On March 29, 2020, Congress enact the Coronavirus Aid, Relief and Economic Security ("CARES") Act in order to provide emergency financial assistance during the COVID-19 pandemic. One aspect of the CARES Act is the Paycheck Protection Program ("PPP"), which authorized up to $349 billion (and in April 2020 added another $300 billion) in forgivable loans to small businesses for job retention and certain other expenses. Eligible businesses can receive loans via PPP with a two-year term and a 1% interest rate; however, said loans must be used for payroll costs, interest on mortgages, rent and utilities. The interest and principal of a PPP loan may be forgiven if the proceeds are spent on the prescribed expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses. All in all a commendable approach to a devastating pandemic. Unfortunately, when I am confronted with such a high-minded, government-funded program, I immediately remind myself that the road to Hell is paved with good intentions, and that no good deed goes unpunished. Truly, I hate it when I'm right.
In a criminal Complaint filed in the United States District Court for the Southern District of Floridahttps://www.justice.gov/opa/press-release/file/1298186/download, David T. Hines, 29, was charged with one count of bank fraud, one count of making false statements to a financial institution and one count of engaging in transactions in unlawful proceeds. Allegedly, Hines fraudulently obtained $3.9 million in Paycheck Protection Program ("PPP") loans. As alleged in part in the DOJ Release:
[H]ines sought approximately $13.5 million in PPP loans through applications to an insured financial institution on behalf of different companies. The complaint alleges that Hines caused to be submitted fraudulent loan applications that made numerous false and misleading statements about the companies' respective payroll expenses. The financial institution approved and funded approximately $3.9 million in loans.
The complaint further alleges that within days of receiving the PPP funds, Hines purchased a 2020 Lamborghini Huracan sports car for approximately $318,000, which he registered jointly in his name and the name of one of his companies. In the days and weeks following the disbursement of PPP funds, the complaint alleges that Hines did not make payroll payments that he claimed on his loan applications. He did, however, make purchases at luxury retailers and resorts in Miami Beach.
I don't wanna be too snarky here but is anyone doing any kind of due diligence on these PPP applications? Then again, these days, who the hell would want to be physically present in an office handling paperwork from strangers? I'm guessing that they got this huge rubber stamp market "APPROVED" and that someone donned in an array of Personal Protective Equipment replete with mask, gloves, and gown is quickly working through a large pile of applications.
In the spirit of full disclosure, I did have a chuckle when I saw that Hines had purportedly spent $318,000 in PPP funds on a Lambo, and also splurged on some so-called luxury purchases. Hell, either go big or go home, right?The resorts in Miami Beach sort of puzzled me -- I mean, geez, is this guy such a moron that he would actually be going to a resort during the COVID pandemic? Of course, I then realized we're talking about Florida, where folks were jamming the beaches and the bars as the pandemic was exploding around them. What should not be lost among the chuckles about Hines' audacity, the Lambo, the glitz, the resorts is that Hines allegedly did not make the intended payroll payments. There is nothing funny about that. Not even remotely.
https://www.justice.gov/opa/pr/texas-entrepreneur-charged-spending-covid-relief-funds-improper-expenses-including. In yesterday's federal case, we learn that Lee Price III, 29, was charged in a criminal Complaint filed in the United States District Court for the Southern District of Texas with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions. As alleged in part in the DOJ Release:
The complaint alleges Price was involved in a scheme to submit fraudulent PPP loan applications to federally insured banks and other lenders. The Small Business Administration (SBA) guarantees the loans for COVID-19 relief through the PPP under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Two fraudulent applications received funding, according to the complaint. Price Enterprises Holdings allegedly received more than $900,000, while a loan application listing 713 Construction was approved for over $700,000. The loan applications allegedly asserted both entities each had numerous employees and significant payroll expenses. According to the charges, however, neither entity has employees nor pays wages consistent with the amounts claimed in the loan applications. Further, the individual listed as CEO on the 713 Construction loan application died in April 2020, a month before the application was submitted, according to the complaint.
Price allegedly used the loan proceeds not for payroll expenses, but for lavish personal purchases, such as expending the loan money on a Lamborghini Urus, a Rolex watch and real estate transactions. He also allegedly spent thousands at strip clubs and other Houston night clubs. The complaint further alleges Price used a portion of the loan money to buy a 2020 Ford F-350 pickup truck.
Price's PPP loan applications were on behalf of companies that had no employees or apparently much, if any, payroll -- which, you know, if you think about it, you wouldn't have much of a payroll if you didn't have any employees, right? The nice fillip in this case was that the Chief Executive Officer on one of the loans had died a month before the application was submitted. I'm not saying that a deceased CEO couldn't submit a PPP loan from the grave but I suspect that the post-mortem condition would impose some serious challenges. Compared to Hines, Price seems to have had a better game. In addition to a Lambo, he got a Ford F-350 pickup truck, a Rolex, and spread some cash around strip clubs and night clubs. Yes, I'm giving Hines credit for his Lambo and resort escapades but I think First Prize goes to Price. Also, let's race the Lambo Urus against the Lambo Huracan against the Ford F-350.
In keeping with the theme that this is a slow news day, inveterate Fox Business reports about William Kelley, who printed a bogus cashier's check on his home computer in order to buy a Porsche and some luxury jewelry. The jeweler held on to his goods in order to see if the check cleared. The car dealer, well, he took the paper and let Kelley drive a 911 Turbo off the lot.