A founder of Blueacorn, a lender service provider, has pleaded guilty to participating in a scheme to fraudulently obtain COVID-19 relief funds through the Paycheck Protection Program (PPP). The program was established by the U.S. Small Business Administration (SBA) to support small businesses during the pandemic.
According to court documents, Nathan Reis, 47, from Rio Grande, Puerto Rico and formerly of Arizona, conspired with others to submit false PPP loan applications. These applications included fabricated income and payroll information as well as falsified tax documents and bank statements. Through Blueacorn, Reis and his co-conspirators charged borrower’s fees based on a percentage of the funds received.
“During a national emergency, this defendant exploited a taxpayer-funded program that individuals and small businesses desperately needed to survive,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “This conviction demonstrates the Department’s ongoing commitment to bring to justice those who would steal from the public fisc to enrich themselves.”
“This defendant had the opportunity to help small businesses overcome tremendous financial hardships during a time of national crisis but instead exploited the system to line his own pockets with taxpayer money,” said Acting U.S. Attorney for the Northern District of Texas Nancy E. Larson. “We will continue to pursue convictions against those fraudsters who preyed upon the generosity of the American people as we struggled through the pandemic.”
“The FBI takes our responsibility to investigate and pursue those who commit fraud for personal gain very seriously,” said Assistant Director Jose A. Perez of the FBI Criminal Investigative Division. “Reis and others exploited a program meant to keep small businesses afloat during the pandemic. The FBI will continue to work tirelessly to prevent these programs from becoming targets and fight fraud wherever we find it.”
Reis pleaded guilty to conspiracy to commit wire fraud and is scheduled for sentencing on November 21. He faces up to 20 years in prison; sentencing will be determined by a federal district court judge after considering relevant guidelines.
The investigation was conducted by several agencies including the FBI, IRS-CI, Special Inspector General for Pandemic Recovery, Federal Reserve Board-CFPB Office of Inspector General, and SBA OIG.
Prosecution is being handled by officials from both national divisions within the Justice Department as well as an Assistant U.S. Attorney for Northern District of Texas.
Since its creation under https://home.treasury.gov/policy-issues/coronavirus/assistance-for-small-businesses/the-paycheck-protection-program-ppp" target="_blank">the CARES Act, more than 200 defendants have been prosecuted in over 130 criminal cases related to PPP fraud schemes led by DOJ's Fraud Section; over $78 million in cash proceeds have been seized along with real estate properties and luxury items purchased using fraudulent funds.
Anyone with information about attempted COVID-19 relief fraud can report it via https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form" target="_blank">the National Center for Disaster Fraud Web Complaint Form.
