Seven Charged in Connection with Scheme to Defraud COVID-19 Relief Program of $16 Million
A federal indictment unsealed last month in Houston charges six individuals from Texas and one from Illinois with wire fraud, conspiracy to commit wire fraud and other federal crimes for allegedly participating in a scheme to fraudulently obtain approximately $16 million in forgivable Paycheck Protection Program (PPP) loans intended to help small businesses make it through the coronavirus pandemic. The funds in question were guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and were meant to provide a direct incentive for small businesses to retain their workforce and hire back any employees that were laid off as a result of the ongoing COVID-19 crisis.
The CARES Act and the Paycheck Protection Program
The CARES Act was meant to provide emergency financial assistance to millions of Americans and businesses struggling to survive the devastating economic impact of the ongoing COVID-19 pandemic and the subsequent shutdown measures nationwide. At the center of the CARES Act was the Paycheck Protection Program, which authorized $659 billion in forgivable loans to be distributed to small businesses across the country for job retention and certain other eligible business expenses, including interest on mortgages, rent and utilities. Unfortunately, the rapid rollout of the PPP program and a lack of oversight by the SBA made the loan program extremely susceptible to fraud and the federal government has vowed to aggressively pursue and prosecute those suspected of misusing PPP loan proceeds or fraudulently obtaining PPP funds they were not entitled to receive.
Federal Charges for Wire Fraud, Conspiracy, Money Laundering
In this federal indictment from the U.S. District Court for the Southern District of Texas Houston Division, Amir Aqeel, 52, and Pardeep Basra, 51, both of Houston; Richard Reuth, 57, of Spring, Texas; Rifat Bajwa, 51, of Richmond, Texas; Mauricio Navia, 41, of Katy, Texas; and Mayer Misak, 40, of Cypress, Texas, are charged with wire fraud and conspiracy to commit wire fraud. Aqeel also faces charges for three counts of money laundering. Also named in the federal indictment is Siddiq Azeemuddin, 41, of Naperville, Illinois, who faces charges for wire fraud, conspiracy to commit wire fraud and money laundering.
According to allegations raised in the federal indictment, all seven individuals conspired to submit more than six dozen falsified applications for PPP funds in order to fraudulently obtain COVID-19 loans backed by the SBA. The indictment alleges that the defendants deliberately misrepresented the number of employees and the average payroll costs of the applicant businesses. In support of these fraudulent loan applications, which were allegedly submitted on behalf of companies owned by the defendants and other companies owned by third parties, the defendants allegedly submitted forged bank records and/or federal tax forms. The indictment further alleges that the defendants laundered a portion of the PPP loan proceeds they obtained by writing checks from companies that received PPP funds to phony employees, including several of the defendants and their relatives.
Federal agents executed 45 seizure warrants in connection with the PPP fraud case, seizing, among other items, a Porsche and a Lamborghini that were allegedly purchased using funds illegally obtained through the Paycheck Protection Program. “These defendants allegedly participated in a scheme to capitalize on the pandemic by filing at least 80 fraudulent PPP applications and enriching themselves by $16 million, spending it on luxury items such as a Porsche and Lamborghini automobiles,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division in a press release announcing the charges. “The department and our law enforcement partners will continue to aggressively pursue those who would seek to illegally exploit the ongoing national emergency for their own benefit.”
“Today’s indictment describes significant abuse of public funds meant for struggling American businesses and families,” said Special Agent in Charge Laurie L. Younger of the Federal Deposit Insurance Corporation (FDIC) – Office of Inspector General (OIG) in announcing the fraud charges in this case. “This alleged fraud represents substantial, egregious, and coordinated actions that undermine faith in our financial systems and programs enacted by Congress to help our nation recover from economic damage brought on by COVID-19. We thank our law enforcement partners for their cooperation in this investigation.” The investigation into the fraud allegations is being conducted by the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) division in Houston, in coordination with the Small Business Administration (SBA) – OIG, FDIC – OIG, Federal Housing Finance Agency (FHFA) – OIG, and Treasury Inspector General for Tax Administration (TIGTA).
Justice Department Aggressively Pursuing PPP Fraud Charges
Federal prosecutors have taken swift action to crack down on suspected PPP loan fraud and any abuse of the COVID-19 relief program will be punished harshly. The first federal accusation of loan fraud tied to the Paycheck Protection Program was announced by the Justice Department on May 5. As of October 2020, the Justice Department had criminally charged at least 65 individuals with PPP fraud in connection with $227 million in PPP loans ranging in size from $30,000 to $24 million. Billions of dollars in questionable PPP loans have been flagged as potential fraud and as the government continues to scrutinize recipients of Paycheck Protection Program loans for possible fraudulent activity, another wave of criminal cases is almost guaranteed.
PPP fraud-related charges like wire fraud and bank fraud carry a potential prison sentence of up to 30 years upon conviction. If you think you or your company may be at risk for a PPP fraud investigation, or if you have been charged with wire fraud, conspiracy to commit wire fraud, or another federal crime in connection with the Paycheck Protection Program, you need a reputable PPP fraud attorney on your side representing your defense. Our federal criminal defense attorneys have a great deal of experience defending clients against fraud charges and other criminal charges at the federal level and we can help guide you towards the best possible outcome in your case. Contact our firm today to begin building a compelling defense against PPP loan fraud charges.