Man sentenced for his role in COVID-19 relief fraud scheme

 

Date: July 14, 2021

Contact: newsroom@ci.irs.gov

A Wisconsin man was sentenced today to 36 months in prison for fraudulently seeking over $600,000 in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Stephen Smith of Milwaukee, pleaded guilty on April 12. According to court documents, Smith admitted that he fraudulently sought, on behalf of three different companies, over $600,000 in PPP loans through applications to an insured financial institution. According to his plea agreement, Smith caused fraudulent loan applications to be submitted that made numerous false and misleading statements about the companies' respective payroll expenses. Smith then directed his co-conspirators to send him portions of the PPP funds within days of receiving them and used the proceeds for personal expenses.

In addition to the prison sentence, Smith was ordered to pay $397,500 in restitution.

Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department's Criminal Division; Acting U.S. Attorney Richard G. Frohling of the Eastern District of Wisconsin; Special Agent in Charge Kathy Enstrom of the IRS Criminal Investigation (IRS-CI) Chicago Field Office; Special Agent in Charge Sharon Johnson of the SBA's Office of Inspector General (SBA-OIG) Central Region; Special Agent in Charge Robert E. Hughes of the FBI's Milwaukee Field Office; and Acting Special Agent in Charge Fran L. Mace of the Federal Deposit Insurance Corporation – OIG (FDIC-OIG) made the announcement.

The IRS-CI, BI, SBA-OIG, and FDIC-OIG investigated the case.

Trial Attorneys Laura Connelly and Leslie S. Garthwaite of the Criminal Division's Fraud Section and Assistant U.S. Attorney Stephen Ingraham of the Eastern District of Wisconsin are prosecuting the case.

The Fraud Section leads the department's prosecution of fraud schemes that exploit the PPP. In the months since the PPP began, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section has also seized more than $65 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds.

In May, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts.