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PPP Loan Fraud: Why Every Independent Contractor Should Absolutely Beware of its Risks

It seems like PPP loan fraud is blowing up lately.

Recently, Womply sent out an email to many borrowers and loan applicants on April 30 to respond to the problem. In the email they stated they have received requests and subpoenas “from law enforcement, including the FBI, SBA, DOJ, and other agencies.” They also said they've noticed a big increase in fraudulent documentation.

Fraud's a scary thing to be accused of. Especially when some claim that it's fraud for any independent contractor to even get the loan. Are you at risk? Did you get in over your head?


You can get the PPP when you deliver for Doordash, Uber Eats, Grubhub, Instacart etc. It's perfectly legal as an independent contractor or self-employed individual. They're not trying to set a trap for accidental fraud. The PPP loan program was created to provide economic security for businesses and sole proprietors in difficult times.

However, you should be aware of the consequences for fraud. Just in case you're thinking of fudging the numbers, making stuff up, things like that.

PPP Loan Fraud illustrated by stacks of PPP loan money sitting as bait in a mouse trap.

In this article, we'll talk about:

  • Why PPP loan fraud is a problem and how it happened.
  • What is PPP loan fraud? (And what isn't it?)
  • Consequences of PPP loan fraud

Why is PPP loan fraud a problem?

I think the problem here is, the US Government is a victim of their own desire to quickly get ppp funds in the hands of people who really need it.

The CARES Act, in response to the pandemic, created the Paycheck Protection Program as a means to help small businesses (including sole proprietors) keep paying its people when the economy ground to a halt during the shutdowns.

The thing is, Congress wanted to get money out to people who need it as quickly as possible. They didn't want the process to get bogged down too much. They tried to streamline the process and speed things up.

But here's the thing when you streamline things like this. If it's easier to get the money, it's easier to commit fraud.

It's already been a huge problem with unemployment. The system was so overwhelmed with applicants, it was like all they could do was just approve applicants. That opened the door to large scale identity theft and fraudulent unemployment claims.

I think it took some time, but scammers eventually figured out they could do the same thing with the PPP Program.

However, I think the problem goes beyond that. I say this from my observations in driver forums and Facebook groups. There's been a feeding frenzy of sorts, with a lot of people looking at the PPP as free money. I think some of that was increased by the generous referral programs being offered by companies like Womply.

When you get all that talk of free money, people get desperate for that money. I think there's an explosion of people making up numbers so they can get approved. It's not the multimillion dollar stuff you read about in the news, but it's fraud all the same.

Cramming in as many funded applications as possible.

A large funnel with several marbles, with the top of the funnel labeled applicants and a few marbels below the funnel on a base labeled PPP Loans.

By late April, nearly 10 million PPP loans had gone out. The Federal government doesn't have the capacity to do all the verification that's needed for 10 million applications in such a short period of time.

The banks that were processing the loans couldn't handle all the applications either. The SBA understood this. To make things go faster, the SBA gave lenders a lot of wiggle room.

lenders will be permitted to rely on certifications of the PPP borrower to determine the borrower’s eligibility and use of loan proceeds

SBA Interim Final Rule on processing of PPP loans, January 6, 2021

The backlog is bad enough as it is. Lenders, the SBA and even the IRS are overwhelmed by the volume of applications. Imagine if they had to actually verify documents.

The Project on Government Oversight had a very in depth article about the overal fraud problem. They noted that the CARES act itself removed some of the fraud prevention controls in order to allow faster processing. In fact, the SBA was approving applications in batches, barely even looking over the information.

Lenders contributed to the problem.

I wrote earlier about how the high processing fees for PPP loans often encouraged lenders and their agents to push through applications. Womply created a Fast Lane application that streamlines a lot of things. It minimized the documentation and the questions asked of applicants. One feature about this is that it essentially allowed people to apply for both first and second draw loans at one time.

You're essentially saying, yes, I want to apply for both draws. I have two problems with this. One, you can't qualify for the second draw unless you had an economic loss of 25% or more for at least one quarter of 2020. Womply doesn't mention that anywhere. Two, they create an expectation that you'll receive both draws. There's a lot of hoops to jump through and I'm not sure there's time.

Concerns that I expressed in my review of Womply's Fast Lane application

I understand why they did all this. Take away the friction and the problems that were slowing applications down. I was told that they didn't need to ask about the economic loss details because it was up to the applicant to verify that they qualified. It all goes back to that interim final rule that said to rely on the applicant's statement.

That made things faster. It sped things up. A financial institution could get more forgivable loans processed that way (and get more processing fees).

However, ‘relying on the applicant statement' opens the door wide open to fraud.

And guess what's happening?

What is (and isn't) PPP Loan fraud?

