Former Seattle man who used fraud to obtain more than $500,000 in COVID benefits sentenced to 3+ years in prison

Seattle – A 30-year-old New York City man was sentenced today in U.S. District Court in Seattle to 42 months in prison for three counts of wire fraud and two counts of bank fraud related to his abuse of the COVID-19 Pandemic Paycheck Protection Program (PPP), announced U.S. Attorney Tessa M. Gorman. Donte McClellon was a resident of Seattle when he submitted falsified documents to obtain $500,948 in loan proceeds from three different financial institutions in May and June 2020. At today’s sentencing hearing U.S. District Judge Lauren King noted that the societal costs of these crimes are serious, saying that the crimes affected taxpayers and diverted funds from struggling small businesses. Judge King added that McClellon had never accepted responsibility for his crimes, and he used the money to fund investments and personal expenses.

“The negative effects of McClellon’s crime go beyond the financial loss. His fraudulent applications clogged an overtaxed application system and stole valuable resources from lending institutions working tirelessly to distribute money,” said U.S. Attorney Gorman. “McClellon even attempted to cut the line in front of actual small businesses. His fraud was not a one-time error in judgment, but rather a calculated attempt to take advantage of the relief systems set up for businesses struggling because of the COVID-19 pandemic.”

According to records filed in the case, McClellon used the names of three limited liability corporations he had once registered in the State of Washington to make his claims. Each of the entities, ‘Frostlake,’ ‘Cannonlake,’ and ‘Skylake’ LLC, had been inactive and showed no signs of business activity in any state or federal registries in the years leading up to the pandemic. Nevertheless, in May and June 2020, McClellon submitted Paycheck Protection Program applications claiming the entities each had as many as 13 employees and, in one case, gross receipts of more than $1.6 million. McClellon forged multiple Internal Revenue Service forms to make it appear the three companies were operating real estate, wholesale, or retail businesses, with employees who would benefit from the Paycheck Protection Program loans. McClellon claimed the businesses operated out of his home address in Seattle. The investigation revealed there was no business activity at that address.

In two cases, McClellon asked lenders to distribute the loan funds to bank accounts that McClellon had set up just days before he made the loan applications. The third loan went to McClellon’s personal bank account. McClellon consolidated most of the fraudulent proceeds in his personal account. McClellon used the money to pay his rent on a Manhattan apartment, for travel and gym memberships, and some $20,000 on Uber rides among other personal, non-business expenses.

The case was investigated by The FBI Seattle Field Division with assistance from FBI New York and the Small Business Administration Office of Inspector General (SBA-OIG).

The case was prosecuted by Assistant United States Attorneys Lauren Watts Staniar, Jessica Murphy Manca, and Krista Bush.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.

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 (NCDF) Hotline via the NCDF Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.