Cheltenham Man Charged, $ 2.2 Million, Tesla Model 3 Seized After Fraudulent Obtaining PPP Loans | thebaynet.com | TheBayNet.com
GREENBELT, Maryland – A criminal complaint has been filed charging Rudolph Brooks, Jr., 45, of Cheltenham, Md., On the federal charge of wire fraud. In addition, law enforcement has obtained warrants authorizing the seizure of more than $ 2.2 million held in various bank accounts, as well as a 2018 Tesla Model 3. The criminal complaint was filed on March 29, 2021. and was unsealed following Brooks’ arrest on April 2. 2021.
The criminal complaint and seizures were announced by Acting US District Attorney for Maryland, Jonathan F. Lenzner; Special Agent in Charge Shimon R. Richmond of the Federal Deposit Insurance Corporation, Office of the Inspector General (FDIC OIG); Acting Special Agent in Charge Darrell Waldon of the Internal Revenue Service – Criminal Investigation (IRS-CI), Washington, DC Field Office; Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office; and Inspector General Hannibal “Mike” Ware of the Office of the Inspector General of the United States Small Business Administration (SBA OIG).
As detailed in the affidavit filed in support of the criminal complaint, the Coronavirus Help, Relief and Economic Security Act (“CARES”) is federal law enacted in March 2020 to provide financial assistance to emergency to millions of Americans suffering from economic problems. consequences of COVID-19. The CARES Act authorized up to $ 659 billion in forgivable loans to small businesses for employee retention and certain business expenses through the Paycheque Protection Program (“P3”). The business must use the proceeds of the PPP loan on salary costs, mortgage interest, rent, and utilities. Initially, the program allowed principal forgiveness if the business spent the loan proceeds on qualifying expenses within eight weeks of loan issuance and used at least 75% of the loan for payroll. On June 5, 2020, the Paycheck Protection Program Flexibility Act 2020 came into effect. This law extended the period from eight to 24 weeks during which loan proceeds were to be spent and reduced the requirement that loan proceeds be spent on payroll from 75% to 60%. An Economic Disaster Loan (“EIDL”) is an SBA-administered loan designed to provide assistance to small businesses that suffer significant economic damage as a result of a declared disaster. An EIDL helps businesses meet necessary financial obligations that might have been met had the disaster not occurred. It provides relief from the economic damage caused by the disaster and enables businesses to maintain reasonable working capital during the period affected by the disaster. In March 2020, the SBA released an EIDL statement making EIDL loans available to small businesses to help mitigate the economic harm caused by COVID-19.
Brooks is the owner of Cars Direct by Gavawn HWD Bob’s Motors (Cars Direct), whose stated purpose was to buy and sell cars. Cars Direct was incorporated with the Maryland State Department of Assessments and Taxation (SDAT) on October 29, 2010. Cars Direct was forfeited on October 1, 2012 and reinstated on May 28, 2020. Brooks is listed as the resident agent with SDAT.
The affidavit alleges that on May 9, 2020, Brooks applied for a PPP loan on behalf of Cars Direct in the amount of $ 1,556,589. In support of Cars Direct’s PPP loan application, Brooks allegedly submitted fraudulent tax forms that reportedly brought in $ 724,469 in payments via 1099-MISC forms and $ 7,471,630 in total unemployment payments to Cars Direct employees. . However, as detailed in the affidavit, the IRS records do not reflect any tax returns made by Cars Direct for any tax period, indicating that Cars Direct did not hire employees or pay unemployment taxes. Additionally, the Maryland Department of Labor has no record of salaries paid by Cars Direct or salaries of Brooks.
On April 7, 2020, Brooks reportedly submitted an EIDL loan application on behalf of Cars Direct that contradicted the information and supporting documentation submitted by Brooks for the Cars Directs PPP loan application. The EIDL application on behalf of Cars Direct reportedly said the company’s gross revenue was $ 148,000 and the cost of goods sold was $ 82,293 in the one-year period prior to the disaster declaration COVID-19, which is incompatible with a business that can support a monthly average. salary costs of $ 622,635 or annual payments of $ 7,471,630, as Brooks indicated in the P3 loan application and supporting fraudulent tax documents.
On May 9, 2020, the Cars Directs PPP loan was approved and $ 1,556,589 was then deposited into a bank account of which Brooks is the sole signatory on the account. Prior to the deposit of the PPP loan funds, salaries or payroll taxes were missing from this account. According to the affidavit, Brooks opened another bank account in the name of Payroll by BJM, into which he transferred $ 500,000 in PPP loan funds. Brooks also registered Payroll by BJM with SDAT, posing as a resident agent. Although the name Payroll by BJM makes the account appear to be associated with a payroll company, no payroll or payroll related expenses have been paid from this account. Brooks also opened additional accounts in the name of Cars Direct, into which he transferred PPP loan funds.
After depositing the PPP loan funds, Brooks initiated numerous PPP loan fund transfers from Cars Direct accounts to his personal bank accounts. Records revealed that Brooks was using the P3 loan funds for personal expenses, including credit card bills, shopping at restaurants, retail stores, grocery stores and auto auctioneers, and mortgage payments for the Brooks Cheltenham Residence.
As of May 22, 2020, Brooks used PPP loan funds from the Cars Direct account and his own personal account to purchase 39 used automobiles (including a 2017 Mercedes Benz S Class, two 2017 Infinity Q50s, a Cadillac Escalade 2015, a 2005 Bentley Continental, a 2018 Tesla Model 3, a 2014 GMC Yukon XL and several older luxury vehicle models. Under the P3 Loan Program, the purchase of these vehicles is not an appropriate use of funds loan.
According to the affidavit, on July 30, 2020, Brooks initiated a wire transfer from his personal account to Tesla Motors for $ 60,407, which was used to purchase a 2018 Tesla Model 3. “Rudolph Brooks” was listed as the customer. of that vehicle, and a District of Columbia driver’s license was on file for a close relative of Brooks. Maryland state records indicate that the Tesla Model 3 was registered in Brooks ‘name at Brooks’ residence in Cheltenham.
Finally, on August 13, 2020, Brooks initiated two wire transfers from one of the Cars Direct accounts for $ 144,343 and $ 2,165 to a title company regarding a property in Baltimore, Maryland. At the time of wire transfers, $ 133,669.54 of funds from the Cars Direct PPP loan remained in the Cars Direct account. Real estate deeds filed with the State of Maryland show that the Baltimore property was purchased by Madaro, LLC (Madaro) for $ 148,500. Madaro was registered with the District of Columbia on August 8, 2019 and Brooks has been listed as the company’s resident agent. Brooks signed an auction contract on June 18, 2020 to purchase the Baltimore property.
Additionally, the foreclosure warrants authorized the seizure of up to $ 2,296,136.86 on eleven bank accounts and the 2018 Tesla Model 3 described above. The affidavit in support of the foreclosure warrants alleges that these funds and vehicles constitute or derive from proceeds that can be attributed to false statements made on bank loan applications.
If convicted, Brooks faces a maximum sentence of 20 years in federal prison for wire fraud followed by three years of supervised release. The actual sentences for federal crimes are generally less than the maximum sentences. A federal district court judge will determine any sentence after taking into account U.S. sentencing guidelines and other statutory factors.
A criminal complaint is not a guilty verdict. An individual charged by indictment is presumed innocent unless and until his guilt has been established in subsequent criminal proceedings.
Acting US Attorney Jonathan F. Lenzner commended the FDIC OIG, IRS-CI, FBI, and SBA OIG for their work in the investigation. Mr Lenzner thanked US deputy lawyers Sean R. Delaney and Jessica Collins, who are pursuing the case.