When I was a newspaper reporter back in Lubbock, Texas, my beats were police and courts, so I know firsthand that criminals are part of the Hub City's population.
Still, I was disappointed to learn this week that a Lubbock man defrauded COVID pandemic financial programs out nearly $4 million.
But I was pleased to learn that he'll see Lubbock in his rear view mirror as he heads to federal prison for 15 years.
The 58-year-old man pleaded guilty in March to three counts of bank fraud, one count of aggravated identity theft, and one count of engaging in monetary transactions in property derived from unlawful activity. I'm not naming him here, but you can find that information in the U.S. Attorney's Office, Northern District of Texas, announcement of the plea.
The man was sentenced on Aug. 24 to the jail term, which was substantially less than the 102 years in federal prison he could have received on the charges.
U.S. District Judge James Wesley Hendrix, however, did order him to pay $4.15 million in restitution, and to forfeit numerous assets, including multiple luxury cars.
3 PPP applications = millions in fraud: Court documents show that the Texas South Plains man admitted to fraudulently applying for and obtaining 27 Paycheck Protection Program (PPP) loans totaling almost $4 million.
The loan applications were on behalf of three entities: an actual business that provided contract speech and occupational therapy services, an actual nonprofit that organized community fundraisers for individuals with intellectual limitations, and a fictitious entity that never provided goods or services of any kind and had no employees.
A quick PPP refresher. The program was created as part of the March 29, 2020, Coronavirus Aid, Relief, and Economic Security (CARES) Act to deliver emergency federal financial assistance to Americans suffering economic hardship due to the coronavirus pandemic. The PPP provided forgivable loans to small businesses to cover payroll, rent, and other business expenses. It ended in May 2021.
In the business' application, the Lubbock man falsely claimed the company paid 49 employees an average of $441,667 per month and provided a fabricated Internal Revenue Service Form 940 that indicated it paid its employees more than $5.1 million in calendar year 2019. The business qualified for a $1.1 million PPP loan, which it re-drew the following year, for a total of $2.2 million.
In actuality, say prosecutors, the company employed about 10 individuals on an ad hoc basis and paid less than $100,000 in wages in 2019. Nevertheless, based on his application, the
The nonprofit PPP application falsely claimed the organization employed 33 individuals, while it actually employed fewer than five. The fictitious entity application falsely claimed the company employed 24 individuals, who, like the company, did not exist.
Each entity also sought, and received, forgiveness on the principal and interest on each of the small business PPP loans. Yet very little, if any, of the money was used for payroll or business expenses, say federal law enforcement officials.
Money diverted to personal use: Instead, Department of Justice officials said the Texas man and a woman with whom he was personally involved used nearly $3.5 million of the illegally obtained COVID relief funds on home renovations, vacations, clothing, cosmetic surgery, college tuition, cars, wedding expenses, and equipment for an unrelated business venture.
The 50-year-old woman has been charged with concealment of her companion's felonies. Her case is awaiting final adjudication.
Agents from the Federal Bureau of Investigation's Dallas Field Office and IRS Criminal Investigation division spearheaded the case, with assistance from Homeland Security.
Tax Felon Friday: Yes, this is the second straight week that the ol' blog's Tax Felon Friday feature has focused on COVID-related crime.
It looks like we're going to be dealing with not only a new variant (check the CDC link in the bottom right column, and get your vaccine when they're available this fall), but also the tax and financial fallout from the original pandemic.
If you know or suspect COVID-19 fraud, report it by calling the DoJ's National Center for Disaster Fraud (NCDF) Hotline toll-free at (866) 720-5721. Or you can submit a report using the online NCDF Web Complaint Form.
You also can catch up on previous tax crime posts, including those that were published long before I gave them a special designation, in the, what else, tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- $163 billion in unemployment fraud run up during pandemic
- COVID federal fraud sweep recovers $836 million, produces 371 criminal charges
- [Another] Texas man pleads guilty to $24.8 million PPP fraud; IRS touts more success in COVID-19 investigations
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