Don't Mess With Taxes

Some people. Trying to survive a global pandemic isn't enough for them. They have to go and break the law, too.

I'm not talking about defying a state's closure order or hawking subpar face masks online.

Nope, two New England businessmen this week became the first individuals to be arrested and charged with fraud in connection with the Paycheck Protection Program (PPP). The small business assistance program was created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to help companies struggling due to the effects of the virus.

David A. Staveley of Andover, Massachusetts, and David Butziger of Warwick, Rhode Island, are accused of conspiring to obtain more than half a million in forgivable PPP loans guaranteed by the Small Business Administration (SBA).

As part of the allegedly false applications, federal prosecutors say the duo claimed to have dozens of employees earning wages at four different business entities. In fact, say officials, none of the businesses had any workers.

Working together to get COVID-19 cash: The federal complaint filed Tuesday, May 5, officially charges Staveley, 52, and Butziger, 51, with conspiracy to make false statement to influence the SBA and conspiracy to commit bank fraud. Staveley also is charged with aggravated identity theft and Butziger is charged with bank fraud.

Overall, according to officials, the pair allegedly sought fraudulent coronavirus relief loans totaling $543,881.

"Every dollar stolen from the Paycheck Protection Program comes at the expense of employees and small business owners who are working hard to make it through these difficult times," said Assistant Attorney General Brian A. Benczkowski of the Justice Department's Criminal Division in a statement announcing the charges.

The good news in this case, say federal officials, is that the alleged criminals did not receive the loans they sought.

Finagling fake loans: According to documents unsealed May 5 in U.S. District Court in Providence, Rhode Island, the fraudulent loan requests were to pay employees of businesses that the two men did not operate prior to the start of the COVID-19 pandemic and which had no salaried employees.

One alleged fraud instance was to pay staff at a business the loan applicant didn't own.

Staveley and Butziger allegedly discussed via email the creation of fraudulent loan applications and supporting documentations to seek the special SBA-guaranteed PPP loans.

Fake food businesses: Staveley is accused of seeking more than $438,500 to help pay dozens of employees at three restaurants he owned, two Rhode Island and one in Massachusetts. Investigators say that one of the Rhode Island eateries and the one in the neighboring Bay State were not open before the start of the COVID-19 pandemic, at the time the loan applications were submitted or at any time thereafter.

Moreover, according to the charges, Staveley did not own or have any role in the second Rhode Island restaurant for which he was seeking financial relief.

Nonexistent enterprise: Butziger is accused of filing an application for a $105,381 SBA PPP loan for an entity he claimed to own. Court records show that in loan documents filed with the bank and a telephone call with a Federal Bureau of Investigation undercover agent posing as a bank compliance officer, Butziger claimed his business had seven full-time employees, including himself.

The Rhode Island State Department of Revenue, however, provided information to the IRS that showed the state tax agency had no records of employee wages ever paid in 2020 by Butziger or his company.

"Defrauding a government program designed to provide financial assistance to small business owners during the Coronavirus pandemic is tantamount to taking money directly out of the pockets of those who need it most," said IRS Criminal Investigation Special Agent in Charge Kristina O'Connell.

Federal team effort: The discovery and dismantling of the alleged conspiracy was a multi-agency investigation that included officers from the Justice Department's Rhode Island office, the FBI's Boston field office, the IRS Criminal Investigation unit and the Inspector General offices for the SBA and Federal Deposit Insurance Corporation (FDIC).

The charges mark what could be the first of many similar criminal actions as the COVID-19 relief programs continue.

"Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic. It is unconscionable that anyone would attempt to steal from a program intended to help hard working Americans continue to be paid so they can feed their families and pay some of their bills," said U.S. Attorney Aaron L. Weisman for the District of Rhode Island.

Weisman noted that the U.S. Attorney General has instructed all offices to make investigation into and prosecution of crimes related to coronavirus and COVID-19 a top priority "and we are doing just that."

Joseph R. Bonavolonta, special agent in charge of the FBI's Boston field office echoed that sentiment and intent.

The arrests of Staveley and Butziger "should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud," said Bonavolonta.

Book 'em, Dano: Let's hope so. And let's hope they're successful.

Small business owners already are having a hard enough time trying to keep their companies going and now maneuvering the PPP maze. They definitely don't need to be competing with crooks for the scarce funds.

You also might find these items of interest:

• TIGTA joins chorus warning of COVID-19 payment scams
• IRS criminal investigators tout 2019 successes, look to year 101's tax crime challenges
• IRS criminal investigation unit stops $10 billion in tax fraud in 2018 despite steep drop in staff

Advertisements