An engineer in Texas today pleaded guilty to filing fraudulent bank loan applications seeking to guarantee more than $ 10 million dollars in forgivable loans by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Acting Assistant Attorney General Nicholas L. McQuaid of the Department of Criminal Justice, Acting U.S. Attorney Nicholas J. Ganjei for the Eastern District of Texas,
Inspector General Laura S. Wertheimer of the Federal Housing Finance Agency (FHFA) – Office of Inspector General (OIG), Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) – OIG, Inspector General Hannibal ” Mike “Ware of the SBA-OIG and Chief Inspector Delany De Leon-Colón of the US Postal Inspection Service (USPIS)’s Criminal Investigations Group made the announcement.
Beaumont’s Shashank Rai, 30, pleaded guilty to one count of making false statements to a bank. He is charged on May 13, 2020 with violations of wire fraud, bank fraud, false statements to a financial institution and false statements to the SBA.
As part of his plea, Rai conceded that he had secured millions of dollars of forfeitable loans from the SBA at two different banks, claiming that he had 250 employees earning wages while in fact no employees worked for his alleged business. Rai has made two fraudulent claims to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP). In the application filed with the first money lender, Rai demanded $ 10 million in OPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly salary of $ 4 million. In the second application, Rai sought approximately $ 3 million in OPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly salary of approximately $ 1.2 million.
According to court documents, the Texas Workforce Commission provided information to investigators that no records of employee wages were paid in 2020 by Rai or its alleged company, Rai Family LLC. In addition, the Texas Comptroller’s Office of Public Accounts reported to investigators that Rai Family LLC did not report any revenue for the fourth quarter of 2019 or the first quarter of 2020.
According to court documents, material obtained from the trash outside Rai’s home included handwritten notes that apparently reflected an investment strategy for the $ 3 million, which is the amount Rai allegedly demanded from the second lender.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide financial relief to the millions of Americans who are suffering the economic consequences of the COVID-19 pandemic. One source of relief under the CARES Act was the approval of up to $ 349 billion in forgivable loans to small businesses to keep jobs and certain other expenses, through the PPP. In April 2020, Congress approved more than $ 300 billion in additional PPP funding, and in December 2020, Congress approved another $ 284 billion in additional 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. OPS loan proceeds must be used by businesses for payment costs, interest on mortgage loans, rent and utilities. The PPP allows the interest and the principal to be forgiven if businesses spend the proceeds on these expenses within a set period of time and use at least a certain percentage of the loan for wage expenses.
This case has been investigated by the FHFA-OIG, FDIC-OIG, SBA-OIG and USPIS. Assistant Chief L. Rush Atkinson and Trial Attorney Lou Manzo of the Crime Division of the Criminal Division and Assistant U.S. Attorneys Frank Coan and Nathaniel Kummerfeld of the Eastern District of Texas are pursuing the case.
The Fraud Division leads the department’s prosecution of fraud schemes exploiting the EMP. In the months since the PPP began, fraud division attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Division also seized more than $ 60 million in cash proceeds from fraudulent funds raised, as well as numerous real estate and luxury items purchased with such proceeds. More information can be found at: https://www.justice.gov/criminal-fraud/ppp-fraud.
Anyone with information about COVID-19 fraud allegations 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.