Millions in fraudulent, SBA-approved COVID relief loans paid for luxuries courtesy of taxpayer

Fraudsters spent pandemic stimulus funds on cryptocurrency, home improvements and a Camaro. 

Updated: March 10, 2022 - 1:54pm

The Golden Horseshoe is a weekly designation from Just The News intended to highlight egregious examples of wasteful taxpayer spending by the government. The award is named for the horseshoe-shaped toilet seats for military airplanes that cost the Pentagon a whopping $640 each back in the 1980s. 

This week's Golden Horseshoe is awarded once again to the Small Business Administration for millions in COVID-19 relief loans issued to fraudsters who used the proceeds to pay for luxury items,  cryptocurrency and home improvements, according to the Department of Justice.

The DOJ recently announced several new indictments, along with sentencing of individuals who obtained fraudulent loans through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). The SBA had oversight over both the PPP and EIDL loan programs.

One case involved twin brothers, Jerry and Jaleel Phillips, 24, of Maryland, who are facing federal charges for $1 million in fraudulent PPP and EIDL loans, according to the DOJ.

IP addresses linked to the Phillips twins were used to submit fraudulent loan applications and unemployment claims, according to the DOJ. The brothers allegedly created fictitious aliases and fake corporate entities to apply for the loans and benefits. 

The Phillips used the funds to pay for a Camaro, furniture, and home improvement items. They also allegedly purchased cryptocurrency and created multiple accounts on digital currency exchange platforms.

If convicted, they face a maximum sentence of 20 years in prison.

Another case involved three men who were sentenced in mid-February for fraudulently obtaining $2.7 million in PPP and EIDL loans.

Joseph Marsell Carttlidge, 30, of North Carolina was sentenced to 72 months in prison; David Christopher Redfern, 32, of North Carolina was sentenced to 60 months; and Eric Alexander McMiller, 30, of Illinois was sentenced to 66 months. 

The three men joined a scheme with a coconspirator to apply for fraudulent PPP and EIDL loans and submitted false tax and bank records to support their fake loan applications, the DOJ reported.

The men used the loans they received to buy luxury items. 

An Oregon man was also sentenced just last week to 61 months in federal prison and three years of supervised release for stealing COVID-19 funds.

David Unitan, aka Daniel Cohen, 47, applied for PPP and EIDL loans using someone else's Social Security number. SBA records showed six EIDL applications had been submitted, and two were funded for $295K. 

IRS Criminal Investigation opened the investigation into the PPP and EIDL loans obtained under suspicious circumstances by someone claiming to be Cohen and later confirmed to be Unitan.

Cases of COVID relief fraud involving unemployment insurance also continue to be reported.

A Tampa woman was indicted last week on aggravated identity theft, access device fraud, and possession of 15 Social Security numbers of others. 

Rolanda Wingfield, 39, allegedly used two Social Security numbers to file for UI benefits and planned to use the others in her possession to file in various other states. 

In Fresno, Calif. the first of seven defendants pleaded guilty for his role in a $25 million prison-based unemployment insurance fraud scheme.

Daryol Richmond, 31, a Kern Valley State Prison inmate, pleaded guilty in late February to conspiracy and aggravated identity theft charges related to the scheme.

Richmond obtained personal identifying information of individuals who were both inmates and non-inmates. He then provided the information to his coconspirators, who filed applications for unemployment insurance with the California Employment Development Department. 

The applications "falsely stated that the inmates, minor children, and others previously worked as clothing merchants, handymen, and other jobs, and recently became unemployed because of the COVID-19 pandemic," according to the DOJ. 

Richmond faces up to 20 years in prison and is scheduled to be sentenced in September. Charges against the other six in the case are pending. 

Rep. Kevin Brady (R-Texas), ranking member of the House Ways and Means Committee, recently said that Democrats and the Biden Administration are attempting to cover up the massive amount of pandemic relief fraud, Just The News reported.

"Right now our Democrat colleagues are continuing to turn a blind eye to what's possibly the greatest theft of American taxpayer dollars in American history," Brady said during a briefing on the estimated $80 billion of pandemic unemployment payment fraud.

"Faced with billions of dollars lost to unchecked unemployment fraud involving organized cybercrime and international crime rings, Democrats have ignored repeated calls for congressional oversight hearings," he added.

SBA Public Affairs Officer Shannon Gilles provided this response to Just the News:

"The Biden-Harris Administration has made it a top priority to address issues of fraud, waste, and abuse inherited from the Trump Administration. Under the leadership of Administrator Guzman, more attention than ever has been placed on ensuring the sound administration of pandemic relief programs.

"The Paycheck Protection Program, as outlined by law under the CARES Act, uses a delegated lending process, where the participating lender submits a lender-approved PPP loan application to the SBA for federal guarantee. PPP uses multiple approaches to help prevent fraudulent and ineligible actors from receiving taxpayer dollars. In addition to automated technology that flags high-risk loans for further analysis, the SBA manually reviews randomly selected loans on an ongoing basis. The sample includes more than 10,000 loans of $2 million or more totaling $33 billion, representing over one third of the total loans over $2 million. SBA's sampling methodology provides greater precision for the overall sample and statistical validity that is compliant with the Office of Management and Budget guidance. When complete, 144,000 loans totaling $50 billion will have been closely reviewed for potential fraudulent activity, PPP loan eligibility, and compliance with forgiveness requirements.  

"Beyond this sampling process, SBA also conducts additional, different forms of manual loan review that together bring the total number of manually reviewed loans to over 200,000 loans so far.  And beyond this framework, we are assessing additional ways to further improve integrity in PPP, including in the forgiveness process. Further, for the PPP, Congress authorized U.S. Treasury and the SBA to deliver the program through lenders delegated to approve the loans without an SBA review. Independent of SBA program rules, lenders also have requirements for identifying and reporting fraud based on their regulatory and internal policies which is another point of review. 

"It has also been our priority to work alongside the Office of the Inspector General to identify and address any and all areas of concern, and any potential fraud we identify through these checks is referred to the Inspector General. So far, the SBA has referred $1.7 billion to our Inspector General for further investigation. In addition, over 5,000 partner lenders also continue to refer potential fraudulent loans to the Inspector General. 

"The SBA will continue to work closely and productively with the Inspector General and others in the oversight community to make improvements to meet our duties of accountability and transparency, and to ensure the utmost program integrity. Anyone with evidence that a PPP borrower has committed fraud is encouraged to report the issue to the SBA Inspector General."


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