Three nail salons in Long Island malls were part of a scheme to steal more than $13 million from the Paycheck Protection Program by falsifying employment records, according to a federal complaint.
In Buffalo, two brothers were charged with defrauding the PPP of more than $600,000 and using some of the proceeds to pay for home improvements and as a prop in a hip-hop video, according to a separate federal complaint.
The two New York cases are among about 50 nationwide — together alleging theft of more than $250 million — in a crackdown on fraud in Washington's marquee COVID-relief loan program, Department of Justice officials said.
The number of prosecutions "is unprecedented in the realm of a federal program," a spokesman for the U.S. Small Business Administration's Office of Inspector General said Friday.
But overall the PPP has operated with a very low percentage of fraud. Only $7 billion, or 1%, of the $521 billion in loans as of June 30 went to "potentially ineligible businesses," according to a Jan. 14 report by the inspector general.
SBA oversees the PPP, in which banks and other private lenders make loans backed by federal guarantees. Borrowers pledge to use the money to retain employees and bring back those who’ve been furloughed. The loans are forgivable if the terms are met.
Of the 5 million loans made through the program's first phase, which ended Aug. 8, more than 64,500 were on Long Island, according to a Newsday analysis of SBA data. Newsday Media Group received a $10 million loan in April.
In the Buffalo fraud case, brothers Larry Jordan II and Sutukh El, also known as Curtis Jordan, face up to 30 years in prison and a $1 million fine, according to James P. Kennedy Jr., the U.S. Attorney in Western New York.
The pair allegedly submitted at least eight applications for PPP loans for 5 Sterns, their cell tower installation and maintenance company. They sought nearly $7 million from a Tennessee bank and a Utah lender, and received $605,200 in late April.
The brothers inflated 5 Sterns’ payroll of fewer than a dozen employees to about 200 to secure larger loans, offering false tax returns and other documents as proof, FBI agent Kathleen A. Garver said in the criminal complaint.
Jordan, 42, of Lancaster, a Buffalo suburb, and El, 38, of Buffalo, were each indicted on Thursday for wire and bank fraud conspiracy, bank fraud and engaging in monetary transactions with criminally derived property. Both pleaded not guilty.
Jordan’s attorney Fonda Dawn Kubiak told Newsday that PPP lenders "discriminate" against "minority business owners like Mr. Jordan and Mr. El, who simply put in multiple applications hoping to get money to keep their business afloat in the midst of an unprecedented global pandemic."
El’s attorney didn’t respond to requests for comment over several days.
The brothers allegedly spent the loan funds on $84,800 in stock, $23,446 in landscaping and other home improvements, and $14,348 for a 2011 Chevrolet Silverado. El allegedly showed off "crisp $100 bills" from the loan in his "Hugo Hunt" rap video, where he performed with his pit bulldog, the FBI agent said, adding more than $400,000 has been recovered by federal authorities.
The Long Island case involves Victoria's Nails & Spa, a family-owned chain with at least 15 locations, including in Hicksville, Smithtown and Valley Stream.
Ngoc Manh Nguyen, Victoria Dieuy Ho and Dat Tat Ho are accused of securing multiple PPP loans totaling more than $13 million by inflating the number of employees at several nail salons. The company received $7.8 million but repaid the money in late May after its bank accounts were frozen "due to suspicion of fraudulent activity," said Simon Y. Dinits, a special agent for the SBA inspector general, in a criminal complaint.
The company's owners won a $1.4 million loan after claiming the salon in Valley Stream’s Green Acres Mall employed 76 people when records show a payroll of 8 to 11. The salon in Hicksville’s Broadway Commons Mall won $828,110 by claiming 55 employees when it only had 10 to 14, according to the complaint.
Nguyen, 44, and Victoria Ho, 31, both of Hicksville, and Dat Ho, 33, of the Bronx are each charged with wire and bank fraud conspiracy, fraud against the United States and conspiracy to make false statements. The charges carry a maximum penalty of 45 years in prison, according to Audrey Strauss, the U.S. attorney in Manhattan.
Nguyen’s attorney James Roth and Dat Ho's attorney Scott Druker both declined to comment. Victoria Ho's attorney didn’t respond over several days.
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The U.S. Department of Justice is cracking down on fraud in Washington's marquee loan program for small businesses struggling to survive the pandemic.
No. of criminal cases: 50+
Number of defendants: 90+
Alleged losses: more than $250 million
SOURCE: Dec. 9 speech by acting Deputy Assistant U.S. Attorney General Robert A. Zink
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