Two New England men have become the first people charged in the United States with fraudulently applying for aid from a federal program designed to help small businesses deal with financial fallout from the coronavirus pandemic.
The men allegedly applied for more than $500,000 in assistance from the new CARES Act Payroll Protection Program, federal prosecutors said Tuesday.
David Staveley, 52, a resident of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, allegedly claimed to "have dozens of employees earning wages at four different business entities when, in fact, there were no employees working for any of the businesses," the Justice Department said.
Staveley and Butziger are charged in a federal criminal complaint with conspiracy to make false statements to influence the Small Business Administration and conspiracy to commit bank fraud.
Staveley, who also is known by the name Kurt Sanborn, additionally is charged with aggravated identity theft, and Butziger also is charged with bank fraud.
Under the name Kurt Sanborn, Staveley was sentenced in 2015 to 27 months in federal prison for fraud related to mortgages on properties in New Hampshire.
Prosecutors said Tuesday that he and Butziger are alleged to have discussed via email "the creation of fraudulent loan applications and supporting documentations to seek loans guaranteed by the SBA for COVID-19 relief."
Rhode Island U.S. Attorney Aaron Weisman, whose office lodged the charges, said in a statement, "Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic."
"It is unconscionable that anyone would attempt to steal from a program intended to help hard working Americans continue to be paid so they can feed their families and pay some of their bills," Weisman said.
Authorities said that Staveley claimed in loan applications seeking $438,500 "that he had dozens of employees at three restaurants he owned, two in Warwick, Rhode Island, and one in Berlin, Massachusetts."
"An investigation determined that one of the Rhode Island restaurants, the former Remington House, and the Massachusetts restaurant, On The Trax, were not open for business prior to the start of the COVID-19 pandemic, at the time the loan applications were submitted, or at any time thereafter," according to the Justice Department.
"Moreover, Staveley did not own or have any role in the second Rhode Island restaurant, Top of the Bay, for which he was seeking financial relief."
Court records show that Staveley's Massachusetts restaurant was closed by March 10 after the town of Berlin revoked its liquor license for reasons that include "Sanborn" allegedly misrepresenting "that his brother owned the restaurant," the Justice Department said.
"Investigators obtained information that Staveley/Sanborn allegedly used his brother's personal identifying information in other real estate transactions as well," the Justice Department said.
Court documents also say that on April 6, Butziger applied for a $105,381 SBA loan as the owner of a company named Dock Wireless.
Butziger allegedly claimed in bank documents and in a call with an FBI undercover agent posing as a bank compliance officer that he had seven full-time workers on Dock Wireless' payroll, including himself.
But Rhode Island State Department of Revenue records did not show any evidence of such workers, according to the Justice Department.
The CARES Act, which became law at the end of March, offers emergency financial aid to Americans affected by the coronavirus outbreak.
The Payroll Protection Program, which is part of the law, originally authorized $349 billion in forgivable loans to small businesses to help them retain employees and to cover some other expenses. Congress last month authorized more than $300 billion in extra funds for the PPP after the original allotment ran dry.
