Report Alleges More Than $1 Billion In Bad PPP Loans As Feds Make Another Arrest – Forbes

The feds have made another arrest tied to Paycheck Protection Program (PPP) loan fraud. This time, it’s an attorney facing charges. Jae H. Choi, who has an office in Fort Lee, New Jersey, has been accused of fraudulently obtaining nearly $9 million in PPP loans.

Choi has been charged with three counts of bank fraud and one count of money laundering. According to the complaint, Choi submitted three fraudulent PPP loan applications to three different lenders on behalf of three businesses that allegedly provided educational services. The Department of Justice did not release the names of the companies, but a LinkedIn profile that matches Choi’s educational and legal info tags him as the CEO of Homeschool Buyers Co-op and MathCloud.

Choi allegedly falsely represented to lenders that the companies had hundreds of employees and paid over $3 million in monthly wages. To do this, he reportedly fabricated the existence of those employees, manipulated bank and tax records, and falsified a driver’s license on the applications. 

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According to the Department of Justice, based on those representations, each lender funded the three businesses with approximately $3 million in PPP loans. As a result, the complaint alleges that Choi received a total of nearly $9 million.

The feds claim that Choi did not use the PPP loans for those businesses. Instead, they claim that he used loan proceeds to pay for personal expenses, including purchasing a nearly one-million-dollar home in Cresskill, New Jersey, and approximately $30,000 in remodeling and other improvements. Choi also allegedly invested millions more in the stock market through an account held in his spouse’s name.

It’s unclear what kind of law Choi practiced before his arrest, but a profile indicates that Choi focuses on patent law. According to the New York State Unified Court System and the New Jersey Courts, Choi has no previous record of public discipline.

The PPP, which was part of the CARES Act, consists of billions of dollars in forgivable loans guaranteed by the Small Business Administration (SBA) intended to keep workers on the payroll. But mistakes have been made. A recent report by the House Select Subcommittee on the Coronavirus Crisis advised that over $1 billion in COVID relief went to companies in violation of the program’s rules. Specifically, 10,856 loans (totaling more than $1 billion) appeared to be multiple loans to the same recipient. The report also found more than 600 loans (totaling more than $96 million) went to companies that have been debarred or suspended from doing business with the federal government. And there were also more than 350 loans (totaling more than $195 million) that went to government contractors previously flagged by the federal government for performance or integrity issues.

You can read the entire report here (downloads as a PDF).

The feds promise that there will be more of these kinds of cases as they investigation fraud allegations. There have been other high-profile arrests tied to PPP loan fraud. In May of this year, David A. Staveley (a/k/a Kurt D. Sanborn) of Andover, Massachusetts, and David Butziger of Warwick, Rhode Island, were accused of conspiring to illegally obtain funds through the PPP loan program. Shortly after his indictment, Staveley disappeared. According to federal authorities, David A. Staveley apparently cut off his GPS-monitoring device. The U.S. Attorney’s office said Staveley then faked his own death by staging a suicide with a note in his car. He was eventually apprehended by the United States Marshals Service in Alpharetta, Georgia on July 23, 2020.

And in July, I reported the arrest of a Florida man charged with fraudulently obtaining $3.9 million in PPP loans and using those funds, in part, to purchase a 2020 Lamborghini Huracan sports car.

As part of my reporting for these stories, I had a conversation with Jeff Grant, who explained that he understood these kinds of stories all too well: he served almost fourteen months in federal prison for a white-collar crime. That crime was related to improperly taking a low-interest SBA loan following 9/11 (similar to the PPP loans but without the forgiveness part). Grant and I discussed the temptation to cheat the system and the consequences (you can listen to it here). 

This won’t be the last of these kinds of arrests: the authorities have indicated that investigations are ongoing. This particular case was investigated by IRS – Criminal Investigation, the U.S. Postal Inspection Service, the Small Business Administration Office of the Inspector General, and the Social Security Administration – Office of the Inspector General. 

The government asks that 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 Hotline at 866-720-5721 or via the NCDF Web Complaint Form.

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Author: HOCAdmin