Charged: 3 from Milwaukee, 2 from Chicago in connection to COVID-19 relief fraud scheme

By: CBS 58 Newsroom

Posted: Oct 22, 2020 10:10 AM CDT

(CBS 58) -- Five people, three from Milwaukee and two from Chicago, were charged for their alleged involvement in a COVID-19 relief fraud scheme.

The United States Department of Justice reported Thursday, Oct. 22, the individuals allegedly participated in a scheme to file fraudulent loan applications seeking more than $1.1 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The following individuals were charged in an indictment filed in the Eastern District of Wisconsin with bank fraud and money laundering.

Thomas Smith, 46, Milwaukee
Stephen Smith, 42, Milwaukee
Robert Hamilton, 59, Milwaukee
Samuel Davis Jr. 40, Chicago
Jonathan Henley, 52, Chicago

The DOJ says the indictment alleges that the defendants submitted several fraudulent PPP loan applications to a federally insured financial institution and the SBA in the names of businesses with no actual operations or employees. In the applications, the defendants allegedly misrepresented the number of employees and payroll expenses. To support the fraudulent applications, the indictment alleges that the defendants submitted fake tax documents. The defendants are alleged to have fraudulently sought over $1.1 million in PPP loan funds.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted March 29, 2020. It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.

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. Businesses must use PPP loan proceeds 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.

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 Hotline at 866-720-5721 or via the NCDF Web Complaint Form HERE.