollars, may face prison time. People who took out PPP loans of $20,000 or more may be sentenced to prison if there is proof of deception, just like those who took out loans of $100,000 or $1 million.

United States Code DescriptionMaximum SentenceMaximum Fine
18 USC § 1344 Bank fraud30 years in prison$1,000,000 in fines
18 USC § 1956 Money laundering20 years for each violationFines of up to $500,000 or double the amount of property involved, whichever is greater
18 USC § 1343 Wire fraud20 years (or 30 years)Maximum fine of $1,000,000, if the violation affects a financial institution or involves any benefit associated with a presidentially declared major disaster or emergency
18 USC § 1341 Mail fraud20 years (or 30 years)Maximum fine of $1,000,000, if the violation affects a financial institution or involves any benefit associated with a presidentially declared major disaster or emergency
18 USC § 1014 Making false statements to the SBA or a financial institution30 years$1,000,000 in fines
18 USC § 1028A Aggravated identity theftA 2-year term of imprisonment, to be served in addition to the penalty for the underlying felony offense 
18 USC § 1349 Attempt and conspiracyAny attempt or conspiracy to commit fraud is punishable by the same penalties as the actual fraud offense. 
18 U.S.C. § 1001 Making false statements to federal agents 5 years in prison 
18 USC § 371 Conspiracy to defraud the governmentA fine and/or a term of imprisonment of up to 5 years 
26 USC § 7201 Tax evasiona term of imprisonment of up to 5 years, or bothA fine of up to $100,000 (for an individual) or $500,000 (for a business)

As of November 15, 2021, we have not exhaustively examined all of the sentences that federal courts have already handed out in PPP loan fraud cases. According to anecdotal evidence, however, judges frequently include prison term in these sentences. Given the applicable statutory penalties, that is not surprising. View the table below.

Penalties Set for PPP Loan Fraud by Law 

The individual charges will determine the applicable statutory fines and maximum prison terms for PPP loan fraud cases. 

Federal criminal laws are applicable in cases involving PPP loan fraud.  

Prosecutors are focusing on illegal PPP loans of all sizes, despite the fact that million dollar PPP loans get all the attention. They haven’t publicly stated that if the PPP loan fraud is less than a certain amount, they won’t prosecute or pursue prison time.

Anecdotally, there have been reports of raids and arrests in connection with $10k, $15k, and $20k PPP loan fraud cases.

The amount of resources the DOJ will commit to pursuing those fraud cases involving lesser loan amounts is not yet known.

The issue still exists that prosecutors and sentencing judges frequently seek to use anyone who took part in PPP loan fraud as a lesson for those whose cases involve lower loan amounts.

Prison terms for PPP loan fraud “should provide warning that the FBI and our federal partners will pursue anyone who misdirects government emergency assistance designated for businesses who need it to stay afloat,” an FBI official said in one recent case.

We won’t put up with anyone who is motivated by personal avarice to keep money from the American taxpayer that ought to be going to people in need.

Additionally, Acting US Attorney Nicholas Ganjei gave the following justification for his strong pursuit of PPP loan fraud:

“Plundering from the less fortunate is the precise definition of stealing scarce COVID assistance money… Every dollar that was stolen and frivolously spent… was one less dollar that went to a struggling company that was fighting to pay its employees’ salaries.

The Department of Justice and its allies will use every legal tool at their disposal to look into and prosecute anyone who would dare to steal these scarce funds and hamper efforts for the country’s recovery.

Regardless of the loan size, this sentiment can be concerning for everyone who took part in allegedly fraudulent PPP loans. 

A Judge’s Approach to Sentencing for PPP Loan Fraud

The task of sentencing a criminal offender is never simple for federal courts. Numerous considerations must be taken into account before sentencing. One of them is the loan amount in a PPP loan scam instance. The government’s capacity to recoup the riches obtained illegally is another.

*Pro-Tip: To learn more about the federal sentencing procedure, click on this recent piece from the Prison Professor’s blog (and the internal connections inside). A case study of PPP loan fraud.

Ganell Tubbs, a woman who admitted to defrauding a $2 million PPP loan, was sentenced to 41 months in prison by the sentencing court. The remarks made by Judge Brian Miller during the sentencing hearing offer some insight into the judge’s potential perspective on the special or mitigating circumstances of a PPP loan fraud defendant.

The Judge acknowledged that it was challenging for him to decide on Tubbs’ sentence, which included a $1 million fine and a maximum prison term of 30 years. Tubbs claimed nearly $2 million in PPP loans for unqualified enterprises. In addition to paying off personal debts and educational loans, Tubbs bought a variety of products and services using the loan profits.

