The United States has filed a civil complaint against two brothers from San Diego County, accusing them of fraudulently securing more than $8 million in pandemic-related loans. The complaint claims that Duraid A. Zaia and Kusay Karana obtained four Paycheck Protection Program (PPP) loans for non-existent or exaggerated businesses between March 25, 2021, and April 28, 2021.
These loans were part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act's PPP initiative, designed to help small businesses retain jobs during the COVID-19 pandemic. To qualify for loan forgiveness, recipients had to use the funds on employee payroll and other eligible expenses.
According to the complaint, Zaia applied for a PPP loan under "Ramona Egg Ranch," claiming it employed 75 people with annual payroll costs exceeding $9.5 million. However, submitted tax returns indicated payroll costs of just $62,848. Another application involved "The Duriad A. Zaia Sole Proprietorship," purportedly employing 137 people since its establishment in 2016. The complaint alleges this business could not have operated legally in 2020 as it lacked an Employer Identification Number until March 30, 2021.
The complaint also accuses Zaia and Karana of fabricating employee lists to bolster their applications. For instance, they reportedly listed employees working full-time at multiple businesses simultaneously.
After being denied loan forgiveness and defaulting on their obligations, the U.S., through the Small Business Administration (SBA), covered the lenders' losses totaling over $8.6 million in principal, interest, and fees.
The brothers are accused of violating the False Claims Act (FCA). This legal action follows a private citizen's lawsuit against them under FCA's qui tam provisions which allow individuals aware of federal fraud to sue on behalf of the government potentially receiving a portion of any recovered funds.
"COVID-relief programs were designed to help people and businesses under extreme financial stress during the pandemic," stated U.S. Attorney Adam Gordon. He emphasized accountability for those who exploited these programs through fraud.
Jonathan Huang from SBA OIG underscored zero tolerance for misrepresentation aimed at accessing SBA funds meant for small businesses: "Our Office will remain relentless in pursuing wrongdoers who seek to exploit SBA’s vital economic programs."
Assistant U.S. Attorney Stephen H. Wong is handling this case within California's Southern District Civil Division office. Allegations remain unproven until addressed in federal court proceedings.
Information about suspected COVID-19 related fraud can be reported via DOJ’s National Center for Disaster Fraud Hotline or web form provided by authorities overseeing disaster-related complaints.
