David Clay Fowlkes, U.S. Attorney | U.S. Attorney for the Western District of Arkansas
A Florida couple who previously lived in Northwest Arkansas have been sentenced to a combined total of more than nine years in federal prison for their involvement in a scheme to defraud pandemic relief loan programs. Julia Youngblood, 41, received a sentence of 15 months in federal prison followed by one year of supervised release and was ordered to pay $6,131,511.16 in restitution after pleading guilty to misprision of a felony. Fawaad Welch, also 41, was sentenced to 97 months in federal prison with three years of supervised release and the same amount of restitution for wire fraud.
The sentences were handed down by Judge Timothy L. Brooks at the United States District Court in Fayetteville.
Court records show that between May 2020 and October 2021, Welch and Youngblood applied for various pandemic relief loans through their business Slipstream Creative, LLC, based in Fayetteville. During the application process, Welch provided lenders with false information about assets, liabilities, and intended use of funds from SBA7(a), Economic Injury Disaster Loan (EIDL), and Main Street Loan Programs. Youngblood signed applications on behalf of the business at Welch’s direction.
According to government filings, after receiving the funds, Welch diverted significant portions for personal use. The couple did not disclose important information such as existing tax liabilities or participation in other loan programs when applying. In one instance following receipt of $1.5 million in EIDL funds in October 2021, $1.3 million was transferred into their personal bank account; they later used $445,000 from these funds to purchase a home in Florida.
Both defendants pleaded guilty after waiving indictment by a grand jury.
Welch’s plea agreement detailed that after being questioned by Generations Bank about salaries—since “the Fed restricts changes to your salaries with the [Main Street Loan Program] and doesn’t allow distributions”—he responded: “Yes sir we do at 10k a month, so all is good there. 5k a piece.” After receiving $3 million from program funds, Welch moved $950,000 from business accounts into personal accounts within one month.
Authorities recovered over $1.2 million from the couple’s accounts prior to sentencing.
U.S. Attorney David Clay Fowlkes for the Western District of Arkansas announced the sentences.
The case was investigated by the Federal Bureau of Investigation; Office of Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau; and Special Inspector General for Pandemic Relief.
Prosecution was handled by U.S. Attorney David Clay Fowlkes and Assistant U.S. Attorney Ben Wulff.
The Department of Justice’s Fraud Section leads efforts against schemes targeting COVID-19 relief programs such as PPP loans; since passage of the CARES Act it has prosecuted over 150 defendants across more than 95 cases involving fraudulent PPP claims and seized over $75 million as well as real estate and luxury items bought with illicit proceeds. More details are available at https://www.justice.gov/opa/pr/justice-department-takes-action-against-covid-19-fraud.
