The Department of Justice continues to focus on pandemic-related fraud. This week, a federal grand jury in the Western District of Tennessee returned an indictment charging ten individuals for their roles in schemes to defraud the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP).
Grand Juries And Indictments
When it comes to certain kinds of federal charges—like potential felony charges—the prosecutor will present the evidence to an impartial group of citizens called a grand jury. Grand juries are typically made up of 16-23 members.
During the grand jury phase, witnesses may be called to present testimony. The prosecution will also present evidence and an outline of the case. The grand jury then votes on whether they believe enough evidence exists to charge the person with a crime. At least twelve jurors must concur to issue an indictment.
An indictment doesn’t mean that a defendant is guilty, just that a grand jury believes that there’s enough evidence to proceed with a trial.
Charges
According to the Department of Justice, the defendants allegedly obtained funds under the EIDL program and PPP by submitting false and fraudulent loan applications that collectively sought over $950,000. The defendants are alleged to have submitted applications on behalf of businesses and entities they purportedly owned, knowing that the applications contained materially false statements and misrepresentations about, among other things, the employee numbers, gross revenues, average monthly payroll, and company start dates. The defendants then allegedly used the loan funds for purposes not authorized by the PPP or EIDL programs, including personal expenses.
PPP Loans and EIDL
PPP Loans and EIDL programs are federal stimulus programs authorized as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
PPP loans were designed for small businesses to keep their workers on payroll during Covid-19. The no-fee, no-collateral loans could help fund payroll costs, including benefits, mortgage interest, rent, utilities, and worker protection costs. Small businesses who met the criteria were eligible for loan forgiveness.
EIDL and EIDL Advance programs were also intended to help small businesses during Covid-19. EIDL loan funds could be used for working capital and other normal operating expenses. EIDL loans were not forgivable and had to be repaid, but the smaller EIDL Advances did not need to be repaid.
Defendants
There are numerous allegations in this case involving ten defendants from various states. Here’s a look at the defendants and the charges, as detailed from the Department of Justice and in court documents.
Rodrick Flowers, 47, of Memphis, Tennessee, is charged with 12 counts of wire fraud. Flowers owned Ezential Consulting & Management Firm LLC and Rodrick Flowers. He allegedly submitted fraudulent EIDL and PPP applications on behalf of Ezential Consulting & Management Firm LLC, claiming that he had five employees and gross revenues of $84,100. As a result, he obtained approximately $37,000 in EIDL proceeds and $74,450 in PPP loan proceeds. Flowers is also accused of working with his co-defendants to file fraudulent EIDL and PPP applications.
Stephen Brown, 44, of Memphis, is charged with two counts of wire fraud. Brown was the owner and pastor of Light of Glory International Church and Stephen Brown Ministries. He allegedly submitted a fraudulent EIDL application for Light of Glory International Church, representing that it had ten employees and gross revenues of $994,826. He is also accused of submitting a fraudulent PPP application on behalf of Stephen Brown Ministries, for which he obtained approximately $149,900 in EIDL proceeds.
LaTonya Herman, 44, of Memphis, is charged with two counts of wire fraud. Herman was the owner of LaTonya Herman. She allegedly submitted a fraudulent EIDL application and a fraudulent PPP application on behalf of her business, representing that it had gross revenues of $187,641. Herman obtained approximately $93,800 in EIDL proceeds.
Jarvys Jones, 38, of West Memphis, Arkansas, is charged with two counts of wire fraud. Jones was the owner and pastor of The Temple of Refuge, also called Temple of Refuge Inc, and Refuge. He allegedly submitted a fraudulent EIDL application on behalf of Refuge, representing that it was established on October 31, 2014, had five employees, and had gross revenues of $50,00. He is also accused of submitting a fraudulent PPP application for Temple of Refuge Inc.
Brian Mays, 40, of Olive Branch, Mississippi, is charged with one count of wire fraud. Mays was the owner of A-Mays-in-Trucking. He allegedly submitted a fraudulent EIDL application on behalf of his business, claiming that it opened on January 1, 2018, and had gross revenues of $214,841. Mays obtained approximately $107,400 in EIDL proceeds.
Diane Moss, 60, of Blytheville, Arkansas, is charged with two counts of wire fraud. Moss owned The Station, Diane’s Boutique, and Diane Moss. She allegedly submitted a fraudulent EIDL application on behalf of The Station, representing that it opened on January 1, 2015, had six employees, and gross revenues of $210,641. She is also accused of submitting a fraudulent PPP application on behalf of Diane Moss. Moss obtained approximately $99,300 in EIDL proceeds and roughly $28,420 in PPP loan proceeds.
Mary Payne, 61, of Memphis, is charged with two counts of wire fraud. Payne was the owner of Right Now Staffing LLC. She allegedly submitted a fraudulent EIDL application and a fraudulent PPP application on behalf of her business, representing that it had four employees and gross revenues in the amount of $381,000. Payne obtained approximately $4,000 in an EIDL advance.
Krystal Sherrod, 34, of Memphis, is charged with one count of wire fraud. Sherrod was the owner of Krystal Sherrod. She allegedly submitted a fraudulent EIDL application for her business, representing that it had ten employees and gross revenues of $186,740. She obtained approximately $83,300 in EIDL proceeds.
Frederick Smith, 54, of Cordova, Tennessee, is charged with two counts of wire fraud. Smith was the owner and pastor of New Life Holiness Church. He also owned Fred Smith Ministries and Frederick Smith, and was the owner and trustee in bankruptcy for New Life Holiness BK. Smith allegedly submitted a fraudulent EIDL application on behalf of Fred Smith Ministries, claiming that it opened on February 1, 2000, had nine employees, and gross revenues in the amount of $221,051. Smith is also accused of submitting a fraudulent PPP application for New Life Holiness BK, for which he obtained approximately $150,275 in PPP loan proceeds.
Cleveland Wells, 65, of Memphis, is charged with two counts of wire fraud. Wells was the owner and pastor of Glory to God Ministries. He also owned Don’t Worry About it Home Solutions, aka Cleveland Wells Jr. dba Don’t Worry About it Home Solutions. Wells allegedly submitted a fraudulent EIDL application on behalf of Glory to God Ministries, falsely representing the identity of its owner, and that it had five employees and gross revenues in the amount of $304,210. Wells is also accused of submitting a fraudulent PPP application on behalf of Cleveland Wells Jr. dba Don’t Worry About it Home Solutions, for which he obtained approximately $149,900 in EIDL proceeds.
To further some of these schemes, the defendants are alleged to have falsified information, including payroll records. In some instances, defendants submitted false tax documentation and misrepresented ownership of businesses, including failing to disclose prior criminal convictions and shared management with other companies.
Potential Sentences
If convicted, they each face a maximum penalty of 20 years in prison on each wire fraud count. Wire fraud involves wire communication—in this case, the internet—sent across state lines to promote or commit fraud.
Take Aways
It’s worth noting that the dollar amounts in these cases, unlike some of the previous high-profile cases, are relatively small. That may mean that the Department of Justice is sending a warning shot to others who falsely believe that low levels of fraud will keep them under the radar.
Since the introduction of the CARES Act, the Fraud Section has prosecuted over 200 defendants in more than 130 criminal cases and seized over $78 million in cash proceeds derived from fraudulently obtained PPP funds and numerous real estate properties and luxury items purchased with such proceeds. More information can be found at www.justice.gov/criminal-fraud/ppp-fraud.
Report Fraud
The government encourages anyone with information about allegations of attempted Covid-19 fraud to report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or using the NCDF Web Complaint Form.
Read the full article here
