Arizona Bank Fraud Attorney
Bank fraud is the act of using a financial institution to conduct a fraudulent act in order to gain financially in some way. This financial gain can be the acquisition of a loan and it is typically acquired by omitting required information or stating false information. A person can exaggerate their income, provide false employment information, or manipulate other information on the application.
Loan officers and other bank employees can also be charged with bank fraud if they become a part of the fraud. Perhaps they will receive a kickback from the applicant if they approve the loan when it should not have been approved. The list can go on and on. No matter what the crime, however, a qualified attorney is needed to defend you in court. Even if you did do something wrong, there may be a detail in your case that can work in your favor. This means a much better outcome for you.
Types Of Bank Fraud
If you are charged with bank fraud, you can be charged by the state or by the federal government. At the state level, the charge is typically fraud, which means that some kind of benefit was received due to omission or misrepresentation of important details. On the federal level, the laws are very broad and this could mean you can face multiple charges. These charges involve conspiracy and mail or wire fraud.
However, for you to be convicted, the prosecutor has the burden of proof. This means that they must prove that you intended on committing the crime. Most loan applicants will sign the loan application without reading it. There are even cases where a person believes that their assets are worth more than what the government considers them to be worth. Honest mistakes are made and, if that is the case, you need to be adequately represented so that it can be revealed that the act was not intentional.
Effective Phoenix Criminal Defense
To show the court what really happened, you want to make sure you have an effective criminal defense in place. This means dealing with someone who knows about finance and the crimes surrounding it. Myles A. Schneider has a degree in corporate finance, so he knows how to provide effective representation. In fact, this unique qualification allows for very specific strategies to be used that are effective in reaching a fair outcome in the case, whether that outcome is a reduction in the number of charges or complete dismissal of the case.
PPP FRAUD aka Payroll Protection Program Fraud
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a federal law enacted in March 2020 and was designed to provide; emergency financial assistance to the millions of Americans suffering from the economic effects caused by the COVID-19 pandemic. One source of relief the CARES Act provided, through a program referred to as the Paycheck Protection Program (“PPP”), was authorization of up to $349 billion in potentially forgivable loans to small businesses for payroll, job retention, mortgage interest, rent/lease, utilities, and certain other applicable expenses.
PPP loans had an interest rate of one percent. Loans issued prior to June 5, 2020, had a maturity of two years, while loans issued after June 5, 2020, had a maturity of five years. Each loan draw had a specific application process and requirements. SBA would forgive PPP loans if all employee retention criteria were met, and the funds were used for eligible expenses within a designated period as set forth in the PPP.
PPP LOAN APPLICATION PROCESS
To apply for a PPP loan, a qualifying business was required to submit a PPP loan application to a participating lender. The lender then transmitted the relevant data for processing the loan to The United States Small Business Administration (“SBA”) who facilitated PPP loans. This included the borrower’s information, the total amount of the loan, and the listed number of employees. In the PPP loan application (SBA Form 2483), the small business (through its authorized representative) had to verify its average monthly payroll, and the total number of employees. These figures were used to calculate the amount of money the business was eligible to receive under the PPP. The maximum PPP loan amount a business could receive was 2.5 times the business’s average monthly payroll costs, up to $10 million.
The PPP loan application required the business to make several affirmative certifications. Among them, the authorized representative was required to certify that: (1) The Application business was in operation on February 15,2020 and has employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Internal Revenue Services (“IRS”) Form(s) 1099-MISC; (2) The funds would be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the PPP Rules; and (3) The information provided in the application and information provided in all supporting documents and forms was true and accurate in all material respects.
Lenders did not require credit checks, verifications of deposit, or any underwriting formalities before disbursing funds for PPP loans to applicants.
PPP LOAN FORGIVENESS PROCESS
At any time up to the maturity date of the loan, a borrower could apply for loan forgiveness so long as all the loan proceeds. Under the applicable PPP rules, the full principal of the PPP loan and any accrued interest was eligible for forgiveness if the business used the PPP loan on permissible business-related expenses and used a certain portion of the loan proceeds towards payroll costs.
