A Texas engineer pleaded guilty today for filing fraudulent bank loan applications seeking more than $ 10 million in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Aid and Economic Security Act (CARES) .
Acting Deputy Attorney General Nicholas L. McQuaid of the Criminal Division of the Department of Justice, Acting Attorney General 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 “Mike” Ware of o SBA-OIG and responsible inspector Delany De Leon-Colón of the Criminal Investigations Group of the US Postal Inspection Service (USPIS) made the announcement.
Shashank Rai, 30, of Beaumont, pleaded guilty to one charge of making false statements to a bank. He was charged on May 13, 2020 for violations of electronic fraud, bank fraud, false statements for a financial institution and false statements for the SBA.
As part of his guilty plea, Rai admitted that he sought millions of dollars in forgiving loans guaranteed by the SBA from two different banks, claiming to have 250 employees receiving salaries when, in fact, no employee worked for his alleged business. Rai made two fraudulent claims to two different creditors for loans guaranteed by the SBA for relief from COVID-19 through the Payment Check Protection Program (PPP). In the application submitted to the first creditor, Rai sought $ 10 million in proceeds from the PPP loan, fraudulently claiming to have 250 employees with an average monthly payroll of $ 4 million. In the second application, Rai sought approximately $ 3 million in PPP loan proceeds, fraudulently claiming to have 250 employees with an average monthly payroll of approximately $ 1.2 million.
According to court documents, the Texas Workforce Commission provided investigators with information that there were no records of employee salaries paid in 2020 by Rai or his alleged company, Rai Family LLC. In addition, the Texas Comptroller of Public Accounts Office informed investigators that Rai Family LLC did not report any revenue in the fourth quarter of 2019 or the first quarter of 2020.
According to court documents, the materials recovered from the trash outside Rai’s home included handwritten notes that appear to reflect a $ 3 million investment strategy, which is the amount of money Rai allegedly sought from the second creditor.
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 retention and some other expenses, through the PPP. In April 2020, Congress authorized more than $ 300 billion in additional PPP funding, and in December 2020, Congress authorized another $ 284 billion in additional funding.
PPP allows qualifying small businesses and other organizations to receive two-year loans and an interest rate of 1 percent. PPP loan proceeds are to be used by companies for payroll costs, mortgage interest, rent and utilities. PPP allows interest and principal to be forgiven if companies spend resources on these expenses within a certain period of time and use at least a certain percentage of the loan for payroll expenses.
This case was investigated by FHFA-OIG, FDIC-OIG, SBA-OIG and USPIS. Assistant Chief L. Rush Atkinson and trial attorney Lou Manzo of the Criminal Division’s Fraud Section and Assistant Attorneys Frank Coan and Nathaniel Kummerfeld of the Eastern District of Texas are suing the case.
The Fraud Section leads the prosecution of the department of fraud schemes that exploit the PPP. In the months since the PPP began, lawyers in the Fraud Section have sued 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 various real estate properties and luxury items acquired with such resources. More information can be found at: https://www.justice.gov/criminal-fraud/ppp-fraud.
Anyone with information about alleged fraud attempts involving COVID-19 can report it by calling the Department of Justice’s National Disaster Fraud Center at 866-720-5721 or via the NCDF Web Complaint Form at: https : //www.justice gov form / disgrace-fraud / ncdf-disaster-claim