Individual Copied List of Names off the Internet and Claimed Them as Employees
TEXARKANA, Texas – A Maud, Texas man has been sentenced for federal violations related to a COVID-relief fraud scheme in the Eastern District of Texas, announced U.S. Attorney Brit Featherston today.
Samuel Morgan Yates, 35, pleaded guilty on May 6, 2022, to wire fraud and was sentenced to 68 months in federal prison today by U.S. District Judge Robert W. Schroeder, III. Yates was also ordered to pay $1,066,432 in monetary penalties for restitution and forfeiture.
According to court documents, Yates made two fraudulent applications to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP). 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 of 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.
“Protecting taxpayer dollars remains one of our highest priorities,” said U.S. Attorney Brit Featherston. “Government programs are designed to assist our citizens in their time of need and are done by following established protocols to ensure the money is properly disbursed and accounted for. Yates chose to steal from those most in need of assistance and is now being punished for his actions. Congratulations to the investigative and prosecution team for this outcome.”
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.
This case was investigated by the SBA Office of Inspector General, and U.S. Postal Inspection Service. Trial Attorney Louis Manzo 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 prosecuted the case.