GRAND RAPIDS, MI – The government is seeking forfeiture of $1.1 million after two Grand Rapids-area men allegedly set up companies to receive coronavirus relief money intended for businesses devastated by the pandemic.
The two “associates,” who have not been charged, allegedly “laundered the funds by disguising withdrawals as ‘payroll’ for friends and family members who were posing” as workers, Assistant U.S. Attorney Joel Fauson wrote in a request for forfeiture of the funds as well as a Mercedes Benz.
IRS-Criminal Investigation is investigating the case.
One of the purported businesses that received funds “had no employees, no business operations, no revenue, and no payroll in either 2019 or in the first quarter of 2020,” Fauson wrote.
One of the two men allegedly used $16,307 to pay off a defaulted credit card and jewelry, court records said.
He provided false information – he said he had 52 employees, a monthly payroll of $317,877 — to MBE Capital Partners in a request for a $795,000 forgivable loan, the government said.
The second man, who also submitted a loan application to MBE, said he had 37 employees, a $280,150 monthly payroll and used his residence for a business address, Fauson wrote.
He sought $700,000 to cover expenses for 2 ½ months but he had no employees, business operations or payroll in 2019 or early 2020, the government said.
After the government seized the $1.1 million in October, the second man filed statements for the past four years to obtain a Certificate of Restoration of Good Standing by the State of Michigan, the government said.
The funding was provided by the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. It provided $349 billion in forgivable loans to keep jobs and pay other expenses. Another $300 billion was later authorized by Congress.
To qualify for a PPP loan, a qualifying small business has to submit a application and show eligibility, including monthly payroll expenses and number of workers, which are used to calculate the loans. The applicant also has to certify that proceeds will be used to keep workers, pay mortgage interest or utility costs.
The applicants certify they had can be held accountable if funds are used for unauthorized purposes.
The funds, guaranteed by the U.S. Small Business Administration, are provided by financial institutions. The lender provides business information to the S(BA).
The federal prosecutor said the two men issued checks and obtained cashier’s checks and withdrew money to access “the fraudulently obtained PPP loan proceeds.”
They “used the money for themselves and gave some to friends and family members.”
That included the second man buying a 2011 Mercedes Benz for $11,500 in hundred-dollar bills, the prosecutor wrote. He told the seller, a local company, that he would handle the paperwork but it was still in the name of the previous owner when it was seized during an Oct. 27 search warrant, court records said.
Challenges to forfeitures must be made within 35 days of a March 3 notice. No claims have been made.
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