Federal prosecutors on Tuesday named a pair of New England businessmen as the first in the nation to be charged with fraudulently seeking coronavirus stimulus loans.
The newly unsealed indictment charged David Staveley, 52, and David Butziger, 51, with using phony bank statements to secure $543,959 in loans meant for small businesses struggling from shutdowns resulting from the COVID-19 pandemic.
The two claimed they had dozens of employees earning wages at four business entities but had no employees working for any of the businesses, the charges say.
Prosecutors said the men also didn’t own one of the businesses for which they applied for a forgivable loan guaranteed under the Paycheck Protection Program.
Mr. Staveley, who also goes by Kurt D. Sanborn, also posed as his brother in real estate transactions, according to the criminal complaint.
Prosecutors said the two men conspired in emails to submit the fraudulent applications, but they never received the money.
The indictments underscore the Justice Department’s resolve to police the nearly $650 billion being doled out through the Paycheck Protection Program.
Congress created the program in March as part of the Cares Act, a federal relief package to blunt the economic damage from the COVID-19 pandemic, which forced millions of small businesses to reduce staff or shutter.
More than $660 billion has been allocated for the program, which has approved loans for 4 million businesses.
Business with fewer than 500 employees that were operating when the crisis hit are eligible for loans of up to $10 million. The loans are forgiven if at least 75% of the money is spent on rehiring employees and the rest is spent on business expenses.
“The alleged actions of defendants Staveley and Butziger are criminally reprehensible,” said Kristina O’Connell, special agent in charge of the IRS’s criminal investigation division. “Defrauding a government program designed to provide financial assistance to small business owners during the Coronavirus pandemic is tantamount to taking money directly out of the pockets of those who need it most.”
Mr. Staveley and Mr. Butziger were charged with conspiracy to make false statements to influence the Small Business Administration and conspiracy to commit bank fraud.
Mr. Staveley also was charged with aggravated identity theft, and Mr. Butziger faces a charge of bank fraud.
Federal prosecutors said Mr. Staveley, who resides in Andover, Massachusetts, sought $438,500 in loans claiming he had dozens of employees at three restaurants in New England.
Investigators concluded that two of the restaurants were not open for business before the start of the pandemic, at the time the loan applications were submitted or any time afterward.
The investigators also found that Mr. Staveley did not own or have any role in the third restaurant for which he was seeking financial relief, according to court documents.
Prosecutors said a restaurant in Berlin, Massachusetts, which Mr. Stavelely owned as “Sanborn,” was closed March 10 when the town revoked his liquor license for numerous reasons, including misrepresentation that his brother owned the restaurant.
Mr. Butziger, who resides in Warwick, Rhode Island, filed an application seeking a $105,381 loan as the owner of an entity named Dock Wireless. He claimed in bank documents and in a phone call with an undercover FBI agent posing as a bank official that he had seven full-time employees, including himself, according to the criminal complaint.
Mr. Butziger said his employees worked without pay through April and he would use the loans to pay them, court documents revealed.
The IRS had no record of employee wages paid in 2020 by Mr. Butziger or Dock Wireless, according to court documents.
Federal agents interviewed several of the supposed employees, who said they never worked for Mr. Butziger or Dock Wireless, court records revealed.
