PPP Enforcement: It’s Not Funny
While many who have accepted PPP loans now consider the forgiveness aspects and process, be mindful of federal enforcement. To date, the Justice Department has filed 36 PPP fraud cases, charging about 51 defendants. Defendants are charged with bilking taxpayers out of tens of millions of dollars. Luckily, the Feds have recovered a large part of the loan proceeds already. While the cases may seem extreme, federal enforcement is never a forgone conclusion.
In July, a fugitive who allegedly faked his own death to avoid prosecution on charges that he fraudulently sought more than $500,000 in forgivable federal small-business loans during the coronavirus pandemic was arrested by the U.S. Marshals Service in Alpharetta, Georgia.
Following an investigation by the FBI and the IRS, David A. Staveley of Andover, Massachusetts and David Butziger, of Warwick, Rhode Island, became the first people in the nation to face federal charges that they had defrauded the CARES Act Small Business Administration Paycheck Protection Program by claiming they needed to pay employees and yet had no employees on the payroll. Staveley, who also goes by Kurt Sanborn, was released on $10,000 unsecured bond with GPS monitoring. After the U.S. Probation Office in Rhode Island received an alert that Staveley’s GPS monitor had been removed, Staveley’s vehicle was recovered near a Quincy beach. Authorities said his wallet, Massachusetts Driver’s License, and a typed and signed suicide note were also in the car.
Massachusetts State Police dispatched a search and rescue boat in an attempt to locate Staveley’s body, according to the news release, but detectives never found evidence indicating he had committed suicide. Concluding he had faked his death and fled the state to avoid prosecution, the Marshals Service in Rhode Island said they learned soon after that Staveley was in fact alive and had traveled to Tennessee.
Staveley was arrested after investigators tracked him down to the Peach State, where he had been living under a fake name, according to a release from the Rhode Island Violent Fugitive Task Force.
Sheng-Wen Cheng, a New York resident, has been charged with fraudulently applying for more than $7 million in COVID-19 relief fund. The complaint against Cheng alleges that he claimed to employ more than 200 people, and submitted a fraudulent payroll summary that listed athletes, actors, television anchors, and other celebrities as his employees.
Cheng received $2.8 million from the US government, the complaint said, and spent hundreds of thousands on designer labels, a luxury condo, and a Mercedes-Maybach sedan. In his application, he listed famous people as fake employees on his payroll, the criminal complaint against him claims, and promptly spent hundreds of thousands on a new Mercedes, designer labels, and a condo renting for $17,000 per month.
The criminal complaint alleges that Sheng-Wen Cheng claimed that his multiple companies employed more than 200 people and that his payroll expenses totaled more than $1.5 million per month. In reality, the allegations say, Cheng’s companies “appear to have a total of no more than 14 employees.”
The complaint, via the DOJ, claims that Cheng duped the SBA by submitting doctored tax forms and payroll documents, going so far as to send in a payroll summary for one of his companies that “listed the names of more than 90 purported employees, several of whom are current and former athletes, artists, actors, and public figures.”
Texas Engineer with Handwritten Notes
Shashank Rai, an engineer from Beaumont, is charged with multiple counts of fraud and false statements to the SBA for seeking more than $10 million in PPP funds. He allegedly claimed to have 250 employees when there is no record of any in his business, Rai Family LLC. Court documents allege that handwritten notes recovered from his trash describe how he planned to use $3 million of the money for personal investments.
“Love & Hip Hop: Atlanta” star Maurice Fayne was indicted on fraud charges over a $3,725,500 PPP loan application for his company, Flame Trucking. Fayne allegedly claimed he had 107 employees and submitted forged bank statements. It’s alleged he then blew the money on a Rolex Presidential watch, a 5.73 carat diamond ring and other jewelry. He also allegedly used the money to pay $50,000 for restitution in a previous fraud case, $40,000 in back child support, $139,000 to lease a Rolls Royce Wraith — and $230,000 to associates who helped him run a Ponzi scheme. When arrested, he had almost $80,000 in cash at his home and $9,400 in his pocket, authorities claim.
Fast Cars, Boats and Jewelry
A Florida man was charged with fraud after receiving $3.9 million in loans from the Paycheck Protection Program to buy himself, among other things, a Lamborghini sports car, authorities said.
David T. Hines of Miami, Florida, was charged with one count of bank fraud, one count of making false statements to a financial institution and one count of engaging in transactions in unlawful proceeds, according to a statement released by the U.S. Department of Justice.
Authorities allege that Hines, 29, applied on behalf of a few companies for $13.5 million in loans provided by Paycheck Protection Program. The complaint also alleges Hines lied about the amount paid to employees. Instead, he used the funds to shop at luxurious stores and resorts in Miami Beach, according to the statement.
