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Northeast Texas Man Guilty Of $5 Million COVID-Relief Fraud

 

Individual Copied List of Names of the Internet and Claimed Them as Employees

A Maud, Texas, man has pleaded guilty to COVID-relief fraud in the Eastern District of Texas, announced U.S. Attorney Brit Featherston today. 

Samuel Yates, 32, pleaded guilty to two counts of wire fraud today before U.S. Magistrate Judge Caroline Craven. Yates admitted to seeking millions of dollars in forgivable loans guaranteed by the Small Business Administration (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, on Apr. 14, 2020, Yates submitted two fraudulent applications to two different lenders, fraudulently seeking more than $5 million in forgivable loans guaranteed by the SBA under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In the application submitted to the first lender, Yates 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 people and obtain a loan of over $500,000. With each application, Yates submitted a list of purported employees that he got from a publicly available random name generator on the internet. He also submitted forged tax documents with each application. 

“These Government loans, funded by taxpayers, were designed to aid businesses in weathering the pandemic-related economic storm,” said U.S. Attorney Brit Featherston. “Yates chose to fraudulently take advantage of the goodwill of the American people by attempting to steal CARES Act funding. Those who seek to misappropriate these vital funds should carefully tread as they will be identified, investigated, and prosecuted, period.” 

The CARES Act is a federal law enacted on Mar. 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of the relief supplied by the CARES Act 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 addition, 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. Companies must use PPP loan proceeds on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the government to forgive the interest and principal if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the forgiven amount for payroll. 

A federal grand jury returned an indictment charging Yates with federal violations on Jan. 14, 2021. He faces up to 20 years in federal prison. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the court will determine the sentencing based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be after completing a presentence investigation by the U.S. Probation Office. 

The Treasury Inspector General for Tax Administration’s Cybercrime Investigations Division, SBA Office of Inspector General’s (OIG) Central Region, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Dallas investigated the case. 

Trial Attorney Louis Manzo and Brandon Burkart 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. 

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.