A Washington man pleaded guilty today to fraudulently obtaining a scheme to obtain fraudulent COVID-19 relief guaranteed by the Small Business Administration (SBA) through the Economic Loan (EIDL) and the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security Act (CARES).
Nicholas L. McQuaid, Acting Assistant Attorney General of the Department of Justice’s Crime Division; Brian T. Moran, U.S. Attorney for the Western District of Washington; J. Russell George, Inspector General of the U.S. Treasury Inspector General for Tax Administration (TIGTA); Gail S. Ennis, Inspector General of the Social Security Administration (SSA); Hannibal “Mike” Ware, SBA inspector general, and Cardell Morant, special agent in charge of the U.S. Immigration and Customs Enforcement’s investigation into Homeland Security (HSI), made the announcement.
Austin Hsu, 46, Issaquah, has pleaded guilty to information charged with one count of wire fraud before U.S. Magistrate Michelle L. Peterson in the Western District of Washington. Sentencing was scheduled for April 19, 2021, before U.S. District Court Judge James L. Robart.
As part of its debt acknowledgment, Hsu has admitted to filing nine fraudulent loan applications requiring more than $ 1.1 million. Hsu, which is the owner and CEO of a company called Blackrock Services PS that does business as ‘Back 2 Health Bellevue’ (Back 2 Health), received EIDL and PPP funds for Back 2 Health and then uses the names of Back 2 Health’s current and former employees to apply for additional OPS loans under the names of four other companies it owns and controls. Hsu further acknowledged that, in support of the fraudulent PPP loan applications, Hsu had filed false federal tax filing.
Hsu also conceded that he set up a company called Blueline Capital LLC (Blueline) in June 2020 for the application for an EIDL loan in July 2020, and then incorrectly suggested to the SBA that Blueline had been operating since 2017 and that, as of January 31, 2020, Blueline had nine employees and gross revenues in excess of $ 1.5 million. Hsu acknowledged that Blueline did not in fact have any business or operations.
Six of Hsu’s nine fraudulent loan applications were approved, and he fraudulently received more than $ 700,000 in COVID-19 emergency relief funds.
The CARES Act is a federal law enacted on March 29th. It is designed to provide financial relief to millions of Americans who are suffering the economic consequences of the COVID-19 pandemic. One source of relief under the CARES Act is the authorization of up to $ 349 billion in forgivable loans to small businesses to keep jobs and certain other expenses by the PPP. In April 2020, Congress approved more than $ 300 billion in additional PPP funding, and in December 2020, Congress approved another $ 294 billion in additional PPP funding.
The PPP allows qualifying small businesses and other organizations to receive loans with a term of two years and an interest rate of one percent. Businesses need to use PPP loan proceeds for wage costs, mortgage interest, 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 costs.
The EIDL program is designed to provide economic relief to small businesses that are currently experiencing a temporary loss of revenue. EIDL returns can be used to cover a wide range of working capital and normal operating expenses, such as continuing health benefits, rent, utilities and fixed debt payments. If an applicant also obtains a loan under the PPP, the EIDL funds cannot be used for the same purpose as the PPP funds.
This case has been investigated by the TIGTA, SSA – Office of Inspector General (OIG), SBA – OIG and HSI. Trial lawyer Christopher Fenton of the Fraud Division of the criminal and U.S. Attorney Steven Masada of the Western District of Washington are prosecuting the case.
Anyone with information about allegations of attempted fraud related to 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.