5 business owners charged in COVID-19 relief fraud scheme

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Five small-business owners are facing federal charges after prosecutors said they defrauded the Paycheck Protection Program out of a collective $4.1 million in loan funding. - Dreamstime/Dreamstime/TNS

ATLANTA — Five small-business owners are facing federal charges after prosecutors said they defrauded the Paycheck Protection Program out of a collective $4.1 million in loan funding.

Darrell Thomas, 34, Andre Lee Gaines, 66, Khalil Gibran Green, 46, and Bern Benoit, 44, are all facing several charges including conspiracy to commit bank and wire fraud, U.S. Attorney BJay Pak said. The fifth business owner, 52-year-old Carla Jackson, is charged with money laundering, he said.

Investigators said Thomas, Gaines, Green and Benoit submitted loan applications on behalf of five businesses and sought about $800,000 in aid for each company. In the applications, the men said the businesses had been operating on February 15, Pak said. They also claimed each business had at least 60 employees and would use the PPP funds to cover about $320,000 in monthly payroll expenses, according to Pak.

“To support these payroll figures, each business’ loan application was accompanied by an Internal Revenue Service Form 941, which employers use to report payroll taxes, for each quarter of 2019,” Pak said. “With the exception of one company’s reporting for one quarter, the five businesses reported an identical number of employees and an identical amount of payroll expenses for each quarter of 2019.”

Investigators determined none of the businesses had filed a Form 941 for any part of 2019 or for the first quarter of 2020. Four of the companies had submitted applications with fake bank statements that “significantly inflated the funds in the businesses’ bank accounts,” Pak said.

“Indeed, two of the businesses did not open their bank accounts until after the time period reported on the fake bank statements,” he said.

When the loans were deposited into the businesses’ accounts, the men moved more than $2 million to accounts for companies owned by Thomas, who is from Duluth, Georgia.

“These transfers were purportedly for payroll services and rental payments, but none of the four businesses that sent money to Thomas’ companies had any legitimate business transaction with either of those companies,” Pak said.

Gaines, of Dallas, transferred about $335,000 to Jackson’s company, Management Resource Services Inc., Pak said. They claimed the funds would pay for a project Jackson’s company would complete for Gaines, but investigators later discovered the project did not exist.

Federal prosecutors said none of the companies engaged in any business-related transactions. Instead, Thomas used some of the funds transferred to his businesses to buy a Mercedes-Benz S Class and a Range Rover, Pak said.

Jackson, of Tucker, Georgia, used the money transferred to her to pay car loans, and the other business owners used the funds for “various personal expenses and withdrawals,” the U.S. Attorney said.

“During the investigation, federal agents seized nearly $3.1 million dollars in PPP proceeds from ten bank accounts before the defendants could further deplete these funds,” Pak said. They also seized Thomas’ Range Rover.

All five were indicted Tuesday, according to Pak. In addition to bank and wire fraud conspiracy, the men are charged with bank fraud, wire fraud, making false statements to a federally insured financial institution and money laundering.

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©2020 The Atlanta Journal-Constitution (Atlanta, Ga.)