Texas Federal Loan Fraud Lawyer

The Statutory Framework: 18 U.S.C. §1014

Section 1014 makes it a federal crime to knowingly make any false statement or report, or willfully overvalue any land, property, or security, for the purpose of influencing in any way the action of any financial institution or federal agency in connection with any application for a loan, advance, commitment, or extension of credit.

Penalty: Up to 30 years in prison and a fine up to $1,000,000.

The knowing and willful elements. The government must prove that the false statement was made knowingly (the defendant was aware the statement was false) and with intent to influence the lending decision. An inaccurate statement that resulted from a good-faith misunderstanding of the application requirements, reliance on an accountant’s figures, or confusion about the eligibility criteria is not a knowing false statement. The intent element is the central defense issue in most loan fraud prosecutions.

PPP and EIDL Fraud: The Current Enforcement Landscape

The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs, established under the CARES Act in 2020, provided approximately $800 billion in federal assistance to businesses impacted by the COVID-19 pandemic. The rapid deployment of these funds, combined with limited initial verification capacity, created substantial fraud opportunities that the government is now actively prosecuting.

Common PPP/EIDL fraud theories charged in Texas federal courts include: overstated employee counts or payroll figures; misrepresented business revenue or operating history; loans obtained for businesses that did not exist or were not operating; funds used for prohibited personal expenses rather than authorized business purposes; and multiple loan applications submitted across different lenders for the same business.

The statute of limitations issue. The standard statute of limitations for federal fraud is 5 years under 28 U.S.C. §3282. For PPP and EIDL loans funded in April and May 2020, the 5-year window began expiring in 2025 and will continue through 2025–2026. Congress extended the statute of limitations for certain COVID-era fraud to 10 years through the PPPFA. Verify the specific application of this extension with counsel in any pending case. If you received a PPP or EIDL loan and have concerns about the application, the time to evaluate your exposure and consult counsel is before charges are filed, not after.

Defense Strategies in Federal Loan Fraud Cases

Lack of knowing intent. The most important defense in loan fraud cases is challenging the government’s ability to prove that the false statement was made knowingly. Many PPP and EIDL applicants relied on accountants, bookkeepers, or loan brokers who prepared the applications using their professional judgment about eligible expenses and calculation methodologies. Where the defendant reasonably relied on a professional’s guidance, the knowing intent element may not be satisfied even if the application contained inaccuracies.

Ambiguous application guidance. The SBA’s initial guidance on PPP and EIDL eligibility and calculation was inconsistent, frequently updated, and in some cases contradictory. Applicants who calculated loan amounts using one permissible methodology but who the government now claims should have used a different methodology may have a genuine defense based on the ambiguity of the applicable rules at the time.

Repayment. Although repayment of a PPP or EIDL loan does not eliminate criminal liability for a knowing false statement, evidence that a defendant returned funds promptly upon learning of an error (or proactively repaid before any investigation was initiated) is relevant to the intent element and to sentencing mitigation.

Loss amount disputes. Federal sentencing in loan fraud cases is driven by the loss amount under U.S.S.G. §2B1.1. The government’s loss calculation in PPP cases often equals the full loan amount, but where the defendant actually used loan proceeds for authorized expenses, the actual loss may be substantially lower. Challenging the loss calculation can reduce the Guidelines range significantly.

If you are facing federal loan fraud charges in Texas, call (214) 225-7117 for a free, confidential consultation with James Lee Bright. Or schedule online at texasdwisite.com.