Individual Copied List of Names off the Internet and Claimed Them as Employees
TEXARKANA, Texas– A Maud, Texas, man has pleaded guilty to COVID-relief fraud in the Eastern District of Texas, announced U.S. Attorney Brit Featherston today.
Samuel Yates, 32, pleaded guilty to two counts of wire fraud today before U.S. Magistrate Judge Caroline Craven. Yates admitted to seeking millions of dollars in forgivable loans guaranteed by the Small Business Administration (SBA) from two different banks by claiming to have over 400 employees earning wages when, in fact, no employees worked for his purported business.
According to court documents, on April 14, 2020, Yates submitted two fraudulent applications to two different lenders fraudulently seeking more than $5 million in forgivable loans guaranteed by the SBA under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In the application submitted to the first lender, Yates sought $5 million in PPP loan proceeds by fraudulently claiming to have over 400 employees with an average monthly payroll of more than $2 million. In the second application, Yates claimed to employ over 100 individuals and was able to obtain a loan over $500,000. With each application, Yates submitted a list of purported employees that he obtained from a publicly available random name generator on the internet. He also submitted forged tax documents with each application.
“These Government loans, funded by taxpayers, were designed to aid businesses in weathering the pandemic-related economic storm,” said U.S. Attorney Brit Featherston. “Yates chose to fraudulently take advantage of the good-will of the American people by attempting to steal CARES Act funding. Those who seek to misappropriate these vital funds should tread carefully as they will be identified, investigated, and prosecuted . . . 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 1 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 forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the forgiven amount for payroll.
A federal grand jury returned an indictment charging Yates with federal violations on Jan. 14, 2021. He faces up to 20 years in federal prison. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case is being investigated by the Treasury Inspector General for Tax Administration’s Cybercrime Investigations Division; SBA Office of Inspector General’s (OIG) Central Region; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Dallas.
Trial Attorney Louis Manzo and Brandon Burkart of the Criminal Division’s Fraud Section and Criminal Chief Frank Coan and Assistant U.S. Attorney Jonathan R. Hornok for the Eastern District of Texas are prosecuting the case.
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.