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California man pleads guilty to COVID fraud | Takeover bid

A California man today pleaded guilty to a scheme to fraudulently obtain approximately $ 1.8 million in COVID-19 relief guaranteed by the Small Business Administration (SBA) through the Loan Program in Economic Disaster (EIDL) and Paycheck Protection Program (PPP).

According to court documents, Hassan Kanyike, 29, of Santa Clarita, admitted to submitting six fraudulent PPP loan applications and two fraudulent EIDL applications. The demands were for funds to allegedly pay the salaries of employees he said worked for two of his companies. Kanyike has successfully secured approximately $ 1 million through four PPP loans and an additional $ 300,000 through two EIDL loans.

In support of the fraudulent PPP loan applications, Kanyike submitted false federal tax returns and payroll reports. For example, in a loan application, Kanyike falsely claimed that the company had 26 employees and an average monthly payroll of $ 168,000, and he submitted a fabricated IRS tax form claiming that Falcon Motors had paid $ 2,022,300 of payroll in 2019. But Kanyike admitted during his plea that the company has far fewer employees and a significantly lower payroll. Kanyike further admitted to obtaining additional employer identification numbers from the IRS in April and May 2020, so that he could apply for multiple loans for the same used car company. Kanyike then used a substantial portion of the proceeds from the PPP loan for his own personal benefit.

Kanyike was arrested in December 2020 at Los Angeles International Airport just before boarding a flight to Dubai. At the time of his arrest, Kanyike had transferred approximately $ 762,000 to Uganda, his country of citizenship, from one of the commercial accounts that had received the loan proceeds, in violation of the terms of the PPP and EIDL program.

Kanyike pleaded guilty to one count of wire fraud in the Central District of California. He is expected to be sentenced on August 23 and faces a maximum sentence of 20 years in prison. As part of his guilty plea, Kanyike must pay around $ 1.3 million in restitution. A federal district court judge will determine any sentence after taking into account U.S. sentencing guidelines and other statutory factors.

Acting Assistant Attorney General Nicholas L. McQuaid of the Criminal Division of the Department of Justice; Acting United States Attorney Tracy L. Wilkison of the Central District of California United States Attorney’s Office; The Los Angeles Special Agent for Homeland Security Investigations (HSI); and Inspector General J. Russell George of the US Treasury Inspector General for Tax Administration (TIGTA) made the announcement.

HSI and TIGTA are investigating the case.

Deputy Chief William Johnston of the Fraud Section of the Criminal Division and Deputy U.S. Attorney Richard E. Robinson of the U.S. Attorney’s Office for the Central District of California are continuing the case. The case had already been prosecuted by former prosecutor Benjamin Saltzman of the Fraud Section.

The CARES (Coronavirus Aid, Relief, and Economic Security) law 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 maintenance and certain other expenditures under the P3, and up to $ 10 billion. dollars in low-interest loans to small businesses under the EIDL program. In April 2020, Congress authorized more than $ 300 billion in additional PPP funding and $ 10 billion in additional EIDL funding, and in December 2020, Congress authorized an additional $ 284 billion in additional PPP funding.

The PPP allows small businesses and other eligible organizations to benefit from loans with a two-year term and an interest rate of 1%. Proceeds from PPP loans are to be used by businesses for staff costs, mortgage interest, rent, and utilities. The PPP allows the remission of interest and principal if the companies spend the proceeds of these expenses within a specified time frame and use at least a certain percentage of the loan for wage costs.

The EIDL program is designed to provide economic assistance to small businesses that are currently experiencing a temporary loss of income. Proceeds from EIDL can be used to cover a wide range of working capital and normal operating expenses, such as maintaining health care 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 purposes as the PPP funds.

The Fraud Section leads the Department of Justice’s prosecutions of fraud schemes that exploit the CARES Act. In the months following the passage of the CARES law, lawyers in the Fraud Section prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section also seized over $ 65 million in cash proceeds from PPP and EIDL funds fraudulently obtained, as well as numerous real estate and luxury items purchased with this product. More information can be found at: https://www.justice.gov/criminal-fraud/cares-act-fraud.

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 Enforcement at 866-720-5721 or through the NCDF online complaint at the following address: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

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