Two Men Charged for Leading Multi-Million Dollar Scam on COVID-Relief Funds
United States Attorney Ariana Fajardo Orshan of the Southern District of Florida, along with interim Assistant Attorney General Brian C. Rabbitt of the Department of Justice – Criminal Division, announced the charges made against a Florida recording artist and a Pennsylvania towing company owner for allegedly getting involved, and leading an elaborate fraudulent scheme that was designed to swindle the United States government’s Paycheck Protection Program (PPP) out of around $24 million in bank loans.
Defendants and Charges
Tonye C. Johnson, 28, of Flourtown, Pennsylvania and Diamond Blue Smith, 36, of Miramar Florida have been charged with bank fraud, wire fraud, and conspiracy to commit bank fraud and wire fraud, following the filing of federal criminal complaints against the defendants.
Details of the Criminal Complaint
On the one hand, defendant Smith is a recording artist who is also the owner of the company Throwbackjersey.com LLC, and Blue Star Records LLC. On the other hand, defendant Johnson is the owner-operator of Synergy Towing & Transport LLC. The criminal complaints filed against the defendants allege that the two have collaborated and conspired with other individuals to swindle the government and obtain millions of dollars in PPP loans, aiming to take advantage of the current economic crisis and defraud the government’s Paycheck Protection Program, depriving numerous small businesses and American citizens of the financial assistance that is direly needed by the nation in this pandemic.
The lawsuits allege that defendant Smith has submitted two successive applications, in total, to different lenders that have been approved by the United States Small Business Administration. The applications that were submitted the defendant had demonstrated how he filed fraudulent documents under several claimed businesses that he owned or controlled, seeking approximately over $1.1 million of proceeds from the Paycheck Protection Program of the government. In his first application, defendant Smith filed for his company Throwbackjersey.com LLC, seeking $426,717 in forgivable bank loans. Following the completion of this application, defendant Smith then obtained his second PPP loan for his other company, Blue Star Records LLC, seeking $708,065, which in total made $1,134,782 received PPP funds. Additionally, all the Paycheck Protection Program applications that the defendant has registered were shown to have contained false information, glaring omissions, and misleading statements regarding the companies’ respective business operations. Further investigations revealed that defendant Smith made luxury purchases using the illegally acquired PPP funds, including purchasing a Ferrari for $96,000. The criminal complaint made against the defendant also alleges that defendant Smith also withdrew $271,805 out of the loan proceeds.
Facing similar charges, defendant Johnson was also served a criminal complaint alleging that he illegally obtained PPP bank loans amounting to $389,627 for his company, Synergy Towing & Transport LLC. It was reported that the defendant submitted altered documents particularly, forged federal tax filings and falsified bank statements of the reported companies. Moreover, the complaint alleges that defendant Johnson agreed to pay co-conspirators a portion of the secured loan proceeds for their assistance and cooperation.
Apart from being accused of conspiring with each other, the criminal complaints filed against the two defendants also made accusations implying that defendants Smith and Johnson conspired with numerous other individuals who made an elaborate scheme that was designed to acquire millions of dollars in forgivable loans through the Paycheck Protection Program of the government. It was found that earlier in their schemes, defendants Smith and Johnson co-conspired with Phillip J. Augustin to obtain extra PPP loans by employing their elaborate, fraudulent scheme. Through Augustin, the defendants attempted to acquire PPP loans under his talent management company using forged and fake documents. This collaboration and partnership led to the creation of more and more fraudulent applications to illegally acquire funds in forgivable bank loans, wherein both defendants Smith and Johnson received partial payments from co-conspirators for their assistance in the preparation of falsified documents to be submitted as an application for PPP loans.
Conspiracy Scheme to Obtain Fraudulent PPP Loans
Over $24 million was reported to have been put together by defendants Smith and Johnson, along with Augustin, through submission of numerous PPP loan applications. The criminal complaints noted that the defendants had been involved in the preparation and submission of at least 90 fraudulent PPP applications, wherein a significant part of the loan applications submitted were approved and funded by financial institutions under the government’s Paycheck Protection Program. It is said that, in total, at least $17.4 million was received by the defendants through their elaborate, fraudulent scheme.
Besides Augustin, defendants Smith and Johnson also got involved with ten other defendants, whose cases have also recently been unsealed. The list of the 11 alleged co-conspirators of defendants Smith and Johnson are as follows:
Six individuals who have been found to be in conspiracy with defendants Johnson and Smith, have been served with federal criminal complaints in Northern District of Ohio, including Phillip J. Augustin, 51 of Coral Springs, Florida, who happened to be one of the head conspirators of the scheme. Augustin has been charged with bank fraud, wire fraud, conspiracy to commit bank fraud and wire fraud, and obstruction in a federal criminal complaint filed on July 28, 2020. Along with him were Ross Charno, 46, of Ft. Lauderdale, Florida; James R. Stote, 54, of Hollywood, Florida; and Wyleia Nashon Williams, 44, of Ft. Lauderdale, Florida who all have received the same charges of bank fraud, wire fraud, and conspiracy to commit wire fraud and bank fraud in a federal criminal complaint after getting involved in the conspiracy scheme that was made to obtain millions of dollars in forgivable loans through the Paycheck Protection Program of the government. The criminal complaints against Charno and Stote were filed on June 24, 2020, whereas, the criminal complaint against Williams was filed on July 28, 2020. Two of the six individuals charged in Northern District of Ohio is Abdul-Azeem Levy, 22, of Cleveland, Ohio, and Deon D. Levy, 50, of Bedford, Ohio, who faces similar charges of wire fraud and conspiracy to commit wire fraud for also engaging in the plot to defraud the American citizens out of millions of PPP loans. The federal criminal complaints about the two were filed on June 8, 2020.
