Six Brooklyn residents are facing a sweeping indictment after prosecutors said they used bogus pandemic-relief applications and forged paperwork to pull in nearly $11 million in federal cash, then flipped a big chunk of it into a multimillion-dollar construction loan.
According to investigators, the money came from Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) funds that were supposed to help businesses stay afloat during the height of Covid. Two defendants were arraigned Friday before Brooklyn Supreme Court Justice Danny Chun, and four others were arraigned on Tuesday. All six were released without bail and are scheduled to return to court on August 12, 2026.
In a press release from the U.S. Department of Labor Office of Inspector General, Brooklyn District Attorney Eric Gonzalez and federal officials framed the case as the result of stepped-up coordination between agencies. The release names the defendants as Gregory Derney Harvey, Gregory Norris James Harvey Jr., Vaughn Harvey, Michelle Harvey, Leroy Smith and John McAulay. The indictment carries 31 counts, including conspiracy, grand larceny, falsifying business records and money laundering. “These defendants allegedly stole millions of dollars from programs meant to help struggling businesses survive the pandemic,” Gonzalez said in the statement.
How investigators say the scheme worked
Prosecutors say the group fired off a series of sham PPP and EIDL loan applications between April 2020 and October 2022, using fake tax returns, made-up payroll records and fabricated bank statements tied to multiple corporations, as reported by the Brooklyn Paper. That reporting states the defendants pulled in more than $6.9 million in pandemic aid, and that two members of the Harvey family then pooled about $2.4 million from those proceeds as a down payment on a construction loan. Investigators say that loan allegedly led to another $4.02 million in theft.
Charges, arraignments and next steps
The Labor Department’s inspector general said in its release that Gregory Derney Harvey and his son appeared before Justice Chun on Friday, while the four remaining defendants were arraigned earlier in the week. All six were released without bail and ordered to return to court on August 12, 2026. The 31-count indictment, according to prosecutors, was built with help from the Brooklyn District Attorney’s Investigations Division, the U.S. Department of Labor, and the U.S. Small Business Administration along with its Office of Inspector General.
Broader context
Pandemic loan fraud remains a prime target for prosecutors and federal watchdogs across New York, who point to the enormous flow of relief dollars and the wide range of alleged scams uncovered since 2020. Hoodline previously covered a separate federal case in which a former NYPD detective admitted to using fabricated tax records and phony applications to tap PPP funds, a pattern that mirrors the tactics described in the Brooklyn indictment. Investigators say the new case highlights ongoing coordination between local and federal authorities as they try to claw back relief money and discourage would-be fraudsters from trying similar plays.
