Feds Charge Texas Man with Filing Fraudulent PPP Loan Applications in COVID-19 Relief Scheme

A Texas man who allegedly fraudulently obtained millions of dollars in Paycheck Protection Program loans and spent the proceeds on luxury personal expenses is facing federal charges for wire fraud, bank fraud and money laundering. The criminal charges were announced by Acting Assistant Attorney General Brian C. Rabbitt of the Department of Justice’s Criminal Division and U.S. Attorney for the Northern District of Texas Erin Nealy Cox, in a press release issued by the Department of Justice on October 9. According to the press release, 55-year-old Dinesh Sah of Coppell, Texas, fraudulently applied for approximately $24.8 million in PPP loans, claiming that he needed the loans to pay his employees. He then spent roughly $17.7 million in PPP funds on extravagant purchases, including multiple homes and a new Bentley convertible, and allegedly sent millions of dollars in PPP proceeds in international transfers.

Indictment Includes Charges for Bank Fraud, Wire Fraud & Money Laundering

According to Acting Assistant Attorney General Brian C. Rabbitt and U.S. Attorney for the Northern District of Texas Erin Nealy Cox, a federal grand jury indicted Dinesh Sah on three counts of bank fraud, three counts of wire fraud and one count of money laundering. “Mr. Sah exploited this terrible pandemic for personal gain – and he should be held accountable to the American people for that behavior,” said Nealy Cox in the Justice Department press release. “COVID-19 has devastated the finances of hardworking business owners across the nation. PPP funds should be reserved for those who really need them to keep their companies afloat. We are committed to ensuring that anyone that takes advantage of the system will be brought to justice.”

What is the Paycheck Protection Program?

The Paycheck Protection Program (PPP) is a federal loan program established under the historic Coronavirus Aid, Relief, and Economic Security (CARES) Act, a federal law enacted to provide emergency financial relief to millions of Americans struggling with financial difficulties as a result of the coronavirus pandemic. Initially worth $349 billion, the PPP program received another $400 billion in funding from Congress, for a total of $649 billion in COVID-19 small business aid. Under the Paycheck Protection Program, qualifying small businesses could apply for loans to pay their employees’ wages and keep their business operations going during COVID-19. The loans are guaranteed by the Small Business Administration (SBA), with no collateral requirements or personal guarantees, and are 100% forgivable if the business uses the funds to keep employees on the payroll and to pay for other specified business expenses.

The amount of PPP funds a business could receive under the Paycheck Protection Program was based on the number of employees employed by the business and the business’ average monthly payroll costs. And while many businesses applied for and received PPP funds in good faith and used the funds to keep their business afloat during the COVID-19 downturn, others secured PPP loans through fraudulent means – either by overstating the number of employees they had on their payroll or the wages they paid, or by fabricating entire businesses and applying for loans under those business names – and used the loans for their own personal gain. According to a statement made by Acting Assistant Attorney General Brian Rabbitt at last month’s PPP Criminal Fraud Enforcement Action Press Conference, “these defendants used lies to obtain millions of dollars in PPP funds and then spent those funds on things like luxury cars, homes, renovations, jewelry — and even adult entertainment and gambling in Las Vegas.”

Defendant Submitted Fraudulent Applications for PPP Loans

According to the indictment returned by the federal grand jury in Texas, Dinesh Sah allegedly submitted 15 fraudulent applications for PPP funds under the names of various businesses that he owned or controlled, to eight different lenders, seeking a total of $24.8 million in PPP loans. Sah lied on his loan applications in order to fraudulently obtain PPP funds, authorities allege, claiming that his businesses employed numerous employees and had hundreds of thousands of dollars in payroll expenses. He also allegedly submitted forged bank statements and falsified tax records in support of these claims. In reality, many of Sah’s businesses were created after the enactment of the CARES Act and none of the businesses employed the number of employees or paid wages consistent with the amounts Sah claimed on his loan applications.

