John’s discussed a few times about issues with the Paycheck Protection Program. For companies that might be questioning whether to return PPP funds, a couple of recent memos highlight reasons it’d be a good idea to make sure PPP loan recipients were really the intended beneficiaries of this CARES Act program. The safe harbor to return PPP funds without penalty ends May 14. John wrote about this extended deadline last week.
First, the U.S. House Select Subcommittee has targeted five companies to return PPP loans or to produce necessary supporting documentation. A McGuireWoods memo summarizes this development and says each of the targeted companies are public companies with market caps of more than $25 million, received loans of $10 million or more and had over 600 employees. The memo advises companies to carefully document the analysis used in determining eligibility for the loans and otherwise mitigate risk and potential future liability.
Next, a Nixon Peabody memo points out the government is keeping a close watch for potentially fraudulent activity. Last week, the Department of Justice announced criminal charges against two people who allegedly filed fraudulent PPP loan applications. The memo says that the DOJ caught on to the plot before any PPP funds were distributed to the individuals. The DOJ brought charges alleging conspiracy to make false statements and commit bank fraud, among other felony offenses. One clear takeaway from the memo is that all CARES Act beneficiaries should prepare for heightened government scrutiny.
-Lynn Jokela, TheCorporateCounsel.net May 13, 2020
