Expeditious Crackdowns on COVID-Relief Fraud
In the span of mere days, the Department of Justice (DOJ) arrested and charged numerous individuals from Virginia, Massachusetts, Texas, and Ohio, alleging that they fraudulently sought Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
At John F. Kennedy Airport, a Virginia couple was arrested on June 20 for COVID-relief loan fraud while attempting to flee the country to Poland. Monica Magdalena Jaworska made her initial appearance in court facing a charge of conspiracy to commit wire fraud by submitting false loan applications in connection with the COVID-19 outbreak. Allegedly, the couple submitted 18 PPP loan applications, with false statements to over 12 financial institutions under four different business entities and received over $1.4M in proceeds under the PPP.
On June 22nd, Elijah Majak Buoi of Winchester, Massachusetts, was charged with wire fraud. The complaint alleged that Buoi was the President and CEO of Sosuda Tech LLC and submitted fraudulent applications for over $13M in PPP loans through SBA-approved lenders. In the application, Buoi purportedly misrepresented the number of employees, payroll expenses, and falsely certified that the U.S. was the primary residence of his employees. Buoi supposedly received over $2M in PPP funds, and the government was able to seize approximately $1.98M from business bank accounts.
Fahad Shah of Murphy, Texas was arrested on June 23rd and charged with three counts of wire fraud, one count of false statements to a bank and four counts of money laundering. It is alleged that Shah submitted fraudulent applications for over $3M in PPP loans to two different SBA-approved lenders and filed them under the name WBF Weddings by Farah Inc. In addition to submitting fraudulent documentation, Shah claimed to have over 120 employees earning wages, when he had none. The DOJ believes that Shah received over $1.5M in PPP loans, but used the loans for personal purposes, such as buying a Tesla, making personal investments, and paying mortgage payments on a personal home.
On June 24th, another Texas resident, Jase DePaul Gautreaux, a funeral home operator in Houston, Texas, was charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions. Allegedly, Gautreaux sought over $13M in PPP loans, ultimately receiving over $1.6M. Additionally, Gautreaux falsified his identity, misrepresented the number of employees working at the business, misrepresented payroll expenses, and falsified tax documents and bank account information in pursuit of the PPP funds.
Also on June 24th, a Dayton business owner faced charges in court in relation to COVID-19 loan relief fraud, which included bank fraud and making false statements to a bank. The business owner applied for two PPP loans totaling $1.5M, claiming to have 73 employees working at a private investigation and security service. However, reports indicated there were few employees working for the business.
Since the first arrests made in early May to the most recent charges by the DOJ in June, similar fraudulent behavior has allegedly been used to obtain PPP funding: applying for multiple loans to SBA-approved lenders, inflating the number of employees working at the business, and even fabricating the company altogether.
The deadline for applying for PPP loans has been extended. A word to those that would apply for PPP loans – fraud does not pay! Make sure that your application is accurate and complete.
Lariss Maldonado and Allison Kruse, a summer associate in Stinson’s Minneapolis office, are responsible for the contents of this article.
Contact Pete Schwingler for more information.