Source: United States Department of Justice News
SAN JUAN, Puerto Rico – W. Stephen Muldrow, U.S. Attorney for the District of Puerto Rico, announced the indictment of six individuals for a multi-million-dollar fraudulent scheme to illegally obtain federal recovery funds under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Grand Jury charged the defendants with multiple counts of wire fraud, money laundering, Paycheck Protection Program (PPP) fraud, and Economic Injury Disaster Loan (EIDL) fraud. The charging documents claim that from April 2020 through April 2023, the defendants and their co-conspirators caused the submission of at least 272 EIDL and PPP loan applications seeking the illegal disbursement of at least $9,020,590.33 in federal recovery funds from the U.S. Small Business Administration (SBA) and Bank 1.
“This case demonstrates the brazenness with which the defendants took advantage of federal programs meant to help businesses that were severely affected by the COVID-19 pandemic. The U.S. Attorney’s Office will continue to work together with our law enforcement partners to find and prosecute those who have fraudulently stolen taxpayer money that was meant to help our citizens,” said U.S. Attorney Muldrow.
The United States Secret Service, Small Business Administration Office of the Inspector General, Treasury Inspector General for Tax Administration, and Internal Revenue Service Criminal Investigations conducted the investigation with the collaboration of the Puerto Rico Treasury Department, Puerto Rico Bureau of Special Investigations, Puerto Rico Police Bureau, and Guaynabo Municipal Police.
According to court documents, Manfred A. Pentzke Lemus, a.k.a. “Man/Contable/El Gestor”; Rodolpho R. Pagesy Roussel, a.k.a. “El Banquero”; Augusto A. Lemus Berríos, a.k.a. “Primo”; Jonatan Ben David Prieto Ruiz De Val, a.k.a. “Johnny Millones”; Ligia María Lemus De Pentzke, a.k.a. “Ligia Lemus Lanuza”; and Carlos Manfredo Pentzke Chamorro, a.k.a. “El Doctor”, knowingly devised a scheme to defraud the SBA and Bank 1 to obtain federal money and property by means of materially false and fraudulent pretenses, representations, and promises submitted through applications for EIDL and PPP loans made available to help small businesses recover from the impact of the pandemic through the CARES Act.
The CARES Act authorized federal assistance through the issuance of SBA loans to small businesses and non-profit entities that experienced revenue loss due to the COVID-19 worldwide pandemic. The EIDL program was one such loan assistance program for small businesses. To procure the loan, applicants had to fill out an online application detailing operational information for the 12‑month period prior to the COVID-19 pandemic, such as the number of employees in the business, the gross business revenues realized, and the cost of goods sold. The applicant also had to certify that the information provided in the application was true and correct under penalty of perjury and applicable criminal statutes. The information submitted by the applicant was then used by the SBA to calculate the amount of money to be made available to the applicant for economic relief.
Non-profit applicants and non-agricultural for-profit applicants were both generally eligible to receive an EIDL loan of up to $150,000, with a 30-year scheduled repayment, deferred for 12 months. Some applicants were also eligible for advance funds of up to $15,000. Pursuant to the provisions governing the EIDL program, loan proceeds could only be used by the affected business receiving EIDL loans to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the COVID-19 disaster not occurred.
Another form of assistance provided by the CARES Act was the authorization of United States taxpayer funds in forgivable loans to small businesses for job retention and certain other expenses, such as interest on mortgages, rent and utilities, through the Paycheck Protection Program (PPP). To procure a PPP loan, the small business was required to submit an application, through its authorized representative, where it provided, among other things, its average monthly payroll expenses, and number of employees. These figures were used to calculate the amount of money the small business was eligible to receive under a PPP loan. The PPP allowed the interest and principal on the PPP loan to be entirely forgiven if the business spent a certain percentage of the PPP loan proceeds to satisfy payroll expenses and the remainder of the loan proceeds on allowable expenses within a designated period.
The indictment alleges that the defendants and their co-conspirators submitted at least 272 fraudulent EIDL and PPP loan applications containing materially false and fraudulent information and false documents, including false and fictitious tax documents, payroll records, bank records, and identification documents, to procure the disbursement of EIDL and PPP assistance loans by Bank 1. The indictment further alleges that the defendants and their co-conspirators directed the recipients of the fraudulently obtained PPP and EIDL loans to remit a portion of the proceeds of the loans to the defendants and their co-conspirators and used the loan proceeds to benefit themselves and others, and to pay for expenses prohibited under the requirements of the EIDL and PPP programs.
The court documents claim that defendant Manfred A. Pentzke Lemus was the principal organizer of the fraudulent scheme to obtain the federally subsidized loans and the efforts to launder the proceeds; defendant Rodolpho R. Pagesy Roussel worked at Bank 1 in San Juan, Puerto Rico and used his position to obtain the approval of fraudulent PPP applications by Bank 1; defendant Augusto A. Lemus Berríos assisted in the preparation of fraudulent PPP applications by, amongst other things, preparing false documents to submit to the bank; defendant Jonatan Ben David Prieto Ruiz De Val acted as a money courier and coordinated the delivery of “kickback” payments to further the fraudulent scheme to obtain PPP and EIDL loans; defendant Ligia María Lemus De Pentzke received “kickback” payments from proceeds of the fraudulent scheme and forwarded them to her co‑conspirators; and defendant Carlos Manfredo Pentzke Chamorro received fraudulent PPP and EIDL loans in furtherance of the conspiracy. The defendants are also alleged to have recruited other un-indicted co-conspirators to obtain the EIDL and PPP loans under false pretenses.
The United States seized approximately $848,957.96 in proceeds of this scheme from Bank 1, which are currently subject to forfeiture.
If convicted, the defendants are facing up to 30 years in prison for the wire fraud counts; and up to 20 years of imprisonment for the money laundering count.
This case is being prosecuted by Assistant U.S. Attorneys Timothy R. Henwood, Daniel J. Olinghouse and María L. Montañez Concepción.
An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
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