2 men charged with fraud over PPP loan applications | #employeefraud | #recruitment | #corporatesecurity | #businesssecurity | #

Dive Brief:

  • Two New England businessmen were charged Tuesday with conspiracy to commit bank fraud and conspiracy to make false statements to the Small Business Administration (SBA) after they sought more than $543,000 in Paycheck Protection Program (PPP) loans, the Justice Department (DOJ) said.
  • David Staveley, 52, of Andover, Massachusetts, claimed he had dozens of employees at three restaurants. Although Staveley owned two of the restaurants for which he sought relief, neither was “open for business prior to the start of the COVID-19 pandemic, at the time the loan applications were submitted, or at any time thereafter,” the DOJ said. Furthermore, Staveley did not own or have any role in the third restaurant, the agency said.
  • David Butziger, 51, of Warwick, Rhode Island, told an undercover FBI agent posing as a bank compliance officer that he had seven employees, including himself, on the payroll at Dock Wireless. However, the Rhode Island State Department of Revenue had no record of employee wages having been paid in 2020 by Butziger or Dock Wireless, the DOJ said.

Dive Insight:

Staveley and Butziger are the first applicants charged in a widespread DOJ effort to root out bad actors from a program meant to deliver $670 billion in relief to small businesses.

“Whenever there’s a trillion dollars out on the street that quickly, the fraudsters are going to come out of the woodwork,” Assistant Attorney General Brian Benczkowski told Bloomberg, adding prosecutors have contacted 15 to 20 of the largest loan processors and seen evidence of applicants overstating their payroll costs or employee count or misrepresenting the nature of their business.

Benczkowski told The Wall Street Journal the DOJ “has a lot of leads and there are multiple ongoing investigations of individuals and small businesses.”

Butziger and Staveley, who also goes by the name Kurt Sanborn, never received the money they sought, the Justice Department said.

Federal investigators launched their probe against them about three weeks ago after local police received a tip that Staveley was posing as his brother in real estate transactions. A search of his emails revealed a plot with Butziger to file the falsified applications, Bloomberg reported.

In the case, Staveley is also charged with aggravated identity theft. Butziger is also charged with bank fraud.

“It’s unconscionable anyone would steal funds from a program intended to help hard-working Americans continue to be paid so they can feed their families and pay some of their bills,” said Aaron Weisman, U.S. attorney for Rhode Island. “Attorney General [William] Barr has directed all U.S. attorneys to prioritize the investigation and prosecution of crimes related to coronavirus and COVID-19, and we are doing just that.”

Court records show that Staveley’s Massachusetts restaurant, On The Trax, was closed by March 10 after the town of Berlin revoked its liquor license because Staveley allegedly misrepresented “that his brother owned the restaurant,” the Justice Department said.

Under the name Kurt Sanborn, Staveley was sentenced in 2015 to 27 months in federal prison for fraud related to mortgages on properties in New Hampshire, according to CNBC.

The Trump administration extended to May 14 the date by which companies can return PPP loans without paying a penalty.

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