TEXARKANA, Texas (KLTV) - According to the U.S. Attorney in the Eastern District of Texas, a man and woman from Cleveland, Texas have been charged with filing hundreds of fraudulent claims under the CARES Act.
Clifton Pape, 45, and Sally Jung, 58, have been charged with filing hundreds of fraudulent Economic Injury Disaster Loan (EIDL) applications with the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Pape and Jung allegedly operated a COVID relief fraud scheme known as My Buddy Loans, that garnered them more than $775,000 in fraud proceeds and resulted in at least $1.3 million in loss to the United States. Pape and Jung are charged by way of a federal criminal complaint that charges a violation of 18 U.S.C. § 1031, major fraud against the United States.
According to court documents filed today in U.S. District Court in Texarkana, Pape and Jung operated under the name My Buddy Loans. In exchange for $1082.50, My Buddy Loans took personal identifying information from third parties and promised to file a federal application for a $10,000 agricultural grant. Instead, Pape and Jung actually filed EIDL applications with the SBA that contained false information. For example, in June and July 2020, Pape and Jung filed 222 EIDL applications, all of which purported to be for businesses with exactly ten employees—the minimum number of employees required to obtain the maximum EIDL advance of $10,000. From those 222 applications, the SBA issued 130 EIDL advances in the amount of $10,000—$1.3 million total.
Pape and Jung allegedly used Square’s credit and debit card processing service to charge third parties the fee of $1082.50. Pape and Jung completed 716 successful charges, obtaining at least $775,000 in fees from third parties. Pape and Jung then transferred the proceeds of the fraud scheme into a bank account they controlled, attorneys say. On one occasion, Pape used the fraud proceeds to pay a traffic ticket. On another occasion, Pape and Jung used more than $3600 from the fraud scheme to pay for a stay at La Cantera Resort in San Antonio, Texas. A picture from that stay shows Pape and Jung celebrating over sparkling wine and other beverages. Pursuant to a seizure warrant, agents seized the $505,535.04 in fraud proceeds remaining in the account.
“At a time when small businesses—the engines of our economy in East Texas—most needed the help that the Small Business Administration was rushing to provide, these individuals took advantage of members of the public, depleting the available resources for small businesses and lining their own pockets with fraudulent gain,” said U.S. Attorney Stephen J. Cox of the Eastern District of Texas. “We encourage members of the public and the banking community to stay vigilant, watching for fraud as another round of COVID relief begins. It is a priority of the Department of Justice to deter and prosecute this type of fraud.”
“These charges represent the consequences of exploiting the COVID-19 pandemic by defrauding the EIDL program and thus taking money intended for legitimate businesses in need,” said William Mack, U.S. Secret Service Resident Agent in Charge of the Tyler Resident Office. “The success of this investigation was the direct result of investigative actions taken by the Secret Service and its law enforcement partners. The Secret Service will continue to hold those accountable who seek to exploit CARES Act programs and seek justice for all those who seek to exploit U.S. citizens for their own illicit gain.”
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
A federal criminal complaint is merely an accusation. A defendant is presumed innocent unless and until proven guilty.
Under federal statutes, Pape and Jung face up to 10 years in federal prison and a $5,000,000 fine at sentencing. The statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors.
This case is being investigated by the U.S. Secret Service and the SBA Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.