Security & Fraud

Two Men Charged In First US Case Of PPP Stimulus Fraud

Two men were charged in Rhode Island with fraudulently seeking loans through the Paycheck Protection Program (PPP), the U.S. Department of Justice said in a statement on Tuesday (May 5).

David A. Staveley, aka Kurt D. Sanborn, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, were arrested and charged with conspiring to obtain forgivable PPP loans backed by the Small Business Administration (SBA). 

The two reportedly said they had dozens of employees on the payroll at four different establishments. They actually have no employees at all.

Both men were charged with “conspiracy to make false statements to influence the SBA and conspiracy to commit bank fraud.” Staveley was also hit with one charge of aggravated identity theft. Butziger was also charged with bank fraud.

Staveley and Butziger reportedly discussed the fraud scheme over email, detailing the parameters of submitting fraudulent SBA loan applications and supporting documents. The DOJ said that Staveley allegedly “posed as his brother in real estate transactions.”

Staveley reportedly asked for over $438,500 in loans to pay his “dozens of employees” at two restaurants he owned in Warwick, Rhode Island, and another in Berlin, Massachusetts. An investigation revealed that the former Remington House in Rhode Island, and On The Trax in Massachusetts were not open before the pandemic hit or when the loan application was submitted. Further, the two eateries weren’t open “at any time thereafter” and Staveley never owned Top of the Bay, the second Rhode Island restaurant he tried to obtain loan money for. 

Court documents indicate that Staveley’s Massachusetts restaurant was forced to close on March 10 after his liquor license was revoked by Berlin municipal authorities. Investigators said Staveley allegedly used his brother’s identity for the loan as well as in other real estate transactions.

Butziger allegedly submitted a loan application for $105,381 on April 6, representing himself as the owner of Dock Wireless, according to court documents. He allegedly filed fake documentation with the bank and lied over the phone to an undercover FBI agent posing as a bank compliance officer. 

Butziger reportedly told the agent that he had seven full-time workers at Dock Wireless, including himself. He allegedly claimed that his employees went full-time on Jan. 1 but he had to lay them off by the end of March. He further claimed that everyone worked without pay through the end of April 2020, the DOJ said.

Staveley and Butziger are the first people charged in the U.S. with allegedly trying to defraud the program.

In response to the worldwide coronavirus pandemic, the federal government allocated $349 billion in forgivable loans for small businesses struggling to stay afloat amid the crisis. The business funds were part of the $2 trillion stimulus bill called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27. 

“Every dollar stolen from the Paycheck Protection Program comes at the expense of employees and small business owners who are working hard to make it through these difficult times,” said Brian A. Benczkowski, assistant attorney general with the DOJ’s criminal division.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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