There were five individuals involved with defendants Johnson and Smith who have been charged in the Southern District of Florida, including Joshua J. Bellamy, 31, of St. Petersburg, Florida, who is a National Football League player. Bellamy, along with Keyaira Bostic, 31, of Pembroke Pines, Florida; Andre M. Clark, 46, of Miramar, Florida; Damion O. Mckenzie, 38, of Miami Gardens, Florida; and Tiara Walker, 37, of Miami Gardens, Florida, have all been charged with bank fraud, wire fraud, and conspiracy to commit wire fraud and bank fraud. The federal criminal complaints against Bostic, Clark, and McKenzie were filed on August 3, 2020, whereas, the criminal complaints against Walker and Bellamy were filed on September 3, 2020, and September 9, 2020, respectively.
These 11 individuals are allegedly guilty for having submitted fraudulent applications for their own companies, and also for having recruited and referred other individuals to the head conspirators of the scheme, which allowed them to receive kickbacks for each referral made, once the loan has been approved and funded for. Ultimately, 90 fraudulent applications were reported to have been submitted through this network, in line with their scheme to swindle over $24 million in PPP loans.
Paycheck Protection Program
The Paycheck Protection Program has been assembled to help and sustain American citizens, particularly small business, through the economic crisis that the COVID-19 pandemic has brought upon the whole nation. With this government funding program, individuals are allowed to acquire forgivable PPP loans through the submission of a signed application for qualifying business. The application forms submitted to the Paycheck Protection Program shall be signed and represented by authorized personnel of the declared businesses. The United States Small Business Administration has put together the Paycheck Protection Program to support small businesses as a part of the $2.2 trillion funded Coronavirus Aid, Relief, and Economic Security (CARES) Act, which is a federal law that was enacted in March of 2020, made specifically to ensure that assistance and sustenance are provided to small businesses, in order to sustain the nation through the major economic crisis in this current pandemic.
Over $649 billion is currently available to small businesses, wherein an initial $349 billion was set to fund the Paycheck Protection Program, in accordance with the CARES Act, and the additional $300 billion was authorized by the Congress later on, in April of 2020. The $649 billion in forgivable loans is available to qualified small businesses to aid them in job retention, and other specific expenses. United States government’s Paycheck Protection Program states that the proceeds from the PPP funds shall only be used in certain permissible expenses such as interests on mortgages, payroll costs, rent, and utilities. Furthermore, it specifies that the interests and principal taken from the Paycheck Protection Program loan shall be entirely forgiven when the small business establishes that the business is able to utilize 60% of the loan proceeds on payroll expenses and spend the loan on the aforementioned permissible expenses within a designated period of time. Apart from the chance of obtaining forgivable loans, qualifying small businesses are also allowed to acquire forgivable PPP loans with a maturity of two years and having an interest rate of only one percent.
In order to acquire Paycheck Protection Program loans, applications containing approved certifications, specific legal documents such as average monthly payroll expenses and declaration of a number of employees, and a signed acknowledgement of the Paycheck Protection Program rules are required. The United States Small Business Administration (SBA) authorizes participating lenders to provide bank loans using its own monies, as it is guaranteed full by the SBA. Participating lenders are responsible for reviewing the applications of small businesses and also in charge of approving these applications.
Investigation and Prosecution
The successful investigation of the cases was led by the Federal Bureau of Investigations Cleveland and Miami Offices, by the Internal Revenue Service – Criminal Investigation Cincinnati and Miami Field Offices, and by the United States Small Business Administration Office of Inspector General. The prosecution of the case is being managed by the Department of Justice – Criminal Division Fraud Section Trial Attorney Philip Trout, and by Assistant United States Attorneys Aimee Jimenez and David Snider for the Southern District of Florida. The case investigations were made in collaboration with Federal Bureau of Investigation’s Philadelphia Field Office, the Federal Deposit Insurance Corporation Office of Inspector General, the Internal Revenue Service – Criminal Investigations Atlanta and Philadelphia Field Offices, and the United States Attorney’s Office for the Northern District of Ohio.
Arrest and Court Appearances
Defendant Diamond Blue Smith was arrested and appeared in court on October 5, 2020, before the United States Magistrate Judge Regina D. Cannon of the Northern District of Georgina. Defendant Tonye C. Johnson was arrested on October 1, 2020, and has appeared in court on October 2, 2020, before the United States Magistrate Judge Henry S. Perkin of the Eastern District of Pennsylvania.
The cases were announced with the presence of United States Attorney Ariana Fajardo Orshan of the Southern District of Florida and interim Assistant Attorney General Brian C. Rabbitt of the Department of Justice – Criminal Division, along with Acting Special Agent in Charge Tyler R. Hatcher of the Internal Revenue Service – Criminal Investigation Miami Field Office, Special Agent in Charge George L. Piro of the Federal Bureau of Investigation Miami Field Office, and Special Agent in Charge Kevin A. Kupperbusch of the United States Small Business Administration Office of Inspector General – Investigations Division, Eastern Regional Office.
The public is reminded that the provided criminal documents contain allegations that are not evidence of guilt, and that the defendant shall be presumed innocent and is entitled to a fair trial at which the state has the burden of proving the defendant guilty before the Court in accordance with the applicable law.
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Contact Details for Additional Information
Additional information on possible attempts of defrauding the Paycheck Protection Program, the Coronavirus Aid Relief and Economic Security (CARES) Act, and other COVID-19 related schemes shall be reported to the National Center for Disaster Fraud of the Department of Justice by contacting them through their Hotline at (866)-720-5721.