Already on Parole
Joseph Cherry II of Virginia was indicted on 10 counts of COVID fraud and faces 10 to 30 years of prison time on each count. Cherry was on supervised release in an unrelated federal case when he applied to the SBA Paycheck Protection Program. It is alleged he got over $190,000 in proceeds and managed to withdraw cash or cashier’s checks for $140,000. “Providing false statements to gain access to SBA’s programs will be aggressively investigated by our office,” said Hannibal Ware, Inspector General of the U.S. Small Business Administration, in a statement.
Michael George McQuarn, 51, of Austin, is charged with fraudulently receiving over $2 million in SBA PPP loans for two fictitious companies, Vantastic Voyages, LLC and Happy Days Movers, LLC. McQuarn allegedly used the money for personal purposes including buying a 26-foot Pavati Wake Boat and a Rolls Royce.
Lee Price III is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions. He allegedly received over $1.6 million in PPP funds. He then went on a luxury buying blitz acquiring a Lamborghini Urus, a Rolex watch, a 2020 Ford F-350 pickup truck, and real estate — according to allegations. He allegedly squandered thousands at strip clubs and nightclubs.
The FBI apprehended Monica Jaworska and her husband Tarik Jaafar at JFK Airport allegedly attempting to flee to Poland. The pair are charged with submitting 18 fraudulent PPP loan applications with false payroll tax returns, and receiving $1.4 million in funds. The Feds managed to freeze most of the funds but not before the couple allegedly withdrew $30,000 in cash.
Eye Didn’t see it Coming
Meet Goyal, MD, an ophthalmologist in Rye, New York, was already under indictment for healthcare fraud. That didn’t stop him from allegedly applying for two PPP loans using different business names. He also allegedly lied certifying he had no pending indictments. Acting U.S. Attorney Audrey Strauss said, “Goyal allegedly looted over $630,000 in federal funds earmarked for legitimate small businesses in dire financial straits.”
Mohan Mukand, who used to work for Microsoft and Amazon according to his LinkedIn profile, is charged with submitting 8 PPP loan applications on behalf of six companies. Authorities allege he bought a company on the Internet in May with no employees, and then forged documents to claim he had paid millions in payroll taxes in 2019.He allegedly transferred a quarter million dollars of proceeds to his personal brokerage account.
In this PPP fraud case, five individuals from three states are charged with fraudulently getting over $4 million, collectively, and misusing the proceeds. Charged were: Darrell Thomas, Andre Lee Gaines and Carla Jackson of Georgia; Kahlil Gibran Green Sr. of Ohio; and Bern Benoit of California. This case appears to be an alleged PPP fraud ring of individuals paying each other for services never rendered to try to hide the money trail. They are accused of using money for personal purchases including a Mercedes-Benz S-Class S65AMG and a Land Rover Range Rover. Authorities seized the Range Rover, worth about $125,000, jewelry, $120,000 in cash, and $3 million from 10 bank accounts.
Kenneth Gaughan, 41, from Washington, D.C., has been arrested and charged with fraudulently obtaining more than $2.1 million in PPP and Economic Injury Disaster Loans relief funds, according to the United States Department of Justice.
The complaint alleges that Gaughan applied on behalf of several companies that all falsely claimed to register emotional support animals. He is being accused of forging paperwork and bank records, and charged with one count of bank fraud, one count of the theft of government funds, one count of wire fraud, and one count of money laundering. After receiving the money, the complaint said Gaughan used it to buy a $300,00033-foot 2020 Cruisers Yachts 338 CX,a $1.13 million row house, and a Kia Stinger. He is also charged with stealing more than $427,000 from the Catholic Church in an eight-year scheme to embezzle money from the Catholic Archdiocese of Washington, where he worked as an assistant superintendent and contracting contact for its 95 schools.
“We will not tolerate exploitation of this national emergency for personal gain,” acting U.S. attorney Michael R. Sherwin of Washington said in a statement. Gaughan’s attorney, Assistant Federal Public Defender Jose German, declined to comment. Prosecutors said authorities seized the boat, the car, Gaughan’s bank accounts and an investment account, and filed a civil forfeiture action against a home he had purchased.“Mr. Gaughan was so emboldened by deceiving a church for eight years he then, allegedly, turned his deception to the government,” Baltimore FBI Special Agent in Charge Jennifer Boone said.
“During this time, many businesses are feeling effects of the pandemic… Unfortunately, there are greedy individuals who choose to abuse these programs in order to enrich their lifestyle,” added IRS-Criminal Investigation Washington field office Special Agent in Charge Kelly R. Jackson.
Don’t take the perceived or apparent extremities of these cases as the threshold for enforcement.Instead, treat them as a reminder that federal enforcement is a real potential. If you have concerns about the legality of your PPP loan, and its use, contact your attorney.
 Credit for these stories (and more) to:https://smallbiztrends.com/2020/08/ppp-fraud.html
 All of the parties identified in this article are presumed to be innocent unless and until there is a conviction.But that doesn’t defeat this cautionary tale.