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A Texas engineer pleaded guilty today to filing fraudulent bank loan applications asking for more than $ 10 million in forgivable loans guaranteed by the Small Business Administration (SBA) under the CARES (Coronavirus Aid, Relief) Act. , and Economic Security).
Acting Assistant Attorney General Nicholas L. McQuaid of the Department of Justice Criminal Division, Acting U.S. Attorney Nicholas J. Ganjei for the Eastern District of Texas,
Inspector General Laura S. Wertheimer of the Federal Housing Finance Agency (FHFA) – Office of the Inspector General (OIG), Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) – OIG, Inspector General Hannibal SBA-OIG’s “Mike” Ware and Inspector-in-Charge Delany De Leon-Colón of the US Postal Inspection Service’s (USPIS) Criminal Investigation Unit made the announcement.
Shashank Rai, 30, of Beaumont, pleaded guilty to one count of misrepresenting a bank. He was charged on May 13, 2020 with bank fraud violations, bank fraud, making false statements to a financial institution, and making false statements to the SBA.
As part of his guilty plea, Rai admitted that he was seeking millions of dollars in SBA-guaranteed forgivable loans from two different banks claiming that 250 employees were earning a salary when in fact no employee. worked for his so-called company. Rai made two fraudulent claims to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP). In the application submitted to the first lender, Rai solicited $ 10 million in PPP loans by fraudulently claiming to have 250 employees with an average monthly payroll of $ 4 million. In the second request, Rai solicited about $ 3 million in PPP loans by fraudulently claiming to have 250 employees with an average monthly payroll of around $ 1.2 million.
According to court documents, the Texas Workforce Commission provided investigators with information that no records of employee wages were paid in 2020 by Rai or his alleged company, Rai Family LLC. Additionally, the Texas Comptroller’s Office of Public Accounts reported to investigators that Rai Family LLC did not report any income for the fourth quarter of 2019 or the first quarter of 2020.
According to court documents, materials recovered from the garbage outside Rai’s residence included handwritten notes that appear to reflect an investment strategy for the $ 3 million, which is the amount Rai allegedly requested from the second lender. .
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $ 349 billion in forgivable loans to small businesses for job maintenance and certain other expenses, through the PPP. In April 2020, Congress authorized more than $ 300 billion in additional PPP funding, and in December 2020, Congress authorized an additional $ 284 billion in additional funding.
The PPP allows small businesses and other eligible organizations to receive loans with a two-year term and an interest rate of 1%. Proceeds from PPP loans are to be used by businesses for staff costs, mortgage interest, rent, and utilities. The PPP allows the remission of interest and principal if companies spend the proceeds of these expenses within a specified time frame and use at least a certain percentage of the loan for wage costs.
This case was investigated by the FHFA-OIG, FDIC-OIG, SBA-OIG and USPIS. Deputy Chief L. Rush Atkinson and Trial Lawyer Lou Manzo of the Fraud Section of the Criminal Division and US Deputy Lawyers Frank Coan and Nathaniel Kummerfeld for the Eastern District of Texas are continuing the case.
The Fraud Section leads the department’s prosecution of fraud schemes exploiting the PPP. In the months following the start of the PPP, lawyers in the Fraud Section prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section also seized more than $ 60 million in cash from fraudulently obtained PPP funds, as well as numerous real estate and luxury items purchased with this product. For more information see: https://www.justice.gov/criminal-fraud/ppp-fraud.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or through the NCDF online complaint form at the following address: https: //www.justice. gov / disaster-fraud / ncdf-disaster complaint form.
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