Individual Copied List of Names from the Internet and Claimed Them as Employees
TEXARKANA, Texas: The Eastern District of Texas U.S. Attorney Stephen J. Cox announced that the court charged a 32-year-old Maud, Texas man with allegedly fraudulently filing bank loan applications seeking more than $5 million in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The court charged Samuel Yates with two counts of wire fraud returned by a federal grand jury in Texarkana, Texas, on Jan. 14, 2021. Yates allegedly sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have over 400 employees earning wages when, in fact, no employees worked for his purported business.
According to court documents unsealed today in U.S. District Court in Texarkana, Yates allegedly made two fraudulent applications to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the PPP. In the application submitted to the first lender, Yates allegedly sought $5 million in PPP loan proceeds by fraudulently claiming to have over 400 employees with an average monthly payroll of more than $2 million. In the second application, Yates claimed to employ more than 100 persons and obtain a loan of over $500,000. Yates submitted a list of purported employees that he got from a publicly available random name generator on the internet with each application.
He also submitted forged tax documents with each application.
The CARES Act is a federal law enacted on Mar. 29, 2020, designed to provide emergency financial assistance to the millions of Americans suffering the economic effects caused by the COVID-19 pandemic. One source of the CARES Act’s relief was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. Businesses must use PPP loan proceeds on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the discounted amount for payroll.
A federal criminal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty.
The SBA Office of Inspector General and U.S. Postal Inspection Service investigated. Trial Attorney Louis Manzo of the Criminal Division’s Fraud Section and Criminal Chief Frank Coan, and Assistant U.S. Attorney Jonathan R. Hornok for the Eastern District of Texas are prosecuting the case.