David Hines, 29, was charged with fraudulently obtaining a $3.9 million loan under the Paycheck Protection Program, which Congress passed to help small business owners pay employees and rent due to economic setbacks from the coronavirus pandemic.
A criminal complaint filed in federal court in Miami says that Hines claimed he had 70 employees at four different companies and paid more than $4 million in payroll each month.
Hines applied for $13.5 million in loans overall, according to an affidavit from Bryan Masmela, a U.S. Postal Inspector.
According to Masmela, Hines lied about his company’s payroll needs and used the loan proceeds to purchase the sports car, a vacation, jewelry, and clothes. Bank statements show that Hines made several cash withdrawals just under $10,000. He also wrote checks to several individuals, including $30,000 to someone referred to as “Mom.”
Masmela said Hines had “little to no” payroll expenses.
Authorities seized the sports car and $3.4 million in Hines’s bank account, the Justice Department said in a statement announcing the charges.
The Justice Department has said it will crack down on fraud in the PPP program. Congress approved nearly $350 billion in low-interest loans to small businesses to cover payroll costs and other overhead expenses. Businesses have two years to pay off the loans, and some can have loans forgiven altogether if they are spent within a certain period of time.
The Governmental Accountability Office warned in a report on June 25 that PPP loans were likely to be a major source of fraud given. The agency said “the limited safeguards and lack of timely and complete guidance and oversight planning have increased the likelihood that borrowers may misuse or improperly receive loan proceeds.”
By Chuck Ross
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