While the emergency relief program was designed to help struggling small businesses stay afloat during the global pandemic more than a year ago, federal investigators claim fraudsters — including trucking-related businesses — took advantage of the U.S. Small Business Administration’s chaotic launch to vie for billions in government-backed forgivable loans.
Now, federal prosecutors are attempting to claw back up to $70 billion in fraudulent and ineligible pandemic relief loans obtained through the SBA’s Paycheck Protection Program (PPP).
A reality TV star and owner of a trucking company is the latest to be sentenced in the feds’ effort to track down potential PPP loan fraud scammers.
Maurice Fayne, aka Arkansas Mo, 38, of Dacula, Georgia, who appeared on VH1’s reality TV show “Love & Hip Hop: Atlanta,” was sentenced to more than 17 years in federal prison on Sept. 14, related to the $3.7 million PPP loan he received for his defunct trucking company, Flame Trucking, and to fund his long-running Ponzi scheme.
“Fayne planned to use the PPP program as a cover for his long-running Ponzi scheme,” Kurt R. Erskine, acting U.S. attorney for the Northern District of Georgia, said in a statement. “The funds the program supplies serve as a lifeline to many businesses desperately trying to stay afloat during the pandemic, and unfortunately his fraud helped deplete those precious dollars.”
Court documents alleged he also defrauded more than 20 people out of millions of dollars in a Ponzi scheme that were supposed to be invested in his trucking business from March 2013 through May 2020.
According to the original complaint filed in May 2020, Fayne submitted a PPP loan application with United Community Bank (UCB), headquartered in Blairsville, Georgia, which is a U.S. SBA lender.
In his application, Fayne stated that he had 107 employees and his average monthly payroll was nearly $1.5 million. He also certified that the loan proceeds for Flame Trucking would be used to “retain workers and maintain payroll or make mortgage payments, lease payments and utility payments specified under the Paycheck Protection Program Rule.”
Instead, prosecutors said Fayne used the PPP funds to purchase expensive jewelry, pay back $40,000 in child support and lease a Rolls-Royce.
The feds claim he used the investors’ money to pay his personal debts and expenses and transferred more than $5 million to a casino in Oklahoma to cover his gambling debt in the seven-year Ponzi scheme.
In addition to his prison sentence, a federal judge sentenced Fayne to five years of supervised release and ordered him to pay restitution of nearly $4.5 million to his victims.
Two days after his sentencing, Fayne’s new attorney, Leigh Ann Webster of the Atlanta-based law firm Strickland Webster LLC, filed a notice of appeal in the U.S. Court of Appeals for the 11th Circuit in Atlanta.
Webster did not return FreightWaves’ request for a comment regarding Fayne’s appeal.
Feds crackdown on PPP fraud
Applicants exhausted $349 billion within 13 days of the SBA’s initial rollout of funds through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. A total of $800 billion was doled out in three waves to pandemic-relief funds to help struggling businesses.
Many of the PPP loans weren’t properly vetted and lacked internal controls to prevent fraud in its haste to provide a lifeline to small businesses, according to the SBA’s watchdog report that was released in October 2020.
“To expedite the process, SBA ‘lowered the guardrails’ or relaxed internal controls, which significantly increased the risk of program fraud,” the report stated.
Instead, prosecutors allege the scammers quickly got to work forging documents and creating fake payroll numbers to apply for the loans before the emergency relief funds ran out.
Since the PPP program’s rollout, Joshua Stueve, senior communications adviser for the DOJ, told FreightWaves its Fraud Section attorneys have prosecuted more than 100 defendants in over 70 criminal cases.
The Fraud Section has also seized more than $65 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds, Stueve said.
The owner of a Pennsylvania-based towing company, Tonye Johnson, 29, of Philadelphia, was sentenced to 18 months in prison in late July, three months after pleading guilty to conspiracy to commit wire fraud in April.
Federal prosecutors have linked Johnson to a massive fraud ring attempting to obtain $24 million in PPP loans that sucked in more than 11 individuals who are facing or have pleaded guilty to fraud charges. Prosecutors say the scammers offered their services to help other fake business owners apply for PPP loans — for a price.
Investigators claim the network used the same forged documents and fake payroll numbers on the majority of the fraudulent loan applications. If the business owners’ PPP loans were paid out, the scammers demanded kickback payments of up to 25% of the loan amount. Then, the scammers urged those business owners to refer others to the scheme for a cut of the kickback payments if the loans were approved.
Johnson was originally charged with wire fraud, bank fraud and conspiracy to commit wire fraud and bank fraud in the U.S. District Court for the Southern District of Florida in September 2020.
He admitted to obtaining a fraudulent PPP loan of $389,627 for his intrastate company, Synergy Towing & Transport LLC of Flourtown, Pennsylvania, based on falsified documents, provided by a network that helped him prepare the fake documents and submit his PPP application in exchange for a 25% kickback from the loan proceeds.
According to court filings, four confidential informants involved in the PPP fraud scheme have been cooperating with the FBI since late June 2020.
PPP funds spent on luxury cars, not payroll expenses
The owner of a purported California road maintenance company is facing multiple charges after federal prosecutors claim he stole hundreds of thousands of dollars, which he allegedly spent on luxury cars and other high-priced goods, after obtaining more than $7.25 million in PPP funds.
Oumar Sissoko, 59, of Temecula, California, was taken into custody by FBI agents in April after a grand jury indicted him on four counts of wire fraud.
According to the indictment, Sissoko obtained a $7.25 million loan for his company, Road Doctor California LLC, after submitting a PPP loan application with JPMorgan Chase Bank in April 2020, claiming his pothole repair company was in the process of hiring 450 full-time employees and would have average monthly payroll expenses of $2.9 million.
Court filings state that when Sissoko applied for the loan, he acknowledged the funds would be used to pay employees, interest on mortgages, rent and utilities.
After JPMorgan approved his PPP loan in May 2020, prosecutors allege he went on a personal spending spree, purchasing a luxury car for over $100,000, paying off the loan on a different luxury car he owned and spending $6,000 on a personal computer.
“The impermissible uses also included a nonrefundable down payment of approximately $100,000 to purchase a company located in New Hampshire and the attempted transmission of approximately $150,000 to accounts in the African nation of Mauritania associated with a minerals exploration company for which Sissoko purports to serve as CEO,” the Department of Justice said in a news release on Wednesday.
The DOJ didn’t indicate what happened to the rest of the $7.25 million in PPP loan funds Sissoko received.
According to a document filed with the California secretary of state’s office, Sissoko registered Road Doctor California in December 2019. However, he used the address of a post office in Los Angeles as the company’s headquarters.
Sissoko claims he had 20 employees when he filed his PPP loan application, but there’s no website or phone number listed for his pothole repair business. There’s also no mention of owning Road Doctor California on Sissoko’s LinkedIn profile.