Reported / Citable
SAN ANTONIO – The United States Attorney’s Office for the Western District of Texas today announced its role in a nationwide enforcement action led by the Justice Department’s National Fraud Enforcement Division, the Small Business Administration, and the SBA Office of Inspector General targeting fraud in the SBA’s Paycheck Protection Program (PPP). The Western District of Texas was a key participant in this surge effort.
From June 12 to Sept. 1, federal prosecutors across the country facilitated fraud enforcement actions spanning over 160 criminal defendants, including approximately 80 newly charged defendants, reaching approximately $245 million dollars in intended loss to American taxpayers.
“Six years after our first PPP fraud case was charged in Austin, we are still finding fraudsters and holding them accountable for their greed-driven schemes that undermined a federal program and stole from American taxpayers in the midst of the chaos that was the COVID-19 pandemic,” said U.S. Attorney Justin R. Simmons for the Western District of Texas. “This surge, led by the National Fraud Enforcement Division, highlights our commitment to protecting the integrity of our government programs and ensuring no one gets away with defrauding the public.”
“Pandemic loan relief was meant to keep American small businesses alive during government lockdowns—not line the pockets of fraudsters,” said Attorney General Todd Blanche. “The defendants charged during our summer surge allegedly fabricated businesses, submitted false payroll and revenue claims, stole identities, and concealed foreign ties on their applications— but they will now be prosecuted to the fullest extent of the law.”
“This summer surge shows what is possible when dedicated public servants across the country work together with a single purpose,” said Assistant Attorney General Colin M. McDonald of the National Fraud Enforcement Division. “Our mission is clear: protect taxpayer funds, safeguard the integrity of federal relief programs, and deliver justice to those who exploited them. We will remain steadfast every day—standing shoulder-to-shoulder with our partners—to identify fraud, pursue those responsible, and restore confidence in the programs meant to help American small businesses thrive.”
“Today’s announcement represents the largest-ever action against perpetrators of SBA fraud, with 870,000 suspended borrowers tied to $39 billion in suspected fraudulent PPP and COVID EIDL activity. In partnership with Vice President Vance and the White House Task Force to Eliminate Fraud, we’re putting fraudsters on notice: the federal government will no longer turn a blind eye to those who stole from taxpayers and exploited programs designed to sustain small businesses during the pandemic,” said SBA Administrator Kelly Loeffler. “With demand letters going out to suspected fraudsters, we’re also sending a clear message that they must repay their debts or face Treasury collections and possible federal law enforcement. Under this Administration, the free ride is over. We are restoring accountability, recovering taxpayer dollars, and protecting SBA programs for the legitimate small businesses they were created to serve.”
“Operation No Doze brings a focused and coordinated approach to pursuing fraud in SBA’s pandemic relief programs,” said SBA Inspector General William Kirk. “By concentrating our investigative resources and working closely with SBA and our law enforcement partners, we are strengthening our ability to identify fraud, recover taxpayer funds, and hold accountable those who exploited programs created to help small businesses in a time of extraordinary need. This initiative makes clear that the passage of time does not diminish our commitment to accountability.”
In the Western District of Texas, U.S. Attorney Justin R. Simmons announced that two defendants pleaded guilty in two separate PPP-related fraud cases involving approximately a combined $1.2 million in alleged losses.
According to court documents, Arun Mago was an accountant in Austin and a known money launderer. Mago laundered $150,000 in cash represented by an undercover agent to be the proceeds of cocaine distribution. In addition to his money laundering activities, he also engaged in repeated loan fraud during the pandemic, applying for and receiving several fraudulent PPP loans for several business entities totaling $905,264. Mago pleaded guilty in July. IRS-CI investigated the case.
In a separate case, Eve Zou, an employee of the Texas Department of Family and Protective Services, made false and fraudulent promises and representations to the Small Business Administration (SBA) to obtain Economic Injury Disaster Loans (EIDL) and grants that were purportedly for legitimate business purposes, but, in truth and fact, the loan proceeds were used by Zou for her own personal use and benefit, including the purchase of real estate and for investment in brokerage accounts. Zou also made multiple false statements in those loans, including using her daughter’s identity without her daughter’s knowledge or permission, falsely claiming to have 50 employees, and falsely claiming lost rental income. She fraudulently obtained three SBA loans, for a combined total of $319,800. Zou also pleaded guilty. IRS-CI investigated the case.
On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.
An indictment, information, or complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
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Source: U.S. Attorney’s Office — Western District of Texas — U.S. Department of Justice press release.