Womply's email put it pretty simply:

If you lie on your application or provide fake documents, then you are committing fraud and stealing money from the intended beneficiaries of the PPP program.

Womply email to borrowers about Paycheck Protection Program loan fraud

That puts it pretty well.

If you are lying on the PPP loan application, you're committing fraud. If you are making false statements, making up amounts or creating documents to support your application, that's fraud.

Fraud isn't limited to the million dollar applications

The criminal cases that have made the news do distort things a little.

I've read a lot of stories where someone was charged with fraud for inflating the number of employees they had. It seems like most of the stories involve someone buying a luxury car with the money.

However, what happens in the big dollar cases also happens with independent contractors. Someone told me they were seeing Doordash and Grubhub drivers claiming to receive loan amounts of $50,000, or they were getting money that equaled half their income.

That tells me that either the person lied about what they received or they committed fraud.

The maximum that one person can get for a PPP loan is $20,833. The maximum PPP loan is based on 20.83% of your Schedule C income. The only way to get more money than that is to either 1) claim to have employees that you didn't really have, or 2) inflate your earnings amount on the application.

Both are fraud.

If you are making up documentation to prove you were in business when the pandemic started, you are committing fraud.

Do you see a pattern here? These are things that you're actively doing. All of these involve lying about your finances or your situation in order to either get the funding or get more funding.

In other words, if you're committing fraud, you know it.

Digital fraud concept illustrated by a circuit board with a fingerprint on it, with the word Fraud in red letters hovering over it.

Applying for the PPP as an independent contractor is NOT fraud.

I see this a lot in the Facebook groups and on Reddit.

People ask about the PPP and right away, someone posts an article about fraud. Others are saying that if you don't have actual payroll expenses, you don't qualify.

It is not fraud to apply as an independent contractor, or as a gig worker for gigs like Doordash, Uber Eats, Grubhub, Instacart, Lyft or others. It is perfectly legal. You are small business owners.

If you are being honest in your application, and in your forgiveness application, do not worry about fraud. If you're acting in good faith, you're not committing fraud.

Do not be concerned about all the stuff out there people are throwing around about how to spend your PPP money. If you are a self-employed independent contractor, you don't need to worry about that. Your loan is meant for owner compensation. Once you receive that money, the loan has done what it's meant to do. Don't worry about all those hoops everyone tells you to jump through.

There's really one type of fraud here. That's intentionally deceiving the government in order to receive money that you're not eligible to receive.

Like I said, if you're committing fraud, you know it.

What are the consequences of PPP loan fraud?

All of the stories you see out there are about the big money fraud cases. But what about for independent contractors? Can the little guy slip under the radar?

Don't count on it. It's not worth the risk of having a felony or federal charges on your record, or facing criminal prosecutions.

According to Hubbs Law firm, these are some of the criminal charges you could face:

  1. Bank fraud. PPP loans are processed through banks, meaning you could be charged with bank fraud if you lied on your application or submitted falsified documents. Bank fraud is punishable by up to 30 years in federal prison a a $1 million fine.
  2. Wire Fraud. If you are applying over the internet while lying on your application or transmitting falsified documents you can be charged with wire fraud. Punishment? Up to 30 years in federal prison and a $1,000,000 fine.
  3. Mail Fraud. If you used the US Mail system to submit falsified documents, you can be charged with mail fraud. The punishment is the same as the two above.
  4. Identity Theft. If you created false payroll records involving Social Security Numbers in order to get more funding, now Identity theft enters the picture. Once again, you're at risk of up to 30 years and a $1 million fine. You may also be subject to a minimum mandatory 2-year sentence.

This is not minor stuff. If you're getting ppp loan funds under false pretenses, you're committing a federal crime.

And here's another thing you may not have thought about.

Think about it:

You filled out your application, and based on the money you earned, you can take out so much. But you want more. So you change the application. You tell them you made more than what you really earned.

Congratulations. You just told the United States Government that you made more money. There's another branch of the government that might be interested in knowing that. You may have heard of them.

The Internal Revenue Service.

Hope you enjoy that audit.

Unless of course, you decide you're going to make up some extra expenses to offset all that extra income you just told them that you made. Great. Now you can add tax fraud to the list.

But what are the odds of being caught?

Businessman in dress shirt and tie being arrested near a police car.

After all, they're overwhelmed, right? They're far more interested in those who defrauded the government by millions than the small fish whose fraudulent applications were only for thousands.

Aren't they?

I think in practice, that may be true more often than not. However, here are a few things to think about:

The Department of Justice is hiring prosecutors to address this.

As I mentioned earlier, the email Womply sent to borrowers mentioned the increase in law enforcement activity. Federal agencies including the Justice Department, SBA, U.S. Attorney's office and even the IRS are getting involved here. The government has been adding federal agents to the Market Integrity and Major Frauds Unit.

