10-11-2024 11:18am

STRIKE FORCE SNARES

Baltimore County Businessman Pleads Guilty To Fraudulently Obtaining More Than $1.3 Million In Covid-19 Cares Act Loans

Defendant Admitted to Using Paycheck Protection Program Funds to Purchase a Mercedes-Benz and to Make Extensive Home Renovations, Including the Installation of a Pool

David Epstein, age 46, of Owings Mills, Maryland, pleaded guilty to one count of wire fraud, relating to the submission of fraudulent CARES Act loan applications. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a federal law enacted in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects caused by the COVID-19 pandemic.

The guilty plea was announced by Erek L. Barron, U.S. Attorney for the District of Maryland and Acting Special Agent in Charge Kareem A. Carter of the Internal Revenue Service - Criminal Investigation (“IRS-CI”), Washington, D.C. Field Office.

Financial assistance offered through the CARES Act included forgivable loans to small businesses for job retention and certain other expenses, through the Paycheck Protection Program, administered through the Small Business Administration (SBA), as well as an Economic Injury Disaster Loan (EIDL) and/or an EIDL advance to help businesses meet their financial obligations.

According to his plea agreement, beginning in May 2020 and continuing through February 2021 in the District of Maryland, Epstein engaged in a scheme to defraud financial institutions, including Cross River Bank, Bluevine, Celtic Bank, and the United States Small Business Administration (SBA), to obtain fraudulent loans for his business PEI Staffing (PEI), a temporary staffing company, under the Paycheck Protection Program (PPP), and the Economic Injury Disaster Loan (EIDL) program.

Specifically, on April 30, 2020, Epstein submitted a false and misleading PPP loan application in the name of PEI, seeking approximately $1,307,170 in PPP funds. The application allegedly contained false statements and omissions relating to PEI including the number of employees, the wages paid to employees, and that any funds received would be spend on expenses such as payroll, business rent and business utilities. For example, the application stated that PEI had 382 employees, when in fact, an IRS Form 941 for the second quarter of 2020 listed 79 employees for PEI. Epstein also falsely stated that he did not have common management with any other business. In fact, Epstein was a common manager of both PEI and Stafquik.

As detailed in the plea agreement, Epstein submitted a fictitious February 2020 bank statement for a SunTrust bank that purported to be a bank statement of PEI. In truth, this account was not in the name of PEI but instead was in the name of Stafquik. Epstein admitted that he had earlier altered the bank statement for the purpose of submitting it in connection with PPP applications for PEI.

According to the plea agreement, on May 4, 2020, approximately $1,307,170 in PPP loan proceeds were disbursed to the SunTrust Stafquik account. Within four days, Epstein opened four personal bank accounts at two separate banks and subsequently transferred the PPP loan proceeds to those accounts to be used for personal and unauthorized expenses.

Epstein admitted that he spent the fraudulently obtained PPP funds in multiple ways that were impermissible under the PPP. One day after receiving the PPP funds, on May 5, 2020, Defendant made an ACH transfer in the amount of $110,356.48 from the SunTrust account that received the PPP funds to Mercedes-Benz Financial in connection with a payment for a 2019 Mercedes-Benz GT43C4 automobile previously purchased by the Defendant.

Epstein also admitted that beginning on May 20, 2020, and continuing through in or about August 2020, he transferred approximately $138,522.22 in PPP funds to a contractor in connection with extensive renovations to the Defendant’s home and installation of a pool there. He further admitted to using the PPP funds to pay $100,000 in connection a settlement agreement pertaining to a 2013 litigation involving unpaid insurance premiums and to pay off a $344,341.05 debt related to funds the Defendant misappropriated from a business partner and used for personal expenses. None of these were permissible uses of the PPP funds.

According to the plea agreement, Epstein also used the PPP funds to pay various personal expenses (including a trip to a luxury golf resort) and provided PPP funds to various family members and associates for purposes unrelated to employment with PEI (including his family’s nanny), making withdrawals for himself, and paying off various personal debts. Epstein also attempted to repeatedly add individuals whom he owed money to PEI’s payroll to make it appear as though they were employees when they were not. He also attempted to hide the size of the PPP loan he received, concealing it from his family members, other employees of PEI, and various business partners whom he owed money.

Epstein faces a maximum possible sentence of 20 years in prison followed by up to three years of supervised release. U.S. District Judge Richard D. Bennett has scheduled sentencing for January 14, 2025 at 11:00 a.m.

The District of Maryland Strike Force is one of five strike forces established throughout the United States by the U.S. Department of Justice to investigate and prosecute COVID-19 fraud, including fraud relating to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act was designed to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic. The strike forces focus on large-scale, multi-state pandemic relief fraud perpetrated by criminal organizations and transnational actors. The strike forces are interagency law enforcement efforts, using prosecutor-led and data analyst-driven teams designed to identify and bring to justice those who stole pandemic relief funds.

For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus. Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

U.S. Attorney Barron commended the IRS-CI for its work in the investigation. Mr. Barron thanked Assistant U.S. Attorney Paul A. Riley who is prosecuting the case. Mr. Barron also recognized the assistance of the Maryland COVID-19 Strike Force Paralegal Specialist Joanna B.N. Huber.