Articles Tagged with bank fraud

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Two men in Rhode Island were recently arrested and charged by federal prosecutors with attempting to defraud the Small Business Administration (SBA) of over $500,000 by purportedly submitting a false application for relief funds earmarked for small business owners through the Coronavirus Aid, Relief and Economic Security (CARES) Act. Given the increasing desperation of many small business owners during the pandemic and quarantine, as well as the significant amount of federal funding being made available, one can expect more such prosecutions to occur in the near future.

According to a Department of Justice press release, David Butziger and David Staveley sought over half a million in forgivable loans for various businesses that either were no longer operating, for which they had no employees, or in which they held no ownership stake. Though they have not yet been indicted, they have been charged by way of criminal complaint Conspiracy to Make a False Statement to Influence the SBA (18 U.S.C. § 371), Conspiracy to Commit Bank Fraud (18 U.S.C. § 1349), and Bank Fraud (18 U.S.C. § 1344[2]). Though it is difficult to estimate the prison penalties they may be facing, a fraud involving $500,000 might put them at an offense level of 18 for purposes of the Federal Sentencing Guidelines. As such, they might be facing a Guideline sentence of 18-24 months in prison following a guilty plea. However, there is no statutory minimum sentence, so they could receive in theory receive probation.

This arrest and prosecution should serve as a serious warning to any small business owners considering submitting false or exaggerated applications. However, it will be interesting to see whether the federal authorities will start making arrests or threatening to prosecute individuals whose applications might contain sloppy mistakes rather than outright falsehoods. Without the assistance of a competent accountant, or with a fluctuating and/or seasonal payroll, one could easily envision a small business owner submitting an “honest” application that raises eyebrows from SBA administrators.

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