In response to the impact on small businesses caused by COVID-19 and the global pandemic, Congress passed the CARES Act on March 29, 2020. The Act created loan programs like the Economic Injury Disaster Loan (EIDL). In July of 2020, the Office of the Inspector General (OIG) for the Small Business Administration (SBA) reported over 5,000 complaints of suspected fraud arising from financial institutions. The OIG’s initial investigation identified $250 million in loan and advanced grants were approved to potentially ineligible recipients as well as approximately $46 million in potential duplicate payments. 

In 2022, the Department of Justice (DOJ) established a Strike Force to combat and prevent EIDL Loan Fraud among other fraudulent schemes. The DOJ has charged and convicted several individuals connected to EIDL Loan Fraud and continues to investigate as the numbers of potentially fraudulent recipients have risen since the OIG’s latest report. 

What is an EIDL Loan? 

The COVID Economic Injury Disaster Loan (EIDL) program is a government loan initiative created to aid nonprofit organizations and small businesses in recovering from the COVID-19 economic crisis by providing rapid, borrower-friendly funds. Loans are instantly available and may be utilized to take care of several urgent business expenses. Loans can be used to cover regular operational costs, provide working capital, prepay or settle commercial debt, as well as to pay for things like rent, the cost of items supplied, wages, and federal business debt. The SBA started approving loans up to $500,000 and increased the maximum loan to $2 million to eligible recipients. 

Small business owners must have complied with the eligibility requirements to be approved for an EIDL Loan. Businesses and nonprofits, including sole proprietorships or self-employed small business owners with 500 or less employees, were allowed to apply. Businesses applying must have been active or created by January 2020. A credit score of 570 or higher was required and the applicant must be a U.S. citizen or permanent resident. Businesses are also required to submit federal income tax or the business’ financial statements as well as IRS forms to verify income. 

What is EIDL Loan Fraud? 

If you submitted fabricated or false paperwork, misrepresented your income, or supplied other incorrect information on an EIDL loan application, you could be subject to an investigation for loan fraud. EIDL loan fraud may result in a number of federal criminal charges, including bank fraud, wire fraud, mail fraud, identity theft, and making false statements to a financial institution, depending on the particulars of your case.

Types of EIDL Loan Fraud

If you are a subject of an EIDL loan fraud investigation, you may be charged with several federal financial offenses. These offenses might include:

1. Bank Fraud – Bank fraud is a conspiracy to defraud a financial institution that is federally insured. All EIDL loan applications had to be processed via a certified bank, thus, if a fact was misrepresented or fraudulent supporting documents was provided, bank fraud might be a potential offense related to EIDL loan fraud.
2. Wire Fraud – Wire fraud is a conspiracy to defraud a person or an entity of money utilizing wire, radio, or television transmission that impacts interstate commerce. Since EIDL loans are received through wire transfers from the SBA to the borrower's bank account, any investigation into EIDL loan fraud is likely to lead to a wire fraud offense. 
3. Mail Fraud – Mail fraud is a conspiracy to defraud a person or an organization of money via the United States Postal Service. If someone used the mail to provide false paperwork to their lender or to the SBA in support of their EIDL loan application, they may be charged with mail fraud. 
4. Identity Theft – Identity theft is the illegal use of another person's identity to pursue a crime. If a person applies for an EIDL loan using someone else's identity rather than their own, they may be charged with identity theft.
5. Money Laundering – Money laundering is the act of moving funds through a series of transactions to conceal the proceeds of illegal activity while making them look legitimate.
6. False Statements to Financial Institution – False Statements to Financial Institution is a crime that can be brought against someone who fabricates information on an EIDL loan application. Anyone who knowingly submits a false EIDL loan application to a bank that is federally insured may be charged with this offense. 

Who Investigates EIDL Loan Fraud? 

Several federal agencies including the Federal Bureau of Investigations (FBI), the Office of the Inspector General (OIG), the U.S. Department of Justice (DOJ), and the Internal Revenue Service (IRS), may investigate EIDL Loan Fraud.

What are the possible penalties for EIDL Loan Fraud?

Each of the criminal charges above carries serious potential consequences.

