First charges filed in alleged fraud of $500,000 in bank loans through PPP initiative

What are being called the first charges of fraudulent involvement in the massive federal program meant to protect pay of workers in the face of the coronavirus crisis were announced Tuesday by federal prosecutors.

According to the U.S. Department of Justice, two businessmen (from Rhode Island and Massachusetts) were charged with allegedly filing fraudulent bank loan applications in pursuit of more than $500,000 in forgivable loans guaranteed by the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).

The federal law enforcement agency said David A. Staveley (also known as Kurt D. Sanborn), 52, of Andover, Mass., and David Butziger, 51, of Warwick, R.I., are charged with conspiring to seek forgivable loans guaranteed by the SBA. The agency said the pair claimed to have dozens of employees earning wages at four different business entities when, in fact, there were no employees working for any of the businesses.

The Justice Department said the Federal Deposit Insurance Corp.’s (FDIC) Office of Inspector General participated in the investigation.

According to a release, the pair are charged by way of a federal criminal complaint with conspiracy to make false statements to influence the SBA and conspiracy to commit bank fraud. Additionally, Staveley is charged with aggravated identity theft. Butziger is charged with bank fraud.

The Justice Department said that, according to court documents unsealed Tuesday in federal court in Providence, R.I., the fraudulent loan requests were to pay employees of businesses that were not operating prior to the start of the COVID-19 pandemic and had no salaried employees, or, as in one instance, to pay employees at a business the loan applicant did not own.

“As alleged, David Staveley and David Butziger tried to capitalize on the coronavirus crisis by conspiring to fraudulently obtain more than half a million dollars in forgivable loans that were intended to help small businesses teetering on the edge of financial ruin,” said Special Agent in Charge Joseph R. Bonavolonta of the FBI’s Boston Field Office in a release. “Thankfully we were able to stop them before taxpayers were defrauded, but today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud.”

Two Charged in Rhode Island with Stimulus Fraud