Finance
Feds Net Another Guilty Plea Related To Covid-Related Financial Fraud
shot of coronavirus Fraud
gettyIn March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide emergency financial assistance during the pandemic. The CARES Act included funding in the form of loans to eligible businesses—intended to be used to help keep the lights on. Unfortunately, these loans also proved to be magnets for fraud. Since then, officials have been working to identify and prosecute those who took advantage of the program.
Guilty Plea
Last week, Arashio Harris, a Corrections Sergeant with the Miami-Dade Corrections and Rehabilitation Department, pleaded guilty to wire fraud in connection with his fraudulent applications for two Paycheck Protection Program (PPP) loans, two Economic Injury Disaster Loans (EIDL), and an EIDL advance. Harris entered his guilty plea in Miami, Florida, before Chief U.S. District Judge Cecilia M. Altonaga.
EIDL
The EIDL program was created to support small businesses as they recovered from the pandemic.
- EIDL loan funds were intended to be used for working capital and other standard operating expenses. The loans were not forgivable and were required to be repaid.
- EIDL Advance funds were awarded to existing COVID-19 EIDL applicants who meet certain criteria. The advances were like grants, but without the typical U.S. government grant requirements. Most importantly, EIDL Advances did not need to be repaid.
PPP
The PPP was an SBA-backed loan that helped businesses keep employees working during the pandemic.
There were two draws available, depending on timing and the criteria. The loans qualified for full loan forgiveness if, during the covered period following the loan disbursement, the business maintained employee and compensation levels, and the loan proceeds were spent on payroll costs and other eligible expenses. At least 60% of the proceeds must have been spent on payroll costs.
Facts
According to the facts admitted at the change of plea, Harris was the owner and president of two companies, The Good Family Property Solutions Inc. and Flying Lions LLC. On April 3, 2020, working with an associate, Harris submitted a fraudulent application in the name of Good Family, seeking an EIDL and an EIDL advance. Harris falsely claimed that for the 12-months before Jan. 31, 2020, Good Family had gross revenues of approximately $130,000 and nine employees. As a result, Good Family obtained a $9,000 EIDL advance that did not need to be repaid and $14,500 in EIDL loan proceeds.
On June 30, 2020, Harris submitted a fraudulent EIDL application to the SBA for Flying Lions, claiming that Flying Lions had gross revenues of over $480,000 and 10 employees during that same period. As a result, Flying Lions obtained approximately $150,000 in EIDL proceeds.
Harris also admitted that (again, with assistance), he fraudulently obtained two PPP loans in the name of Good Family.
On July 9, 2020, Harris submitted a PPP loan application falsely claiming that Good Family had ten employees and a monthly payroll of approximately $51,710. To support his application, Harris submitted a 2019 Form 1120—corporate return—falsely claiming that Good Family had over $1,050,000 in income and had paid wages and salaries that year of over $768,000, as well as a 2019 Form 944—payroll tax return—showing over $620,500 in wage and salary payments. The application also included false IRS Forms W-2 and payroll records. As a result of this false and fraudulent application, Harris was given a $129,275 PPP loan.
On Feb. 26, 2021, Harris applied for a second-draw PPP loan for Good Family. The second-draw application again relied on false income and payroll numbers. As a result, Good Family was granted a second-draw PPP loan of $129,276.
Sentencing
Harris is scheduled for sentencing on October 27 before Chief U.S. District Judge Altonaga in Miami, Fla. He faces a sentence of up to 20 years in prison.
Focus On Fraud
The FBI’s Miami Area Corruption Task Force, which includes task force officers from the MDC-OIG, working in conjunction with IRS-CI Miami and SBA-OIG Investigations Division’s Eastern Region, investigated the case. It’s part of the COVID-19 Fraud Enforcement Task Force, intended to enhance efforts to combat and prevent pandemic-related fraud.
If you have information about attempted pandemic-related fraud, you can call the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or make a complaint online using the NCDF Web Complaint Form.
Expect to read about more investigations and arrests. According to its website, “The Department of Justice remains vigilant in detecting, investigating, and prosecuting wrongdoing related to the crisis.”