TEXARKANA, Texas (KSLA) - A Texas man is charged with allegedly filing fraudulent bank loan applications totaling more than $5 million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Samuel Yates, 32, of Maud, Texas, sought the loans from two different banks by claiming to have hundreds of employees at his business when he had no employees working for his alleged business.
According to court documents from the U.S. District Court in Texarkana, Yates’s application to the first lender sought $5 million in Paycheck Protection Program (PPP) loan proceeds claiming to have over 400 employees with over $2 million in monthly payroll. In his second application, Yates claimed to have over 100 employees and was able to get a loan for over $500,000.
Yates submitted both applications using forged tax documents and lists of employees created by using random name generators on the internet.
“These charges should serve as a strong deterrent to anyone considering exploiting the COVID-19 pandemic to enrich themselves through fraud. These individuals have no concern for legitimate businesses whose employees and their families are hurting financially during these unprecedented times,” said Special Agent in Charge Ryan L. Spradlin of U.S. Immigration and Custom’s Homeland Security Investigations (HSI) Dallas. “HSI stands at the ready to utilize its ample investigative mandate to assist in rooting out such unscrupulous individuals, and hold them accountable for their crimes.”
Yates was charged in the Eastern District Court of Texas by way of a federal indictment with violations of wire fraud. Federal criminal indictments are accusations meaning Yates is presumed innocent unless and until he is proven guilty.
Two others are facing similar charges in the same U.S. District Court in Texarkana.
Clifton Pape, 45, and Sally Jung, 58, both of Cleveland, Texas, are facing charges for filing hundreds of fraudulent Economic Injury Disaster Loan (EIDL) applications with the SBA under the CARES Act.
Pape and Jung allegedly operated a COVID relief fraud scheme known as My Buddy Loans. The two were able to get more than $775,000 in fraud proceeds resulting in at least $1.3 million in loss to the United States.
Pape and Jung face up to 10 years in federal prison and a $5,000,000 fine at sentencing.
“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.”
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. A source of relief provided by the act allowed businesses to obtain forgivable loans to keep employees and cover other expenses, such as mortgages, rent and utilities.
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.