In the past year and a half, federal prosecutors have charged more than a dozen individuals in the St. Louis area for fraud relating to the Paycheck Protection Program and other COVID-relief programs. The various schemes that have resulted in prosecution add up to more than $7 million in alleged fraud, according to analysis of court documents by the RFT.
A source familiar with the matter tells the RFT that the number of individuals charged with COVID-related fraud in the Eastern District of Missouri will continue to grow.
One study from last year out of the University of Texas at Austin found that 15 percent of PPP loans, which were intended to help businesses negatively impacted by the pandemic cover payroll loans, were given out to fraudsters. That 15 percent is equal to $76 billion.
The largest allegations in the Eastern District so far are against Christopher Carroll and George Reed, two men on the sex offender registry who, prior to the COVID-19 pandemic, ran Square One Development Group. Headquartered in Clayton, the business aided individuals wanting to exit time-share rental agreements. The majority of the company's staff was in sales and paid on commission rather than salary.
According to court documents, Carroll described PPP loan money as "1.6 million in free dollars."
Carroll and Reed received an initial PPP loan of a little more than $1.2 million in May 2020. But instead of using this money to cover payroll, Carroll and Reed allegedly furloughed much of their staff without pay. Those who were not furloughed only received sales commissions.
According to their indictment, the two men "continued to require that their sales staff make sales and generate revenue in order to receive compensation, despite the fact that to make in-person sales, employees would have to travel during a global pandemic and meet in-person with potential customers."
When employees complained, court documents say, Carroll encouraged them to apply for unemployment benefits.
Instead of covering payroll, prosecutors allege that Carroll and Reed used much of the $1.2 million to start a new company, Whiskey Dix Big Truck Repair. According to court documents, the two men bought trucks, vans and trailers, as well as land in Bourbon, Missouri, where the newly incorporated Whiskey Dix established its headquarters.
In March 2021, Reed took out a second PPP loan in the name of his wife for $1.6 million, again claiming an intention to cover payroll for the time-share exit company's staff. However, court documents allege that Reed and Carroll used more than $600,000 from the second loan to pay themselves.
Both men were indicted in September of last year. They face four counts of bank fraud and five counts of money laundering.
The Reed and Carroll case is hardly the only one related to COVID-relief fraud currently working its way through the Eastern District of Missouri.
In April 2021, Rose Shaw of St. Louis County was indicted for applying for and receiving PPP loans for three companies she claims she ran, stating on loan applications that she had seven employees. According to her indictment, the only employee at any of her companies was Shaw herself. Nonetheless, she received $357,000 in PPP loans to cover payroll.
The following month, Porshia Thomas of St. Louis was indicted for receiving a $291,600 PPP loan to help cover payroll for what she said in her application were the 15 employees at her company, Couture Trading. Her indictment states, "in truth and fact, Couture Trading had few if any payroll expenses." Instead, Thomas allegedly used the money to buy an Audi Quattro as well as to shop at Neiman Marcus, Ulta, Bath and Body Works and Victoria's Secret.
In June 2021, U.S. Attorneys indicted a group of three individuals for allegedly using a St. Louis-based company, Legacy Consumer Directed Services, to defraud Medicaid pre-pandemic. In addition to the Medicaid fraud, the indictment also alleges that in August 2020, the group used Legacy to apply for and receive $90,000 in PPP loans.
According to an indictment filed in August, Deandre Horne of St. Louis County vastly inflated his towing and trucking companies’ number of employees and revenue in his PPP and Economic Injury Disaster Loan applications. He allegedly received around $295,000 in fraudulent relief money.
A November 2021 indictment outlines the case against Florissant mother and son Dionneshae Forland and Dwayne Times, who allegedly submitted applications for PPP loans for six different businesses. The applications contained fraudulent IRS forms and doctored bank statements, with Forland submitting the same statements multiple times for multiple companies, with only some basic identifying information altered. The mother and son face 11 counts in total with charges including wire fraud, bank fraud, theft of government property and identity theft. Court documents allege they received around $700,000 in ill-gotten relief funds.
Fake Companies, Fake People
While Carroll, Reed and many others stand accused of misrepresenting real companies, others in the St. Louis area applied for and got COVID-relief funds for companies that didn't exist at all – not even on paper.
David Smiley of St. Charles applied for and received an EIDL loan for $54,900 to help keep his company "DC Investments" afloat. In his application, Smiley stated that DC Investments had revenues of $175,000 for the year pre-COVID. However, according to court filings, DC Investments does not exist.
Neither does Kathryn Thomure Accounting and Tax Services, for which Kathryn Thomure of Farmington applied for and received a $29,375 PPP loan. At the time, Thomure worked for U.S. Bank and her job was to review incoming PPP loan applications.
Neither Smiley nor Thomure appear to have had LLCs for their companies registered with the state of Missouri at the time they received the funds.
Smiley was indicted in August 2021, Thomure in April 2022.
Forty-six year-old Terrell Alexander of St. Louis is also alleged to have invented at least one company and the person who allegedly ran it. In July 2020, the Small Business Administration issued a $25,000 loan to "Ferrell Thomas," a fake persona court documents state Alexander created. He even submitted a fake driver's license and social security number on behalf of the fictitious person.
The $25,000 sent to the fictitious Ferrell is just a small percentage of the $1 million dollars in Covid-relief funds that Alexander is accused of fraudulently receiving from the SBA and the Economic Injury Disaster Loan Program. According to court filings, Alexander exaggerated the pre-COVID revenue and numbers of employees at his company Direct Management, LLC, as well as at other companies for which he applied for loans.
In addition to inventing Ferrell Thomas, Alexander also allegedly stole the identity of other individuals, using their names and social security numbers to apply for and receive COVID-relief loans.
Alexander was indicted in March.
Ten years in Prison
While many of these cases will likely take months, if not years, to work their way through the courts, the government has already wrapped up one case of PPP-related fraud in the area.
In December last year, 58-year-old Robert Williams of St. Louis was indicted on seven counts of bank fraud.
According to a Department of Justice press release, Williams submitted "approximately thirty different PPP loan applications that contained materially false statements."
He used some of the $1.5 million to buy a Maserati Levante and a Jaguar F-Pace.
Williams waived his right to be indicted by a grand jury and then pleaded guilty to all seven charges.
This April, Williams was sentenced to a little more than 10 years in prison.
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