Texas engineer sought millions of dollars in forgivable loans to pay non-existent employees.
A Texas based Indian American engineer has pleaded guilty for filing fraudulent bank loan applications seeking more than $10 million dollars in forgivable loans under covid-relief law.
Shashank Rai, 30, of Beaumont, pleaded guilty in the Eastern District of Texas Tuesday to one count of making false statements to a bank, according to a Justice Department release.
He was charged on May 13, 2020, with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the Small Business Administration (SBA).
As part of his guilty plea, Rai admitted that he sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have 250 employees earning wages when, in fact, no employees worked for his purported business.
Rai made two fraudulent claims to two different lenders for loans guaranteed by the SBA for Covid-19 relief through the Paycheck Protection Program (PPP).
In the application submitted to the first lender, Rai sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million.
In the second application, Rai sought approximately $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.
According to court documents, the Texas Workforce Commission provided information to investigators of having no records of employee wages having been paid in 2020 by Rai or his purported business, Rai Family LLC.
In addition, the Texas Comptroller’s Office of Public Accounts reported to investigators that Rai Family LLC reported no revenues for the fourth quarter of 2019 or the first quarter of 2020.
According to court documents, materials recovered from the trash outside of Rai’s residence included handwritten notes that appear to reflect an investment strategy for the $3 million, which is the amount of money that Rai allegedly sought from the second lender.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted on March 29, 2020 provided for emergency financial assistance including up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP.
The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. PPP loan proceeds must be used by businesses for payroll costs, interest on mortgages, rent and utilities.
The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.