As a part of this, the Department of Justice is advertising positions for Cares Act Fraud prosecutors. In other words, they're ramping up enforcement.

The easier you make it to get caught, the greater the likelihood you get caught.

I've mentioned the IRS a few times already. It's very easy to compare your application to tax records.

If you're crazy enough to try and claim employees, you should know that it's easy to compare your application to payroll tax records.

While there may not be enough manpower to comb through all the applications, you also have to understand that computers can do a lot of the work. If you're making up numbers and documents, there's a good chance it doesn't match up with tax records and other things that are already out there.

Sometimes the independent contractor who's dumb enough to make crap up is low hanging fruit that's real easy for them to have an open and shut case. Don't be that idiot.

Watch out for Qui Tam

No, Qui Tam is not some Jedi Knight working for the SBA.

A person committing fraud may be more likely to be turned in, and SUED, by another individual than being caught by the government. That's because of the False Claims Act.

A qui tam lawsuit is a whistleblower lawsuit where someone can sue you for PPP loan fraud. They can receive a portion of the money that was recovered. An ordinary citizen can make money by suing you for fraud. And oh, by the way, the government can then step in.

Phillips & Cohen, a law firm that specializes in qui tam lawsuits, says this about who can file a suit:

Any individual with information about fraud against the government may become a whistleblower and bring a qui tam lawsuit. This is often an employee of the company committing the fraud, but it also can be a competitor, a contractor or anyone else who has information about the fraud.

Phillips & Cohen: Who can become a whistleblower and file a qui tam lalwsuit?

If felonies and tax fraud and all of that don't scare you, this should:

Your loan is on public record. You can look up anyone who has ever received a PPP loan.

If anyone knows you, knows you committed fraud, and realizes they can get a percentage of your loan just for turning you in, you're at risk.

Think about this: How did I find that quote from Phillips & Cohen? There are scores of lawyers out there advertising that they'll take on qui tam whistleblower lawsuits for you. Many will do it for a percentage of the recovery fee.

In other words, people can rat you out for money and you're left with civil penalties.

And maybe a felony.

The moral of the story?

Don't commit PPP loan fraud.

I'm hoping that if you're reading this, you're not the type that would do that.

Because of all the fraud, it's going to be harder for legitimate businesses to get PPP funding. Reading the letter from Womply, it's like everyone's putting the brakes on the whole process. More documentation is required. The SBA's starting to give applications a bit more scrutiny. Loan forgiveness may need more documentation and that documentation may be examined more closely. Companies like Womply are scrutinizing their referral fees to make sure that's not all involved in any of that fraud.

Those things probably should have been happening all along, to be honest. I think everyone went too far in making it all too easy.

If you did doctor the numbers or did make up documentation, your best course of action is to fix it now. If you're the one to take the steps, you're less likely to face charges. You can pay the funds back at any time.

If you were honest with your application and submitted genuine information, thank you. Don't confuse the fraud going on with all the hype that's out there. Understand where you qualify. If you did things right, relax.

Could this help someone else? Please share it.


Friday 25th of June 2021


shirley oswalt

Wednesday 9th of June 2021

@shirley oswalt,I need help quickly please before the money from womply forppp hits the bank they got in the text it sid chase bank n gave last four of a account n routhing number n I. Just Terrified to death I've called the 800 toll free to chase they checked my ssn n name no account with any chse around so what now

Wednesday 9th of June 2021

You can probably relax. My guess is someone's trying to set you up for a scam. At some point someone's going to contact you claiming to be from the SBA or from a bank and try to scare you into giving away money or personal information. Think about it: If someone had used your information to get a PPP loan the last thing they're going to do is let you in on it. They need to go unnoticed for ID theft to work. Under no circumstances should you talk to whoever this is and if someone calls saying they're from the SBA don't believe them. You can read more about phishing and scam attempts here:

The other thing you can do is go to the SBA site for reporting fraud. Give them all the details including the number they contacted you from.

If you did nothing wrong, you don't need to be worried.

Last thing I would suggest is be careful about where you put contact information. I deleted your comment where you have your phone number. It just makes it too easy for fraudsters to try to contact you.

Comments are closed.
About the Author

Ron Walter made the move from business manager at a non-profit to full time gig economy delivery in 2018 to take advantage of the flexibility of self-employment. He applied his thirty years experience managing and owning small businesses to treat his independent contractor role as the business it is.

Realizing his experience could help other drivers, he founded to encourage delivery drivers to be the boss of their own gig economy business.

Ron has been quoted in several national outlets including Business Insider, the New York Times, CNN and Market Watch.

You can read more about Ron's story,, background, and why he believes making the switch from a career as a business manager to delivering as an independent contractor was the best decision he could have made.

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