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Press Release

Port Arthur Businessman Guilty Of Disaster Loan Fraud

For Immediate Release
U.S. Attorney's Office, Eastern District of Texas

Department of Justice
Office of Public Affairs

 BEAUMONT, Texas – The former owner of a Port Arthur, Texas business has pleaded guilty to disaster loan fraud in the Eastern District of Texas, announced U.S. Attorney John M. Bales today. 

Kenneth W. Matthews, 58, of Fort Pierce, Florida pleaded guilty to conspiracy to defraud the Small Business Administration of disaster loan funds on Mar. 12, 2014, before U.S. Magistrate Judge Zachary Hawthorn.

According to information presented in court, from January 2008 to May 2010, Matthews conspired with his general contractor and subcontractor to submit falsely inflated invoices and checks for repair work done after Hurricanes Humberto and Ike in order to obtain low interest disaster repair loans extended by the Small business Administration.  Matthews, the former owner of MegaBowl in Port Arthur, received SBA disaster loan proceeds of $750,000 after Hurricane Humberto and $760,000 after Hurricane Ike.  After receiving the loan disbursements based upon the false invoices, the general contractor and a subcontractor would receive from Matthews a lesser amount than invoiced for the work actually done, or would kickback to Matthews a portion of the loan disbursement paid to them.  The loan funds were disbursed solely for repairs and other expenses associated with the hurricanes and were not allowed for other general business or personal use.  Matthews agreed to pay criminal restitution of $500,000 to the SBA and remains civilly liable for all loan proceeds.

Matthews faces up to 5 years in federal prison.  A sentencing date has not been set.

In September 2005, the U.S. Department of Justice created the Hurricane Katrina Fraud Task Force, designed to deter, investigate and prosecute disaster-related federal crimes such as charity fraud, identity theft, procurement fraud and insurance fraud.  The Hurricane Katrina Fraud Task Force includes members of the FBI, the Federal Trade Commission, the U.S. Postal Inspection Service, and the Executive Office for United States Attorneys, among others.

This case is being investigated by the Small Business Administration-OIG and the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney Robert L. Rawls.
Updated March 12, 2015