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Liberty County Man and Woman Behind My Buddy Loans Sentenced for Fraud Related to COVID Relief

TEXARKANA, Texas– A Cleveland, Texas man and woman have been sentenced to federal prison for wire fraud violations in the Eastern District of Texas, announced U.S. Attorney Brit Featherston today.

Clifton Pape, 47, and Sally Jung, 59, each pleaded guilty on May 6, 2022 to wire fraud violations and were sentenced to federal prison today by U.S. District Judge Robert W. Schroeder III.  Pape was sentenced to 121 months in federal prison and Jung received a sentence of 66 months in federal prison.  They were also ordered to forfeit $680,710.31 and pay more than $3.7 million in monetary penalties.

According to court documents, Pape and Jung operated a sophisticated telemarketing scheme under the name My Buddy Loans from a house in Cleveland, Texas. In exchange for a fee, My Buddy Loans took personal identifying information from victims and promised to file an application for an agricultural grant, which they said was available to those who owned as little as one acre of land. Instead, Pape and Jung actually filed fraudulent EIDL applications with the SBA that contained the victims’ personal identification information. Based on these fraudulent applications, the SBA issued more than $1.56 million in EIDL Advances to people who were not eligible. Pape and Jung also submitted applications for an additional $1.44 million in EIDL Advances that were not funded because–among other reasons–the congressionally appropriated funds for the EILD Advance program were exhausted.

Pape and Jung used Square’s credit and debit card processing service to charge third parties the fee. Pape and Jung completed at least 700 successful charges, obtaining at least $700,000 in fees. Pape and Jung then transferred the proceeds of the fraud scheme into a bank account they controlled.  On one occasion, Pape used the fraud proceeds to pay a traffic ticket.  On another occasion, Pape and Jung used more than $3600 from the fraud scheme to pay for a stay at La Cantera Resort in San Antonio.  A picture from that stay shows Pape and Jung celebrating over sparkling wine and other beverages.

“This investigation closed down one of the largest COVID fraud schemes in the country in terms of the number of fraudulent EIDL applications,” said U.S. Attorney Brit Featherston. “Well intended and needed economic assistance (taxpayer dollars) was brazenly stolen from legitimate deserving applicants. We are asking those with information about the My Buddy Loan fraud scheme, including those who believe they may be victims, to call the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or file a complaint using the NCDF Web Complaint Form at”

“The Small Business Administration’s Economic Injury Disaster Loan program (EIDL) was designed to help businesses adversely affected by the pandemic,” said Resident Special Agent in Charge William Mack of the U.S. Secret Service Tyler Resident Office.  “Clifton Pape and Sally Jung, however, viewed the government’s direct response to the unprecedented size and scope of pandemic relief fraud as an opportunity to illicitly line their own pockets.  As this sentencing illustrates, the Secret Service, along with its law enforcement partners, is committed to holding these criminals accountable for their fraudulent activities.”

“Conspiring to defraud SBA’s programs is a flagrant attempt to rob the nation’s small businesses of vital funds that are used to assist in building the economy,” said SBA OIG’s Central Region Special Agent in Charge Sharon Johnson. “OIG is focused on rooting out bad actors in these vital SBA programs.  I want to thank the Department of Justice and our law enforcement partners for their dedication to justice.”

The CARES Act is a federal law enacted in March 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 or EIDL advances and low-interest loans to small businesses to meet financial obligations and operating expenses that could have been met had the disaster not occurred. Under the EIDL program applicants were eligible for a forgivable advance of up to $10,000 if the applicant had ten or more employees.

This case was investigated by the U.S. Secret Service and the Small Business Administration-Office of Inspector General and prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.

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Davilyn Walston

Public Affairs Officer/Law Enforcement Coordinator

U.S. Attorney’s Office

Eastern District of Texas

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