1. Bank Fraud – Bank fraud is punishable by a $1,000,000 fine and up to 30 years in federal prison.
2. Wire Fraud – Wire fraud is punishable by a $1,000,000 fine and up to 30 years in federal prison.
3. Mail Fraud – Mail fraud is punishable by a $1,000,000 fine and up to 30 years in federal prison.
4. Identity Theft – Identity theft is punishable by a $1,000,000 fine and up to 30 years in federal prison. A minimum mandatory term of two years may also be imposed as punishment for the offense, and this sentence will run concurrently with any prior convictions.
5. Money Laundering – Money laundering is punishable up to $500,000 fine or twice the value of the money obtained and up to 20 years in federal prison.
6. False Statements to Financial Institutions – False statements to a financial institution is punishable by a $1,000,000 fine and up to 30 years in federal prison.

In addition to the previously indicated penalties, a conviction for any of these criminal offenses may trigger deportation procedures if the defendant is not a citizen of the United States.

What are possible defenses to EIDL Loan Fraud?

A conviction does not always follow from an arrest for a crime. If you or someone you know is detained on suspicion of any of the offences connected to EIDL loan fraud, they may be able to utilize one of numerous defenses.

Lack of Knowledge or Intent – If you accidentally supplied false information on an EIDL loan application, you could have a defense of lack of knowledge or intent. Most offences involving EIDL loan fraud require the prosecution to establish that you purposefully or deliberately altered information on the application. This circumstance could occur if you relied on a third party to apply for an EIDL loan on your behalf or if you unintentionally provided false information on your application for an EIDL loan.

EIDL Loan Used for Legitimate Purposes – If you are charged with misusing the proceeds of an EIDL loan, you may have a defense against EIDL loan fraud if you can demonstrate that the loan profits were utilized for lawful reasons as permitted by the CARES Act.  The CARES Act stated that EIDL loan proceeds must be used for “working capital”.  An attorney could potentially argue that term is vague and that your conduct falls within the statute. 

Identity – The federal government must establish your culpability in every criminal prosecution by showing that you were the one who committed the offense. In the vast majority of EIDL loan applications, the borrower submits the application and all supporting documents online without ever going to a bank or consulting with an SBA representative. As a result, the government will frequently rely on evidence that is circumstantial to prove that you are the person who applied for and was given the loan. If the prosecution lacks compelling circumstantial evidence that establishes your guilt beyond a reasonable doubt, you may have a viable defense.

Find an Attorney for EIDL Loan Fraud in Miami, FL

You need a skilled and determined criminal defense lawyer for counsel if you are under investigation or have been charged with any felony connected to the EIDL Loan Fraud in Miami, Florida. Your liberty can be in jeopardy as a result of the harsh repercussions of EIDL loan fraud offenses. 

In addition to having experience as a criminal defense lawyer, E.J. Hubbs has also worked as a former prosecutor. With more than 10,000 criminal cases under his belt, he has the expertise needed to give you the best chance of a successful outcome. Additionally, he is Board Certified, in Criminal Trial Law by the Florida Bar, a distinction held by fewer than 1% of Florida lawyers.

Hubbs Law assists clients in all kinds of criminal cases, including charges involving EIDL Loan Fraud, in South Miami, Coral Gables, Pinecrest, Palmetto Bay, Cutler Bay, Hialeah, Miami Gardens, City of Miami, and anywhere in Miami-Dade County.

Hubbs Law offers free consultations for all criminal cases. Contact us anytime to review your case or legal issue at 305-570-4802.

Additional Resources 

Department of Justice (DOJ) - Fraud Section Enforcement Related to the Cares Act – The Department of Justice (DOJ) is one of the law enforcement agencies that enforces federal law.  Click on the link to find press releases related to EIDL Loan Fraud and ourt records related to publicly charged cases.

Small Business Administration (SBA) - COVID-19 Economic Injury Disaster Loan  – The Small Business Administration is the federal agency that provides assistance to small businesses through loans like the EIDL loan. Find additional information and program updates on the EIDL loan as well as data reports. 

Small Business Administration – Office of Inspector General (SBA-OIG)  – The Office of Inspector General investigates EIDL loan fraud reported to the SBA.  Click here to find additional information regarding OIG investigations and policies. 

Internal Revenue Service (IRS) – Criminal Investigation Press Releases - - The Internal Revenue Service (IRS) is the government agency responsible for administering and enforcing federal tax law. You can read about criminal investigations and cases related to EIDL loan fraud and other fraudulent schemes at the previous link.

Federal Bureau of Investigations (FBI)  – The FBI is the primary federal law enforcement agency who is tasked with enforcing federal criminal laws.  Click the link for more information and tips as the FBI attempts to combat COVID-19 scams including EIDL loan fraud.