Nine charged in $24 million COVID-relief fraud scheme
Northern District of Ohio entities received $875,000 in fraudulent PPP loans
The owner of a Florida talent management company, two Northeast Ohio men, and six others have been charged via criminal complaint in federal court for their alleged participation in a scheme to file fraudulent loan applications seeking more than $24 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. Five of these complaints were unsealed today.
U.S. Attorney Justin Herdman for the Northern District of Ohio, Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, Special Agent in Charge (SAC) Eric B. Smith of the FBI’s Cleveland Field Office, SAC Bryant Jackson of the IRS Criminal Investigation Division’s (IRS-CI) Cincinnati Field Office, and Inspector General Hannibal “Mike” Ware of the SBA Office of Inspector General (OIG) made the announcement.
Six defendants were charged in this scheme in federal criminal complaints filed in the Northern District of Ohio in July:
- Phillip J. Augustin, 51, of Coral Springs, Florida, was charged on July 28, 2020 with wire fraud, bank fraud, conspiracy to commit wire fraud and bank fraud, and obstruction of justice.
- Wyleia Nashon Williams, 44, of Ft. Lauderdale, Florida, was charged on July 28, 2020 with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud.
- James R. Stote, 54, of Hollywood, Florida, and Ross Charno, 46, of Ft. Lauderdale, Florida, were charged on June 24, 2020 with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud.
- Deon D. Levy, 50, of Bedford, Ohio, and Abdul-Azeem Levy, 22, of Cleveland, Ohio, were charged on June 8, 2020 with wire fraud and conspiracy to commit wire fraud.
Three more defendants were recently charged with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud by federal criminal complaints filed in the Southern District of Florida on August 3, 2020. Those defendants are Damion O. McKenzie, 38, of Miami Gardens, Florida; Andre M. Clark, 46, of Miramar, Florida; and Keyaira Bostic, 31, of Pembroke Pines, Florida.
“As many of our family, friends and neighbors suffered adverse economic consequences from our nation’s response to a global pandemic, these defendants were allegedly looking for ways to profit off of our collective troubles and fears,” said U.S. Attorney Justin Herdman, “The Justice Department will continue to work long hours with our federal, state, and local partners to find and prosecute those who may have defrauded the public of funds meant to help the American economy recover from this once-in-a-century catastrophe.”
“The defendants are alleged to have coordinated a scheme to fraudulently obtain millions of dollars in PPP loans and to receive kickbacks for filing fraudulent loan applications for others,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “The Department and our law enforcement partners are aggressively pursuing individuals who scheme to steal PPP funds intended for legitimate small businesses suffering the economic hardships of the COVID-19 pandemic.”
“While the entire world was focused on dealing with a pandemic, it is alleged that these individuals were selfishly focused on exploiting programs designed to help people survive financially during the shutdown,” said FBI SAC Eric B. Smith. “Rest assured, as our country continues to move forward, law enforcement will identify those that have financially benefited from providing fictitious information to COVID-19 assistance programs. Law enforcement will ensure these ill-gotten gains are returned so that honest, hardworking employers and employees can continue to receive the assistance they need.”
“Criminals seize on every opportunity to exploit bad situations, and this pandemic is no exception,” said Bryant Jackson, SAC, IRS-CI, Cincinnati Field Office. “The Paycheck Protection Program under the CARES Act was designed to help Americans struggling with financial hardship and IRS Criminal Investigation along with our federal law enforcement partners will be aggressive in investigating anyone who allegedly defrauds this critical program.”
The complaints unsealed today allege that the defendants conspired to obtain millions of dollars in fraudulent PPP loans. Early on in the scheme, Augustin is alleged to have obtained a fraudulent PPP loan for his company, Clear Vision Music Group LLC, using falsified documents. After submitting that application, Augustin recruited Williams to assist in a scheme with other co-conspirators to submit numerous fraudulent PPP loan applications for confederate loan applicants, in order to receive kickbacks for obtaining said loans.
Following the success of Clear Vision’s PPP application, Augustin and Williams immediately began working to obtain additional and larger PPP loans for Augustin’s associates, generally for several hundred thousand dollars for each loan and up to as much as approximately $1.24 million, according to the complaint. The applications submitted for these loans relied on fake payroll numbers, falsified IRS forms, phony bank statements, and counterfeit checks. According to the complaint, Williams allegedly facilitated the loan applications, while Augustin continued to recruit more applicants and pressured them to send their kickbacks once funds were received.
Augustin is alleged to have recruited numerous confederate PPP loan applicants using his network of business contacts from his work as a manager for professional athletes. Augustin monitored the progress of applications and of the kickback wires he was expecting. McKenzie, Clark, and Bostic are alleged to have sought PPP loans for their own companies and to have recruited other confederate PPP loan applicants in exchange for a share of the loan proceeds.
The complaint alleges that the scheme involved the preparation of at least 90 fraudulent loan applications, most of which were submitted. The defendants are alleged to have conspired to obtain PPP loans collectively worth more than $24 million dollars. Many of those applications were approved and funded by financial institutions, paying out at least $17.4 million.
The scheme allegedly included at least two loans to entities in northeast Ohio worth approximately $875,000.
According to the complaint, investigators identified more than $2.3 million in kickback wire transfers from entities that obtained sizable PPP loans or their owners. Augustin received more than $900,000 in kickback wires in a six-week period.
The CARES Act is a federal law enacted on March 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 relief provided 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 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. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses a certain amount of the PPP loan proceeds on payroll expenses.
A federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The Northern District of Ohio cases are being prosecuted by Assistant U.S. Attorney Elliot Morrison and Trial Attorney Philip Trout of the Criminal Division’s Fraud Section.
These cases were investigated by the FBI’s Cleveland Field Office, IRS-CI Cincinnati Field Office, FBI Miami Field Office, IRS-CI Miami Field Office, the SBA-OIG, and the Federal Deposit Insurance Corporation Office of Inspector General. The U.S. Attorney’s Office for the Northern District would like to acknowledge and thank the U.S. Attorney’s Office for the Southern District of Florida for assistance with this matter.
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.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.