Borrowers were eligible for forgiveness of eligible payroll costs if at least 60% of the loan proceeds were spent on actual payroll costs during the eight-week covered period. Borrowers were also eligible for forgiveness of nonpayroll costs such as mortgage payments, rent or lease payments, and utility payments. To apply for loan forgiveness, the borrower was required to complete a Loan Forgiveness Application (SBA Form 3508) and submit it to its lender, or the lender that was servicing the PPP loan. The Loan Forgiveness Application then required the borrower to submit: (1) a PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; and (3) a Schedule A worksheet.
At any time up to the maturity date of the loan, a borrower could apply for
loan forgiveness so long as all the loan proceeds for which the borrower was requesting
forgiveness had been used. If borrowers did not apply for forgiveness within ten months after the last day of the covered period, then PPP loan payments were no longer deferred, and borrowers
were required to repay their loans to their PPP lender. Like the PPP loan application, the PPP Loan Forgiveness Application required the business (through its authorized representative) to make several affirmative certifications. Among them, the business’s authorized representative was required to certify the following statements were true:
- The dollar amount for which forgiveness is requested “was used to pay costs that are eligible for forgiveness (payroll costs to retain employees; business mortgage interest payments; business rent or lease payments; or business utility payments)”;
- The borrower understands that if the funds were knowingly used for unauthorized purposes, the federal government may pursue recovery of loan amounts and/or civil or criminal fraud charge; and
- “The information provided in this application and the information 12 provided in all supporting documents and forms is true and correct in all material respects.
THE FIRST ACT OF PPP FRAUD
As part of the PPP Application, defendants certify that it had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on Form(s) 1099-MISC whom never existed or did not exist in the amounts represented. Then, defendants would represent or swear, under the penalty of surgery, that the funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments. .. [and] if the funds are knowingly used for unauthorized purposes, the federal government may hold [applicant] liable, such as for charges of fraud. During this process, defendants knew that it had no employees, or overstated the amount of employees it had, and that it paid no salaries or payroll taxes to any employees or independent contractors, when it did not. Defendants also falsely and fraudulently represented that the funds sought in its application would be “used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments” when, in fact, they intended to divert the funds to their personal use and benefit. In reliance on such applications, the sponsoring bank would then pay the defendant or its company large sums of money.
THE SECOND PPP FRAUD
When it came time to seek forgiveness of the wrongfully obtained loan, Defendants would false IRS Form 940 purporting to show that it made payments to employees. When in fact, no such Form 940 was ever filed with the IRS on 12 behalf of Defendant or its company. Defendant’s application included fictitious payroll ledger purporting to show the monthly wages of employees with an average monthly payroll of approximately exceeding the required minimum. In fact, at the time the Defendant’s application was filed State Agencies did not have any tax or wage reports to match payroll allegedly paid by Defendants to employees. Defendants then disbursed the money to their own personal accounts for personal gain.
In these types of schemes, Defendants are typically charged with: 18 U.S.C. § 371 (Conspiracy) to Commit Bank Fraud, Bank Fraud pursuant to 18 U.S.C. § 1344 and Transactional Money Laundering pursuant to 18 U.S.C. § 1957.
18 U.S. Code § 371 – Conspiracy to commit offense or to defraud United States
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.
If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.
18 U.S. Code § 1344 – Bank fraud
Whoever knowingly executes, or attempts to execute, a scheme or artifice—
(1)to defraud a financial institution; or
(2)to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S. Code § 1957 – Engaging in monetary transactions in property derived from specified unlawful activity (Money Laundering)
(a)Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b).
(1)Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. If the offense involves a pre-retail medical product (as defined in section 670) the punishment for the offense shall be the same as the punishment for an offense under section 670 unless the punishment under this subsection is greater.
(2)The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction.
(c)In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.
(d)The circumstances referred to in subsection (a) are—
(1)that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States; or
(2)that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section).
(e)Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate, and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of the Department of Homeland Security as the Secretary of Homeland Security may direct, and, with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Secretary of Homeland Security, the Postal Service, and the Attorney General.
(f)As used in this section—
(1)the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;
(2)the term “criminally derived property” means any property constituting, or derived from, proceeds obtained from a criminal offense; and
(3)the terms “specified unlawful activity” and “proceeds” shall have the meaning given those terms in section 1956 of this title.
Contact A Phoenix Bank Fraud Lawyer
If you have been accused of bank fraud, Myles A. Schneider can help you. Helping many clients throughout Arizona prove what really happened is why there are many former clients who have been able to move on with their lives and put their cases behind them. To find out what can be done in your case, call us at 602-926-7373 for a free consultation.