Three South Florida Residents Who Participated In $24 Million Covid-Relief Fraud Scheme Charged In Federal Court
MIAMI – Federal prosecutors have filed charges in the Southern District of Florida against three local residents 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.
Ariana Fajardo Orshan, U.S. Attorney for the Southern District of Florida, Brian C. Rabbitt, Acting Assistant Attorney General of the Justice Department’s Criminal Division, Michael J. De Palma, Special Agent in Charge, IRS Criminal Investigation (CI), Miami Field Office, George L. Piro, Special Agent in Charge, FBI, Miami Field Office, and Hannibal “Mike” Ware, Inspector General, SBA Office of Inspector General (OIG) made the announcement.
Damion O. McKenzie, 38, of Miami Gardens, Andre M. Clark, 46, of Miramar, and Keyaira Bostic, 31, of Pembroke Pines, were each charged in separate criminal complaints with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud. According to their criminal complaint affidavits, McKenzie, Clark, and Bostic, with the assistance of other co-conspirators, submitted fraudulent PPP loan applications for their respective companies. The fraudulent loan applications were supported by falsified documents, including fake bank statements and payroll tax forms.
After submitting fraudulent loan applications for their own companies, McKenzie, Clark, and Bostic allegedly became recruiters and referred other business owners to their co-conspirators for the purpose of creating and submitting additional fraudulent PPP loan applications. McKenzie, Clark, and Bostic allegedly would receive a kickback for any loan approved and funded for any client they referred to their co-conspirators.
The alleged scheme that McKenzie, Clark, and Bostic participated in with their co-conspirators, which included other recruiters and loan applicants (some of whom face related charges in the Northern District of Ohio), involved the planning or preparation of at least 90 fraudulent PPP loan applications, worth more than $24 million dollars. Many of the loan applications were approved and funded by financial institutions, paying out at least $17.4 million.
“The United States made funds available to small business owners through the Paycheck Protection Program to ensure that our communities’ local businesses and their employees financially survive this pandemic,” said U.S. Attorney Ariana Fajardo Orshan. “Those who defraud the program with no regard for the effect that their actions of greed will have on the small business owners and employees who legitimately need the money will be vigorously prosecuted by my office.”
“The defendants allegedly participated in an extensive nationwide scheme to file at least 90 fraudulent applications for millions of dollars in PPP loans in exchange for illegal kickbacks of portions of the loan proceeds,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “These allegations reflect an organized effort by defendants to defraud the SBA’s PPP program on a large scale by stealing funds intended for legitimate small businesses suffering from economic hardships caused by the COVID-19 pandemic. The department and our law enforcement partners will continue to aggressively pursue those who would seek to illegally exploit the ongoing national emergency for their own benefit.”
“During these difficult times, while hardworking American citizens are facing a pandemic and struggling to take care of their families, crimes like these literally rob the coffers of critically needed relief funds,” said Special Agent in Charge Michael J. De Palma of the IRS Criminal Investigation (CI) Miami Field Office. “We will continue to tirelessly pursue the culprits behind these heinous schemes and bring them to justice. Any fraud of COVID-19 financial relief programs will never be tolerated.”
“The Paycheck Protection Program was designed to help hardworking small business owners who are suffering economically due to the COVID-19 shutdowns,” said George L. Piro, Special Agent in Charge, FBI Miami. “The FBI will not tolerate anyone who fraudulently misuses federal funds designed to assist Florida businesses. In the current climate, we are committed to diligently investigate those who illegally take advantage of these critical funds.”
“The reprehensible alleged actions of the defendants sought personal gain at the expense of taxpayers,” said Inspector General Hannibal “Mike” Ware of the SBA Office of Inspector General (OIG). “OIG will aggressively pursue fraud in the PPP and other SBA programs aimed at assisting the nation’s small businesses during the pandemic. I want to thank the Department of Justice and our law enforcement partners for their pursuit of justice.”
Defendants McKenzie, Clark, and Bostic had their initial appearances yesterday before U.S. Magistrate Judge Patrick M. Hunt, who sits in Ft. Lauderdale. For information on other co-conspirators charged for their involvement in this fraud scheme, click here.
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.
U.S. Attorney Fajardo Orshan commends IRS-CI Miami, FBI Miami, and SBA-OIG for investigating these cases. She also thanks IRS-CI Cleveland and FBI Cleveland for their work and the Federal Deposit Insurance Corporation Office of Inspector General for its assistance. David Turken, Assistant U.S. Attorney for the Southern District of Florida, and Philip Trout, Trial Attorney with the Criminal Division’s Fraud Section, and are prosecuting these South Florida cases.
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.
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.
Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or at http://pacer.flsd.uscourts.gov, under case nos. 20-mj-6316, 20-mj-6317, and 20-mj-6318.