U.S. Charges Texas Man With $5 Million Cares Act Fraud

The Justice Department alleged that a Texas man fraudulently applied for $5 million of forgivable bank loans through the SBA's Cares Act.
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The Justice Department charged a Texas man with fraud, alleging that he fraudulently applied for $5 million of forgivable bank loans through the Small Business Administration's Coronavirus Aid, Relief and Economic Security Act. 

Samuel Yates, 32, of Maud, Texas, is accused of seeking the loans from two different banks. He claimed "to have over 400 employees earning wages when, in fact, no employees worked for his purported business," a statement from the department said.

The Cares Act is supposed to provide forgivable loans for businesses using the funds for payroll. 

The Department of Justice filed a criminal complaint in U.S. District Court for the Eastern District of Texas, charging Yates with federal violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA. 

"Any time the government provides large amounts of money to the public, there are people who will try to cheat the system,” said Joseph D. Brown, U.S. attorney for the Eastern District of Texas. 

“We encourage lenders to be very careful and to report suspicious applications. It is a priority of the Department of Justice to deter and prosecute this type of fraud.”

In one application, Yates allegedly sought $5 million in Paycheck Protection Program loan proceeds by claiming to have 400 employees with an average monthly payroll of $2 million. 

In the second application, Yates claimed to employ more than 100 individuals and was able to secure a loan of more than $500,000.

Payment protection funds are two-year loans to small businesses with an interest rate of 1%. The businesses must use the proceeds from the loan for payroll costs, interest on mortgages, rent and utilities. 

Businesses that spend the loan proceeds within eight weeks of receipt and use 75% for payroll can have their interest and principal be forgiven.