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Press Release

Two Florida Men Plead Guilty to $35 Million COVID-19 Relief Fraud Scheme

For Immediate Release
U.S. Attorney's Office, Northern District of Ohio
Northern District of Ohio entities received $875,000 in fraudulent PPP loans

Two Florida men pleaded guilty this week in the Northern District of Ohio for leading a nationwide scheme to fraudulently obtain over $35 million in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

According to court documents, James R. Stote, 55, of Hollywood, and Phillip J. Augustin, 52, of Coral Springs, conspired to obtain millions of dollars in fraudulent PPP loans.  Augustin and Stote obtained a fraudulent PPP loan for Augustin’s company, Clear Vision Music Group LLC, using falsified documents.  After submitting that application, Stote and Augustin immediately began working to obtain larger PPP loans for themselves and their associates. Stote and Augustin recruited additional PPP loan applicants and prepared and submitted fraudulent loan applications for them in exchange for a share of the loan proceeds.  Augustin used his network of business contacts from his work as a manager for professional football players.  The applications they submitted for all of the loans in the scheme relied on fake payroll numbers, falsified IRS forms and phony bank statements.  They submitted or facilitated at least 79 fraudulent loan applications worth at least $35 million and planned to submit more.  As part of the plea, Stote agreed to forfeit more than $1 million in proceeds of the fraud that had previously been seized. 

The scheme included at least two loans to entities in Northeast Ohio worth approximately $875,000. 

“These convictions, and the numerous convictions of others involved in this wide-ranging conspiracy, demonstrate that people will be held accountable for defrauding the PPP Program,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division.  “Fraud against PPP programs directly harms taxpayers and undermine public trust in essential government support during the pandemic.  We will continue to combat fraud and ensure that COVID-19 relief goes to those who deserve it.”

“While many businesses in our communities relied upon relief funds to keep their doors open and employees paid, these defendants profited off a scheme that stole millions of taxpayer dollars intended for struggling businesses and spent it lavishly on themselves,” said First Assistant U.S. Attorney Michelle M. Baeppler for the Northern District of Ohio.  “Theft of government funds will not be tolerated, and prosecuting PPP fraud remains a priority for law enforcement.”

Stote and Augustin each pleaded guilty to conspiracy to commit wire fraud.  They are scheduled to be sentenced at a later date and each face a maximum penalty of 20 years in prison.  A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

“From submitting false documentation to recruiting other individuals, the defendants went to great lengths to defraud the Paycheck Protection Program of millions of dollars,” said Special Agent in Charge Bryant Jackson of IRS Criminal Investigation (IRS-CI), Cincinnati Field Office.  “IRS-CI will continue to work with our law enforcement partners to hold those accountable that defraud programs designed to help struggling Americans and businesses.”

“This sentencing serves as a deterrent to anyone who would commit fraud targeting COVID-19 relief programs,” said Acting Assistant Director Jay Greenberg of the FBI’s Criminal Investigative Division.  “Programs like these were created to help individuals during a pandemic, not for fraudsters to take advantage for personal gain.  The FBI will continue to pursue criminal actors who engage in this activity.”

“Conspiring to fraudulently use SBA program funds is unacceptable,” said Special Agent in Charge Sharon Johnson of the SBA Office of Inspector General’s (SBA-OIG) Central Region.  “OIG will aggressively root out fraud to protect the integrity of SBA’s programs, which are intended to provide vital assistance to the nation’s small businesses.  I want to thank the Department of Justice and our law enforcement partners for their dedication and commitment to seeing justice served.”

In total, 25 people have been charged for their participation in this scheme in the Northern District of Ohio, Southern District of Florida and Middle District of North Carolina.  To date, 20 of those defendants have been convicted.

The IRS-CI, FBI and SBA-OIG are investigating the cases.

This case is being prosecuted by and Assistant U.S. Attorney Elliot Morrison and Trial Attorney Philip Trout of the Criminal Division’s Fraud Section.

 

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Contact

Daniel Ball Daniel.Ball@usdoj.gov

Updated March 6, 2024

Topics
Coronavirus
Disaster Fraud
Financial Fraud