January 29, 2022

Two south Florida men plead guilty in $35M COVID scam

Two South Florida men have pleaded guilty to a scheme to defraud the federal government of $35 million worth of Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) and funded by federal coronavirus relief money.

James R. Stote, 55, of Hollywood and Phillip J. Augustin, 52, of Coral Springs pleaded guilty this week in the Northern District of Ohio for leading a scheme that stretched from Florida to Ohio, the U.S. Department of Justice (DOJ) announced. The two pleaded guilty to conspiracy to commit wire fraud, and each faces up to 20 years in prison.

The scheme began after Stote and Augustin initially applied for a PPP loan with the SBA for Augustin’s company, Clear Vision Music Group LLC, using falsified documents, according to the DOJ. They began recruiting others to apply for loans and in larger amounts, taking a cut.

They submitted or facilitated 79 loan applications using fake payroll numbers, falsified IRS forms and phony bank statements, worth about $35 million.

“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,” Assistant Attorney General Kenneth Polite Jr. said in a statement. “Fraud against PPP programs directly harms taxpayers and undermines 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.”

The scheme involved willing participants such as Diamond Smith, 37, of Miramar, who was sentenced to 20 months in jail after pleading guilty Aug. 4 in the Southern District of Florida to conspiracy to commit wire fraud.

Smith, a recording artist, applied for and received $426,717 for his company, Throwbackjersey.com LLC, using falsified documents and false information. He then applied for another PPP loan of $708,065 for another company, Blue Star Records LLC, also using falsified documents and false information.

Instead of using PPP funds for payroll, he spent the money at a hotel and casino and on luxury items, including a Ferrari. He also paid more than $250,000 to Stote and Augustin for preparing and submitting the fraudulent loan applications.

Smith was ordered to pay $1,111,345.23 in restitution and $1,134,782 in forfeiture, in addition to his prison sentence.

“When the Paycheck Protection Program was implemented over one year ago, our Office committed to protecting South Floridians from those trying to exploit the Covid-19 pandemic,” said U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida. “Our work is not done. We will continue to hold accountable those who wrongfully obtain funds intended to help struggling small businesses survive the current health and economic crisis.”

Twenty-five people were charged in Stote and Augustin’s scheme in the Northern District of Ohio, Southern District of Florida and Middle District of North Carolina. Twenty have been convicted, the DOJ said.

The DOJ’s Fraud Section is tasked with prosecuting PPP fraud schemes. Since the inception of the Coronavirus Aid, Relief and Economic Security Act in 2020, the DOJ’s Fraud Section has prosecuted more than 150 defendants in more than 95 criminal cases.

It also has seized more than $75 million worth of cash proceeds from fraudulently obtained PPP funds, in addition to real estate properties and luxury items purchased with the money, according to the announcement.

This article was originally posted on Two south Florida men plead guilty in $35M COVID scam