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PLANO, Texas – A Murphy, Texas, man, pleaded guilty Wednesday to filing fraudulent loan applications seeking more than $3 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
According to court documents, Fahad Shah, 44, admitted that he sought over $3 million in PPP loans from two different SBA-approved lenders. In the first application submitted to one lender, Shah sought over $1.7 million in PPP loan proceeds by fraudulently claiming that WBF Weddings by Farah Inc. (WBF) employed 126 individuals with an average monthly payroll of over $700,000. In the second application, Shah sought over $1.5 million in PPP loan proceeds by fraudulently claiming that WBF had 126 employees with an average monthly payroll of over $600,000.
According to court documents, WBF had only two employees. In connection with both PPP loan applications, Shah submitted fraudulent Employer’s Quarterly Federal Tax Return (IRS Form 941) documents for 2019.
“PPP loans were intended to help businesses keep themselves and their employees afloat during the COVID-19 pandemic,” said Acting U.S. Attorney Nicholas J. Ganjei. “PPP loans were not, and never were, intended to serve as personal loans for personal use. By applying and qualifying for PPP funds on fraudulent grounds, Fahad Shah took advantage of the COVID-19 economic crisis to enrich himself and his family. By seeking a loan that he should not have received, Shah helped deplete the number of funds available to all potential legitimate borrowers who needed financial support. This plea shows that the Eastern District of Texas is dedicated to pursuing fraudsters and ensuring they do not benefit from their crimes.”
Shah admitted that he obtained over $1.5 million in PPP loan proceeds. Within days of receiving the PPP funds, Shah used over $1 million in fraudulently obtained proceeds to pay off his home mortgage, purchase securities through his investment account, and buy two Teslas, two Freightliner trucks a Mercedes Benz van.
A federal grand jury indicted Shah on June 18, 2020, and he pleaded guilty to wire fraud Wednesday. Under federal statutes, Shah 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 the completion of a presentence investigation by the U.S. Probation Office.
Acting U.S. Attorney Nicholas Ganjei of the U.S. Attorney’s Office for the Eastern District of Texas; Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division; Special Agent in Charge Amaleka McCall-Brathwaite of the U.S. Small Business Administration – Office of Inspector General (SBA-OIG); Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency – Office of Inspector General (FHFA-OIG); Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation – Office of Inspector General (FDIC-OIG); Acting Special Agent in Charge Mark Pearson of the IRS Criminal Investigation (IRS-CI) Dallas Field Office; and Inspector General J. Russell George of the Treasury Inspector General for Tax Administration (TIGTA) made the announcement.
The SBA-OIG, FHFA-OIG, FDIC-OIG, IRS-CI, and TIGTA are investigating the case.
Assistant U.S. Attorneys Frank Coan and Robert Wells of the Eastern District of Texas and Trial Attorneys Della Sentilles and Louis Manzo of the Justice Department’s Fraud Section are prosecuting the case.
The CARES Act is a federal law enacted on March 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 the CARES Act relief provided 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 1%. Companies must use PPP loan proceeds on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal forgiven if businesses spend the proceeds on these expenses within a set period and use at least a certain percentage of the loan towards payroll expenses.
The Fraud Section leads the Department of Justice’s prosecution of fraud schemes that exploit the CARES Act. Since the CARES Act passed, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section has also seized more than $65 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real-estate properties and luxury items purchased with such proceeds. You can find more information at: https://www.justice.gov/criminal-fraud/cares-act-fraud.