A Raleigh Company & PPP Loan Fraud: A Closer Look
JaMia Howard ‘28
A Raleigh-based company, DynPro, has been ordered to pay over $2 million for fraudulently obtaining a PPP loan. DynPro is a digital transformation company that solves business challenges and optimizes its operations through various IT consulting services. DynPro applied for a second-draw PPP loan forgiveness application. In the application, DynPro stated that it experienced a 25% reduction in gross receipts, making the company eligible for the loan. However, it did not experience such a reduction and fraudulently included this information in the application.
WHAT IS A PPP LOAN?
A PPP Loan is the Paycheck Protection Program implemented by the Small Business Administration. The program was established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide financial assistance to businesses suffering from economic harm during the 2020 COVID-19 pandemic. The ultimate goal of the PPP loans was to provide business loans to stabilize operations during a period of crisis. Businesses were given funds over an eight-week to twenty-four-week period to pay payroll costs, and funds could also be used to pay interest on mortgages, rent, and utilities. To qualify, businesses had to demonstrate that they were negatively impacted by the pandemic. Under the PPP loan, businesses that received these loans could have them forgiven and would not have to pay anything back if they applied for forgiveness and met the requirements. If they did not meet the criteria, then loan forgiveness could be reduced or denied. The loan forgiveness included two draws, each with similar requirements, with the second draw possessing slightly different criteria.
PPP Loan First & Second Draw Loans
Businesses eligible to apply for full loan forgiveness had two draw periods. The first and second draw PPP Loans required that businesses, during the eight through the twenty-four weeks after receiving the loan, meet the following conditions: employee and compensations levels are maintained, the loan proceeds must be spent on payroll costs, and at least sixty percent of the proceeds must be used on payroll cost. The second draw required the same but required a few additional requirements, including that the company must have no more than 300 employees and demonstrate a 25% reduction in gross receipts between the comparable quarters in 2019 and 2020. The 2020 second quarter must be at least 25% lower than the same quarter of 2019. Gross receipts are all revenue received or accrued. Documentation that businesses can provide includes annual IRS income tax filings and quarterly or monthly bank statements showing the deposits from the quarters, and if not clearly expressed, the applicants must annotate which constitute gross receipts. The 25% reduction in gross receipts represents the area where DynPro failed to meet the required criteria and fraudulently stated that the company did. Consider if a company presents that in 2019, the second quarter gross receipts were $500,000, and in 2020, the gross receipts dropped to approximately $350,000 due to the pandemic. The company would be eligible for a second draw PPP loan because it met the requirement of at least a 25% reduction. Now, let us consider a company that would not meet the criteria. If a company in the 2019 second quarter had $250,000 in gross receipts and in the 2020 second quarter had approximately $240,000, they would not be eligible for the second draw because this is not the minimum 25% reduction.
Consequences & Enforcement of PPP Loan Violations
The United States Attorney’s office and the False Claims Act (FCA) are working diligently to investigate and recover fraudulently obtained PPP loans. The Department of Justice has been clear about its intent to pursue such cases concerning the PPP. Under the FCA, individuals or entities that knowingly submit fraudulent claims are subject to sanctions. The FCA can impose various penalties in addition to the repayment of the loan that include civil fines or criminal imprisonment, depending on the nature of the violation. For DynPro, sanctions include paying $2,178,254 to resolve its liability. However, other businesses found liable or guilty may also explore other avenues for settlement or plea deals to potentially reduce the severity of the penalties. The Acting United States Attorney for the Eastern District of North Carolina, Daniel P. Bubar, expressed his concerns to “root out waste, fraud, and abuse of taxpayer funds.”
Examining the Consequences: What should businesses do now?
DynPro serves as a reminder that abuse of taxpayer funds will not be tolerated. Loan forgiveness was a privilege given to companies and DynPro abused the privilege. The PPP loans are no longer accepted, but existing borrowers may be eligible for loan forgiveness. To avoid any legal issues or penalties, businesses should carefully review the eligibility and not fraudulently file claims that are not true. Businesses should take the necessary steps to review their applications under close examination and be ready to explain any discrepancies. Further, they should maintain full transparency, and if unsure about anything, consulting a legal expert would serve their greater interest.
JaMia Howard is a freshman majoring in political science.
Sources
United States Attorney's Office. (2025, March 13). Raleigh Company to Pay More than $2 Million to Resolve False Claims Act Liability to Resolve False Claims Act Liability Related to Improper Paycheck Protection Program Loan. Department of Justice. https://www.justice.gov/usao-ednc/pr/raleigh-company-pay-more-2-million-resolve-false-claims-act-liability-related-improper
U.S. Department of the Treasury. Paycheck Protection Program. Retrieved on March 31st, 2025. https://home.treasury.gov/policy-issues/coronavirus/assistance-for-small-businesses/paycheck-protection-program
Small Business Administration. (2024, October 3). PPP loan forgiveness. Retrieved March 31, 2025. sba.gov/pppforgiveness