Sah ultimately secured $17.7 million in PPP funds and used the money primarily for personal expenses, according to the federal indictment. He allegedly spent $266,502 to pay off the mortgage on his home in Coppell, Texas. He also purchased another home in Texas for $450,000, paid off two homes in his wife’s name in California for $537,250, and sent $50,000 to India via a wire transfer, the indictment states. Rabbitt and Cox report that the government has seized more than $6.5 million in loans that Sah obtained through the Paycheck Protection Program fraud scheme, as well as six homes in Texas and properties in California.

“Today’s indictment shows Mr. Sah’s disgraceful display of greed,” said Tamera Cantu, IRS-Criminal Investigation’s Special Agent in Charge of the Dallas Field Office. “Mr. Sah looked at the Paycheck Protection Program as his own personal piggy bank, treating himself to not only millions in cash, but several luxury vehicles and properties, all while legitimate small business owners in the United States desperately sought out ways to put food on their tables and to ensure their employees were paid. This indictment reinforces that IRS Criminal Investigation, the U.S. Attorney’s Office and our federal partners in the Northern District of Texas are dedicated to working together to protect innocent Americans from these CARES Act fraudsters.”

Federal Offenses Tied to PPP Loan Fraud

Among the federal charges brought by the federal government against the dozens of defendants accused of defrauding or attempting to defraud the Paycheck Protection Program are bank fraud, wire fraud and money laundering. All white-collar offenses, these crimes are nonviolent crimes typically committed by business or government professionals for the purpose of financial gain. Bank fraud is a violation of 18 U.S. Code § 1344 and the potential punishment for a federal bank fraud conviction is up to $1 million in fines, imprisonment in federal prison for up to 30 years, or both. Wire fraud is a violation of 18 U.S. Code § 1343 and the potential punishment a defendant faces upon conviction for federal wire fraud is the same – up to $1 million in fines, imprisonment in prison for up to 30 years, or both.

Money laundering offenses are covered by two federal statutes: 18 U.S. Code § 1956, which prohibits four kinds of money laundering (concealment, promotional, structuring and tax evasion laundering of the proceeds generated by specified unlawful activity), and 18 U.S. Code § 1957, which prohibits depositing or spending more than $10,000 of the proceeds from specified unlawful activity. A violation of 18 U.S. Code § 1956 carries a potential punishment of up to $500,000 in fines or twice the amount involved in the illegal transaction, whichever is greater, and imprisonment in federal prison for up to 20 years. For a violation of 18 U.S. Code § 1957, the potential punishment includes imprisonment for up to ten years. Sections 1956 and 1957 both include “attempts” to commit these offenses, as well as completed offenses, which means a defendant can face federal charges for any attempt to launder PPP funds, even if the crime is not fully carried out.

Justice Department Ramping Up Efforts to Prosecute COVID-19 Fraud

Early charges brought against individuals accused of fraudulently seeking loans under the Paycheck Protection Program demonstrate the Justice Department’s commitment to aggressively investigating and prosecuting fraudulent activity tied to the loan program. The very first PPP fraud charges were filed in the District of Rhode Island against two businessmen accused of filing fraudulent bank loan applications in May, mere months after the Small Business Administration began accepting applications for Paycheck Protection Program loans. And the Department of Justice has kept its momentum going, filing charges against more than 57 individuals accused of attempting to steal $175 million in coronavirus relief funds, and issuing a press release announcing the arrests and charges in each case.

The Justice Department has tapped numerous federal agencies to assist in investigating allegations of PPP loan fraud across the country, including the FBI, the Criminal Investigation Division of the IRS, the SBA Office of Inspector General and the FDIC Office of Inspector General, and it has brought criminal charges in no fewer than 19 federal districts for bank fraud, wire fraud, money laundering and other offenses related to PPP loan fraud. Sah’s PPP fraud case was investigated by the IRS-Criminal Investigation, the FDIC Office of Inspector General’s Dallas Field Offices, and the U.S. Treasury Inspector General for Tax Administration. The case will be prosecuted by Assistant Deputy Chief Anna G. Kaminska of the Criminal Division’s Fraud Section, Economic Crimes and Public Corruption Section Chief Katherine Miller of the U.S. Attorney’s Office for the Northern District of Texas, and Assistant U.S. Attorney Erica Hilliard, also of the U.S. Attorney’s Office for the Northern District of Texas.