Judge Miller stated that all but $14,000 of the loan funds were recovered by the government after it swiftly discovered the deception. However, he was unable to completely excuse Tubbs for this.

Should Miss Tubbs benefit from the government’s fast discovery of the problem? Why did the bank give Tubbs the loans with with little to no documentation, Judge Miller questioned aloud.

Judge Miller stated, “On the other side of that equation, she walked in and cheated them.” It was a terrible deception, yet she actually entered and carried it out. 

The Judge took Tubbs’ lack of a criminal record into consideration. She hasn’t exactly been prowling the streets robbing people for the past ten years, he remarked. “For some people, three years in prison are equivalent to 20 years. Some people can spend years in prison and get them over with ease. It is a really difficult situation for someone like Miss Tubbs.

Based on Tubbs’ lack of past criminal history and her prompt admission of guilt, Judge Miller gave Tubbs a sentence that was lower than the proposed 41–51 month jail term in the sentencing guidelines.

The Tubbs case demonstrates how a federal sentencing judge weighs various considerations before deciding on a sentence in a case of PPP loan fraud. 

SAMPLING OF PPP LOAN FRAUD PRISON TERMS TO DATE DATA TABLE (November 17, 2021)

PersonLocationLoan AmountSentence
Joseph CherryVirginia$200,00051 months
Tarik JaafarVirginia$6.6 million12 months
Nadine Consuelo JacksonOhio$2.5 million24 months
Gannel TubbsArkansas$2 million41 months
Dennes GarciaFlorida $285,74218 months
Fahad ShahTexas$3.3 million31 months
David Adler StaveleyMass. $543,00048 months
Richard AyvazyanCalifornia$20 million+ Conspiracy17 years
Marietta TerabelianCalifornia$20 million+ conspiracy72 months/6 years
Artur AyvazyanCalifornia$20 million+ conspiracy5 years
David T. HinesFlorida$3.9 million6 years+
Andre ClarkAndre Clark$7.2 million33 months
Maurice FayneGeorgia$3.7 million17 years
Mukund MohanWashington$5.5 million24 months/2 years
Matthew Jason WelchMontana $35,00090 Days Time-Served/5 years Probation
Cindi DentonCalifornia$491,3106 months in prison/12 months home confinement
Thomas SmithWisconsin$1.2 million57 months
Andrew TenzaVirginia$350,00018 months
Manuk GrigoryanCalifornia$20+ million6 years
 Edvard ParonyanCalifornia$20+ million30 months
Vahe DadyanCalifornia$20+ million1 year and a day months
Arman HayrapetyanCalifornia$20+ million10 months probation
Sam FiedlerArizona $638,0008 months
Miranda DevlinCalifornia$368,00018 months

Should $10K or $20K PPP Loan Fraud Not Require Any Jail Time?

First, it should be emphasized that no one, with the exception of a sentencing court, can ensure that a criminal charged of $10k or $20k PPP loan fraud will escape jail time. The relevant statutes stipulate that incarceration may be used as punishment.

In spite of this, many seasoned attorneys and sentencing mitigation specialists think they can successfully argue for little to no jail or prison time in situations where the damage amount is lower.

Keep in mind that, according to data posted online, the majority of PPP loans are for less than $50,000. (see chart below). However, it is still unknown how much the DOJ will invest in cases of PPP loan fraud that are less than $50,000.

Source: http://statista.com/

The justification for minimal to no prison time in cases when the PPP loan amount is $10,000 or $20,000 is not new and is based on the size of the loss. The size of the loss will be one of the most significant and deciding considerations in sentencing in fraud cases.

The “planned loss” or “loss amount” is used by the federal Sentencing Guidelines to suggest a sentence outcome. A person who asked for a $1 million PPP loan but did not receive it because they meant to accept $1 million could still be sentenced on the basis of $1 million under the concept of intended loss.

The Sentencing Guidelines follow a sliding scale, with harsher penalties being generally suggested for larger loan fraud sums. Therefore, counsel would propose the court to sentence the offender to probation without any jail time in circumstances where the intended loss, or PPP loan fraud, is “only” $10,000 or $20,000. It is a reasonable argument.

The reported cases have not yet provided any instances in which offenders were spared prison time due to a tiny fraudulent loan. For instance, even if the PPP loan fraud amount is $20k, the Sentencing Guidelines might suggest a jail sentence for a person with a significant criminal history.

Conclusion 

People must speak with their own legal counsel to determine what could be a likely sentencing decision in their own case, regardless of the expected loss in their PPP loan case. Sentence judges take a variety of criteria into account because every case is different. Contact Heath Hyde at 903.439.0000 or fill out our form for a confidential case review.

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