A St. Louis attorney has admitted to defrauding the U.S. Small Business Administration (SBA) of $379,900 by improperly obtaining and using funds from a COVID-19 relief loan program.
John J. Diehl Jr., 60, pleaded guilty in U.S. District Court in St. Louis to one count of wire fraud. According to court documents, Diehl applied for an Economic Injury Disaster Loan (EIDL) on March 30, 2020, on behalf of his law firm, the Diehl Law Group. The EIDL program was created to provide financial support to small businesses affected by the pandemic through deferred, low-interest loans meant for working capital and fixed debts related to COVID-19 disruptions.
Diehl signed a loan agreement stating that all proceeds would be used solely as working capital to address economic injury caused by the pandemic. However, authorities say he used the funds for personal expenses.
On April 16, 2020, $1,000 was deposited into the law firm's account as an advance on the EIDL loan. Eleven days later, Diehl made a payment of $1,320.15 to a country club for personal dues and charges that included EIDL funds.
The remaining $93,900 from the initial loan was deposited on June 9, 2020. Prosecutors said Diehl transferred some of these funds into his personal accounts and spent them between June 10, 2020 and August 16, 2021 on unauthorized personal uses such as payments for Tesla, Audi and Jeep vehicles; credit card bills; mortgage payments; college tuition for a family member; pool maintenance; country club fees; and cash withdrawals for personal expenses. On September 16, 2020, he also moved $50,039.55 from the EIDL proceeds into his retirement plan where he was the only participant.
In March 2022, Diehl requested an EIDL loan modification and again certified that funds would be used “to alleviate economic injury caused by disaster.” On April 12 that year an additional $285,000 was wired into his firm’s account. Authorities say he transferred some of this money into his personal accounts and continued making payments toward credit cards and legal fees unrelated to business operations as well as tuition costs and mortgage payments through June 21, 2023. On September 16, 2022 he transferred another $150,000 from modified loan proceeds into his retirement plan.
Altogether Diehl obtained $379,900 in EIDL funds through these actions.
Diehl is scheduled for sentencing on December 19. The charge of wire fraud carries a maximum penalty of up to twenty years in prison or a fine up to $250,000 or both. His attorney stated Thursday that Diehl has repaid the full amount of misused loan proceeds to the United States Treasury.
The case was investigated by the FBI and prosecuted by Assistant U.S. Attorney Hal Goldsmith.
"Diehl signed a loan authorization and agreement form in which he falsely represented and certified that Diehl Law Group '…will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter….'"
"In March of 2022, Diehl requested an EIDL loan modification. He again pledged that Diehl Law Group will use the funds 'to alleviate economic injury caused by disaster.'"
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