Two Florida men have been jailed for spearheading a nationwide plan to defraud the Paycheck Protection Program (PPP) out of millions of dollars in loans.
Florida men convicted of PPP loan fraud
So far, 25 people have been charged for their part in the scheme, and now the U.S. District Court for the Northern District of Ohio has sentenced the first man — 53-year-old Phillip J. Augustin of Coral Springs — to 78 months in prison. The second man, 56-year-old James Stote of Hollywood, was sentenced to 120 months in prison. Both men had pleaded guilty to conspiracy to commit wire transfer fraud in an attempt to illegally obtain loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Both men will also be released under surveillance for three years, with Stote being ordered to pay more than $10 million in restitution and an additional $1.1 million in forfeiture. Augustin must pay nearly $6 million in restitution and more than $272,000 in forfeiture.
How the PPP Fraud Scheme Happened
Court documents describe how the fraud scheme came about. It started when Augustin and Stote got a fraudulent PPP loan for Augustin’s company, Clear Vision Music Group LLC, using forged documents. After that application was made, they illegally tried to obtain even larger PPP loans for themselves and their employees.
Stote and Augustin then began recruiting other fraudsters to act as PPP loan applicants, helping them prepare and submit the fraudulent loan applications in exchange for a portion of the loan proceeds. The additional fraudsters were identified and approached by Augustin through the network of business contacts he had gained as a manager of professional football players.
The success of the illegal applications depended on fake payroll numbers and forged IRS forms, as well as forged bank statements. It is clear that Stote has made or at least facilitated a minimum of 79 fraudulent loan applications, valued at over $35 million. Augustin was found responsible for at least 34 fraudulent loan applications, valued at more than $15 million.
The task Forced arrest of fraudsters
The CARES Act is designed to help small businesses, but there have been many attempts at fraud since its inception. The Fraud Department of the Department has so far prosecuted more than 150 suspects in more than 95 criminal cases. They also seized more than $75 million in cash proceeds obtained from fraudulent PPP filings. Numerous real estate and luxury items purchased with the illegal proceeds have also been seized.
The number of prosecutions rose after the Attorney General created the Covid-19 Fraud Enforcement Task Force a year ago to “pool the resources of the Justice Department.” The Task Force is working with government agencies to combat and prevent fraud related to aid provided by the SBA for pandemic relief.
If you have any information about an attempted fraud or current allegations of fraud involving PPP funds related to the Covid-19 pandemic, please report it to the Department of Justice. National Center for Disaster Fraud website or call their Disaster Fraud Hotline at (866) 720-5721.
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