Engineer Charged With Defrauding COVID-Relief Program

Engineer Charged With Defrauding COVID-Relief Program

Texas-based engineer Shashank Rai was charged with defrauding the Coronavirus Aid, Relief, and Economic Security (CARES) Act SBA Paycheck Protection Program (PPP) by fraudulently filing a bank loan application seeking $13 million in forgivable loans. Rai faces charges for wire fraud, bank fraud, making false statements to a financial institution, and making false statements to the SBA.

According to the complaint, Rai filed two separate claims to different lenders for PPP loans in which he requested $10 million and $3 million, respectively. In both applications, he falsely claimed to have millions of dollars’ worth of monthly payroll expenses and 250 wage-earning employees, but documents provided to investigators by the Texas Workforce Commission revealed that there were no records of wages being paid by Rai in 2020.

This latest prosecution reflects the government’s aggressive investigation of fraud related to the PPP, which provides loans intended to be used by small businesses to cover payroll costs, interest on mortgages, rents, and utilities.

A copy of the DOJ press release can be found here. 

SEC Charges Broker For Defrauding Vulnerable Investors in Matched Trading Scheme

Clinton Maurice Tucker, an unregistered broker, was charged by the SEC for his role in a matched trading scheme in which he manipulated market prices to dump shares, and for targeting and defrauding elderly investors he identified through the matched trading scheme.

According to the complaint, from December 2014 to around May 2019, Tucker worked as an investor solicitor for William Marshall and his microcap company Intertech Solutions Inc. In that role, Tucker and Marshall operated a scheme designed to allow Marshall to liquidate his position in Intertech Solutions without causing the price of the stock to crash. Tucker allegedly deceived investors by using fictitious names to conceal his identify from investors, and failing to inform investors of Marshall’s involvement, thereby leading investors to believe that they were entering into standard open-market transactions. Tucker allegedly earned nearly $600,000 in commissions for sales made pursuant to the scheme.

Tucker also allegedly invented a variety of fictitious investment opportunities, such as an investment in a cryptocurrency venture, and convinced elderly investors to send investments for these fictitious ventures directly to him. According to the complaint, he used the $165,000 he collected directly from investors on personal expenses.

The SEC’s complaint can be found here. 

Owner of Durable Medical Equipment Company Charged For Role in Medicare Kickback Scheme

Patrick Wolfe, owner of Wilmington Island Medical Inc., a Georgia-based durable medical equipment company, was charged for his alleged role in a Medicare kickback and telemedicine scheme. Wolfe is accused of conspiring to pay kickbacks in exchange for what he represented as “leads,” but were actually signed orders from physicians. Wolfe then allegedly billed those orders through his company to Medicare.

Wolfe is the 25th defendant charged in the telemedicine conspiracy, and his prosecution is the latest action brought as part of the largest fraud operation in the history of the Southern District of Georgia, which has resulted in fraud charges worth almost half a billion dollars. The far-reaching operation has led to charges against a variety of individuals in the health care industry, including physicians, nurse practitioners, operators of telemedicine companies, patient data brokers, and other owners of durable medical equipment companies.

As telemedicine becomes a larger part of the healthcare system, government investigations of potential fraud and kickbacks in the practice of medicine by electronic means are likely to increase.

The DOJ press release can be found here.

Our Analysis

Are You Prepared? Audits & Investigations Under the Paycheck Protection Program

Presidential candidate Joe Biden underscored the intense focus surrounding Paycheck Protection Program loans when he tweeted, “Let me be clear: My Administration will review every single stimulus loan given to big companies and political insiders. We will find any dollar taken corruptly, we will come get it, and we will punish the wrongdoers.”

Congress created the PPP, part of the CARES Act and administered by the Small Business Administration (SBA) and Treasury Department, to provide relief to small businesses in dire need of financial support during the COVID-19 pandemic. Thousands of businesses applied for and secured PPP loans to help get them through this unprecedented time in our nation’s history. Criticism of the PPP soon festered, however, after it became public that several large, profitable companies, including Shake Shack and the Potbelly Corporation, had received PPP loans.

A key requirement for obtaining a PPP loan is that a borrower must make a good faith certification that the loan is “necessary…to support the [borrower’s] ongoing operations… .” 15 U.S.C. § 636(a)(36)(G)(i)(I). While Potbelly and Shake Shack quickly returned the funds to the PPP, speculation abounds regarding whether other companies appropriately received the much-needed financing.

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