Two former residents of Monmouth County, now residing in Frisco, Texas, were arrested today for their roles in fraudulently obtaining over $3 million in federal Paycheck Protection Program (PPP) payments, U.S. Attorney Philip R. Sellinger announced.
According to U.S. Attorney Sellinger, Jean E. Rabbitt, 51, formerly of Farmingdale, is charged by complaint with bank fraud, conspiracy to engage in monetary transactions in property derived from specified unlawful activity and engaging in monetary transactions in property derived from specified unlawful activity.
U.S. Attorney Sellinger also said that Kevin Aguilar, 51, formerly of Farmingdale, is charged by complaint with conspiracy to engage in monetary transactions in property derived from specified unlawful activity and engaging in monetary transactions in property derived from specified unlawful activity.
According to documents filed in this case and statements made in court:
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans suffering the economic effects caused by the COVID-19 pandemic.
One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP.
In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent.
PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities.
The PPP allows the interest and principal on the PPP loan to be forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses at least a certain percentage of the PPP loan proceeds on payroll expenses.
Rabbitt submitted fraudulent PPP loan applications on behalf of four businesses that she controlled.
The applications contained fraudulent representations to the lenders, including a Federal Home Loan Bank member and the Small Business Administration (SBA), including fraudulent payroll records and tax records and false certifications as to the number of employees and gross revenue of Rabbitt’s businesses.
According to IRS records, none of the purported tax documents that Rabbitt submitted to the PPP lenders were, in fact, filed with the IRS.
Other government records showed that, contrary to the fraudulent payroll records and certifications, Rabbitt’s businesses had not, in fact, paid wages to any employees.
Based on Rabbitt’s alleged misrepresentations in the loan applications, Rabbitt’s businesses received approximately $3.33 million in federal COVID-19 emergency relief funds meant for distressed small businesses.
After Rabbitt’s businesses received the PPP loans through the fraudulent applications, Aguilar created sham payroll companies.
Rabbitt then wrote checks from Rabbitt’s businesses to the sham payroll companies, falsely indicating on each check that the payments were for payroll.
Rabbitt and Aguilar then transferred funds from the sham payroll companies to other companies that Aguilar created.
Aguilar and Rabbitt then used the funds to purchase residential properties in Sherman, Texas, and to pay for personal expenses.
Rabbitt also made false and fraudulent statements and used falsified and fraudulent documents in support of applications for forgiveness of certain of the PPP loans.
Based on Rabbitt’s false and fraudulent certifications and documents, the SBA paid more than 2 million dollars to lenders in connection with the fraudulent PPP loans Rabbitt obtained.
Each count of bank fraud carries a maximum penalty of 30 years in prison and a fine of $1 million.