Men solicited recording artist to help them steal millions in CARES program funds.
James R. Stote, 55, of Hollywood, and Phillip J. Augustin, 52, of Coral Springs, Florida, have pleaded guilty in the Northern District of Ohio this month for “leading a nationwide scheme to fraudulently obtain over $35 million in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act,” according to federal authorities.
Court documents show that the two men conspired to acquire millions of dollars in fraudulent PPP loans for Augustin’s business, Clear Vision Music Group LLC, using fake documents showing need. Once these documents were successfully submitted along with the application, Stote and Augustin began working to obtain even bigger loans. They recruited additional applicants and prepared and submitted fraudulent applications for those individuals in exchange for a share of the money received. In doing so, Stote and Augustin submitted fake payroll numbers, IRS forms and bank statements, according to federal investigators. In total, the two men made nearly 80 fraudulent applications worth at least $35 million, and authorities allegedly have proof that they wouldn’t have stopped there. Each of the men face up to two decades in prison.
“These convictions, and the numerous convictions of others involved in this wide-ranging conspiracy, demonstrate that people will be held accountable for defrauding the PPP Program,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division. “Fraud against PPP programs directly harms taxpayers and undermine public trust in essential government support during the pandemic. We will continue to combat fraud and ensure that COVID-19 relief goes to those who deserve it.”
“While many businesses in our communities relied upon relief funds to keep their doors open and employees paid, these defendants profited off a scheme that stole millions of taxpayer dollars intended for struggling businesses and spent it lavishly on themselves,” said First Assistant U.S. Attorney Michelle M. Baeppler for the Northern District of Ohio. “Theft of government funds will not be tolerated, and prosecuting PPP fraud remains a priority for law enforcement.”
In connection with Stote and Augustin’s scheme, Diamond Smith, 37, was also recently sentenced to twenty months after pleading guilty in August in the Southern District of Florida to conspiracy to commit wire fraud. Smith is a recording artist and admitted to securing a PPP loan of more than $426,000 for his company, Throwbackjersey.com LLC, using falsified documents and false information. Smith then obtained another loan of more than $708,000 for his other company, Blue Star Records LLC, using fake documents. Smith admitted to spending the money on luxury items, including a Ferrari, which was seized by authorities. He said he paid more than $250,000 in kickbacks to Stote and Augustin for their help.
“When the Paycheck Protection Program was implemented over one year ago, our Office committed to protecting South Floridians from those trying to exploit the Covid-19 pandemic,” said U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida. “Our work is not done. We will continue to hold accountable those who wrongfully obtain funds intended to help struggling small businesses survive the current health and economic crisis.”
Sources:
Two Florida Men Plead Guilty to $35 Million COVID-19 Relief Fraud Scheme
Join the conversation!