As the COVID-19 pandemic wreaked havoc globally, the United States government sought to assist struggling small businesses through the Paycheck Protection Program (PPP), a part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This relief bill, passed in March 2020, was aimed at minimizing the economic fallout of the pandemic by providing up to eight weeks of funds for various business-related expenses. While the PPP was enacted with good intentions, cases of fraudulent claims have been emerging, highlighting the program's exploitation.
One such incident has recently come to light in Peoria, Illinois. Three men were sentenced on September 5, 2023, by U.S. District Judge James E. Shadid for making false statements in their PPP applications according to a press release from the Department of Justice. Two of these men were also found guilty of acquiring unemployment insurance benefits fraudulently from multiple states.
The trio had been indicted a year before their trial, in October 2022, following which they pleaded guilty. All three men in their PPP applications posed as sole proprietors of barber shops, but neither had a registered barber shop nor were they licensed barbers. Furthermore, none of the applicants had employees, payroll, or any business-related expenses on record.
Kendall A. Mack, aged 26, made false statements about his PPP loan application and submitted documentation for loan forgiveness in April and September 2021, respectively. His fraudulent scheme cost the Small Business Administration and Capital Plus Financial, LLC, a total of $39,239.08. Mack was sentenced to three years' probation and imprisonment for a time already served. Additionally, he was ordered to pay restitution in the amount equal to the losses.
Meanwhile, Rasheem McCree, 38, admitted to submitting a false application for PPP funds in March 2021 and fraudulently obtaining unemployment benefits from five states. Judge Shadid sentenced McCree to 27 months in prison, followed by three years of supervised release. McCree has also been ordered to pay $89,981.34 in restitution to the Small Business Administration (SBA) and the involved states.
The third individual, Adrian Lamont Morris, age 27, pleaded guilty in April 2023 to making a false statement in March 2021 as part of his application for PPP funds. Morris also filed for unemployment benefits in Illinois, Louisiana, and Pennsylvania, resulting in a loss of $60,642 to the SBA and these states. Morris was sentenced to 24 months' imprisonment, to be followed by three years of supervised release, and he was also ordered to pay $60,642 in restitution.
During the sentencing of both McCree and Morris, Judge Shadid took note of their significant criminal histories. The duo has been ordered to report to the Bureau of Prisons on November 14, 2023. These sentences serve as a cautionary tale for those who may consider exploiting such relief programs that were designed to support businesses in their trying times.
The case was investigated by the Internal Revenue Service, Criminal Investigation, and the Federal Bureau of Investigation, with Criminal Chief Darilynn J. Knauss representing the government in the prosecution. The penalties for making false statements under 18 U.S.C. §1001(a)(3) can range from up to five years' imprisonment, a fine of up to $250,000, and up to three years of supervised release.
