A Washington man pleaded guilty today to perpetrating a scheme to fraudulently obtain COVID-19 relief guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) and the Payment Check Protection Program (PPP) under the Coronavirus Aid, Relief and Economic Security Act (CARES).
Nicholas L. McQuaid, deputy assistant attorney general at the Criminal Division of the Department of Justice; Brian T. Moran, US Attorney for the Western District of Washington; J. Russell George, Inspector General of the US Treasury Inspector General for Tax Administration (TIGTA); Gail S. Ennis, Inspector General of Social Security Administration (SSA); Hannibal “Mike” Ware, SBA Inspector General, and Cardell Morant, Special Agent in Charge of the Homeland Security Investigation (HSI) for US Immigration and Customs Enforcement, made the announcement.
Austin Hsu, 46, of Issaquah, pleaded guilty to information that accused him of an electronic fraud charge before the judge of American magistrate Michelle L. Peterson in the western district of Washington. The sentence was set for April 19, 2021, before US District Court judge James L. Robart.
As part of his guilty plea, Hsu admitted that he filed nine fraudulent disaster loan applications seeking more than $ 1.1 million. Hsu, who is the owner and CEO of a company called Blackrock Services PS doing business as “Back 2 Health Bellevue” (Back 2 Health), received EIDL and PPP funds for Back 2 Health and then used the names of current Back 2 Health and former employees to apply for additional PPP loans on behalf of four other companies he owned and controlled. Hsu further admitted that, in support of fraudulent PPP loan applications, Hsu filed false federal tax returns.
Hsu also admitted that he formed a company called Blueline Capital LLC (Blueline) in June 2020 for the purpose of applying for an EIDL loan in July 2020, and then misrepresented to the SBA that Blueline had been in business since 2017 and that, as of 31 As of January 2020, Blueline had nine employees and gross revenues of more than $ 1.5 million. Hsu admitted that, in fact, Blueline had no business or operations.
Six of Hsu’s nine fraudulent loan applications were approved and he fraudulently obtained more than $ 700,000 in relief funds from COVID-19.
The CARES Act is a federal law enacted on March 29. It was designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects of the COVID-19 pandemic. A source of relief provided by the CARES Act is the authorization of up to $ 349 billion in forgivable small business loans for job retention and some other expenses through the PPP. In April 2020, Congress authorized over $ 300 billion in additional PPP financing, and in December 2020, Congress authorized another $ 294 billion in additional PPP financing.
PPP allows qualifying small businesses and other organizations to receive loans with a two-year maturity and an interest rate of one percent. Businesses should use the PPP loan proceeds for payroll expenses, mortgage interest, rent and utilities. PPP allows interest and principal to be forgiven if companies spend resources on those expenses within a certain period of time and use at least a certain percentage of the loan for payroll expenses.
The EIDL program is designed to provide economic relief for small businesses that are experiencing a temporary loss of revenue. EIDL resources can be used to cover a wide range of working capital and normal operating expenses, such as continued health benefits, rent, utilities and fixed debt payments. If an applicant also obtains a loan under the PPP, the EIDL funds cannot be used for the same purpose as the PPP funds.
This case was investigated by TIGTA, SSA – Office of the Inspector General (OIG), SBA – OIG and HSI. Prosecuting Attorney Christopher Fenton of the Criminal Division’s Fraud Section and Assistant Attorney General Steven Masada of the Western Washington District are suing the case.
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 / disaster-fraud / ncdf-disaster-claim-form.