A founder of Blueacorn, a lender service provider, has pleaded guilty to charges related to a scheme that sought to fraudulently obtain COVID-19 relief funds through the Paycheck Protection Program (PPP). The PPP was created by the U.S. Small Business Administration (SBA) to help businesses affected by the pandemic.
Nathan Reis, 47, from Rio Grande, Puerto Rico and formerly of Arizona, admitted in court documents that he conspired with others to submit false PPP loan applications. These applications included fabricated income and payroll figures as well as falsified tax documents and bank statements. Reis and his co-conspirators charged borrowers fees based on a percentage of the funds received.
“During a national emergency, this defendant exploited a taxpayer-funded program that individuals and small businesses desperately needed to survive,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “This conviction demonstrates the Department’s ongoing commitment to bring to justice those who would steal from the public fisc to enrich themselves.”
“This defendant had the opportunity to help small businesses overcome tremendous financial hardships during a time of national crisis but instead exploited the system to line his own pockets with taxpayer money,” said Acting U.S. Attorney for the Northern District of Texas Nancy E. Larson. “We will continue to pursue convictions against those fraudsters who preyed upon the generosity of the American people as we struggled through the pandemic.”
“The FBI takes our responsibility to investigate and pursue those who commit fraud for personal gain very seriously,” said Assistant Director Jose A. Perez of the FBI Criminal Investigative Division. “Reis and others exploited a program meant to keep small businesses afloat during the pandemic. The FBI will continue to work tirelessly to prevent these programs from becoming targets and fight fraud wherever we find it.”
Reis pleaded guilty to conspiracy to commit wire fraud and is scheduled for sentencing on November 21, facing up to 20 years in prison. Sentencing will be determined by a federal district court judge after considering relevant guidelines.
The investigation involved several agencies including the FBI, IRS-CI, Special Inspector General for Pandemic Recovery, Federal Reserve Board-CFPB Office of Inspector General, and SBA OIG.
Prosecution is being handled by officials from both national sections within the Justice Department’s Criminal Division as well as an Assistant U.S. Attorney from Texas.
Since its inception under the CARES Act, enforcement efforts have led by DOJ’s Fraud Section have resulted in prosecution of over 200 defendants across more than 130 cases involving fraudulent PPP loans; authorities have seized more than $78 million in cash proceeds along with real estate properties and luxury items purchased with illicit funds (https://www.justice.gov/criminal/criminal-fraud/cares-act-fraud).
The Bank Integrity Unit at MLARS continues investigations into banks or financial institutions whose actions may threaten institutional or systemic integrity.
Individuals can report suspected COVID-19 relief fraud through resources provided by DOJ’s National Center for Disaster Fraud (https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form).
