Calaveras County man sentenced for COVID-19 paycheck protection program fraud


Date: May 13, 2024


Sacramento, CA — Tracy Emery Smith of Valley Springs, was sentenced today to 37 months in prison and ordered to pay $901,035 in restitution for COVID-19 Paycheck Protection Program (PPP) loan fraud and money laundering, U.S. Attorney Phillip A. Talbert announced.

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial support to the millions of Americans suffering economic hardship due to the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other business expenses. When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all information provided in their loan applications, including their number of employees and average monthly payroll.

“Smith’s bogus loan applications drained the PPP program of funds intended for actual businesses that were negatively impacted by the pandemic,” said U.S. Attorney Talbert. “The U.S. Attorney’s Office will continue to investigate and prosecute those who obtained PPP funds through fraud.”

“Mr. Smith created ghost employees and falsified loan applications in order to fraudulently obtain PPP loan proceeds earmarked to help struggling businesses during the COVID-19 pandemic. Mr. Smith’s actions not only defrauded the PPP Loan Program, but also disadvantaged business owners who were actually entitled to the benefits,” said Special Agent in Charge Ryan L. Korner from the San Francisco Regional Office of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG). “The FDIC OIG is committed to working alongside our law enforcement partners to protect the Nation’s financial system and hold accountable those individuals, like Mr. Smith, who steal benefits designated to help those in need.”

“The FBI is proud to partner with our fellow agencies. Collaboration ensures a thorough investigation by leveraging the strengths and unique abilities of each agency,” said Special Agent in Charge Siddhartha Patel of the FBI Sacramento Field Office. “This case is an example of how federal agencies work together to protect taxpayer funded programs.”

“Tracy Smith fraudulently falsified Paycheck Protection Program loan applications and obtained funds designated to provide Americans financial relief during the COVID-19 pandemic under the CARES Act,” said IRS Criminal Investigation Acting Special Agent in Charge Michael Mosley of the Oakland Field Office. “Today’s sentencing reinforces that IRS Criminal Investigation special agents and investigative staff are following the money and targeting fraudsters who seek to exploit the government’s relief efforts for their personal gain.”

“Tracy Smith defrauded the federal government of pandemic relief funds for his own personal gain and will now pay the price for his crimes,” said Jon Ellwanger, Special Agent in Charge, Western Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau. “We are proud to have worked with our federal law enforcement partners and the U.S. Attorney’s Office to hold Mr. Smith accountable.”

According to court documents, in 2020, in order to receive PPP loans to which he was not entitled, Smith submitted loan applications for three companies containing false information such as the number of employees, the average monthly payroll for the company, and that he had not been involved in any bankruptcy.

Smith was listed as sole owner of Sharp Holding, and in the PPP loan application for that company, Smith claimed 27 employees with an average monthly payroll of $105,791. He certified that he was not involved in a bankruptcy when, in fact, his bankruptcy was pending at the time of the application. Smith received PPP loan proceeds of $220,600.

According to court documents, Smith submitted similar false loan applications for Real Fund 360 and Sharp Investor, receiving $452,800 and $242,000 respectively. As with Sharp Holdings, neither company had employees or a payroll.

This case was the product of an investigation by the IRS Criminal Investigation (CI), the Federal Bureau of Investigation, the Federal Deposit Insurance Corporation Office of Inspector General, and the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau Office of Inspector General. Assistant U.S. Attorney Roger Yang prosecuted the case.

This effort is part of a California COVID-19 Fraud Enforcement Strike Force operation, one of five interagency COVID-19 fraud strike force teams established by the U.S. Department of Justice. The California Strike Force combines law enforcement and prosecutorial resources in the Eastern and Central Districts of California and focuses on large-scale, multistate pandemic relief fraud perpetrated by criminal organizations and transnational actors. The strike forces use prosecutor-led and data analyst-driven teams to identify and bring to justice those who stole pandemic relief funds.

CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.