Mercedes, Mansions, And Murder: How Fraudsters Spent Millions In COVID Relief Funds

In his 2022 State of the Union address, President Biden said, “Tonight, I’m announcing that the Justice Department will name a chief prosecutor for pandemic fraud.” Sorting through the mounds of waste and abuse in the government’s pandemic relief programs might make that official as sick as the Omicron variant.

With the economy setting new records for growth and prosperity, politicians forced businesses to close their doors in the name of fighting COVID-19. To compensate, the federal government allocated trillions of tax dollars to relieve laid-off workers — but instead of reaching them, some of those funds purchased sports cars, put down payments on luxurious homes, and even reportedly paid a hitman to kill a 24-year-old woman and her three-year-old daughter.

The culprit is the size, scope, and speed of the relief effort’s two largest programs for small businesses: the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). The Small Business Administration, which administered both programs, said it lacked the personnel and resources to vet the sheer volume of applications it received — so the SBA processed as many loans in 14 days as it normally approves in 14 years. A report from the Pandemic Response Accountability Committee, released in January, stated:

The SBA, in conjunction with the U.S. Department of the Treasury, approved a nationwide network of more than 5,000 lenders, including about 800 new lenders, to review PPP applications, assess borrowers’ eligibility, and decide on the suitability of making a loan under delegated authority. PPP lenders reviewed loans quickly, disbursing more than 1.7 million loans totaling nearly $343.3 billion in just 14 days after the SBA launched the program. According to the SBA, it “…processed 14 years’ worth of loans in the first 14 days of the PPP program and reached the smallest businesses with an average loan of $101,000.”

The SBA admitted that, in the process, it “lowered the guardrails” protecting taxpayers against fraud. As a result, it approved an unknown number of applicants who claimed aid for businesses that did not exist or had been closed before the pandemic, demanded wages for more employees than they employed, or engaged in identity theft. While the full amount of COVID fraud remains unknown, as Biden’s comments make clear, some stories have come to light, including:

Murder for hire

The most vicious allegation of COVID relief fraud resulted in the murder of a young woman and the attempted murder of her young daughter. Prosecutors say 33-year-old Jasmine Martinez obtained a $15,000 PPP loan last April, putatively to keep her beauty salon in business. But prosecutors say Martinez used the money to have her boyfriend, Romiel Robinson, hire a hitman a woman with whom she had a years-long rivalry. The warrant claims Martinez made “a series of withdrawals of over $10,000 in cash and/or payments” from the PPP loan in the “days leading up to the homicide.”

Last May 3, a gunman shot and killed 24-year-old Le’Shonte Jones outside the Coral Bay Cove apartments in Naranja, Florida. Bullets also struck Jones’ 3-year-old daughter, who lived. NBC Miami reports that the suspected hitman, Javon Carter, even made a remark that could be interpreted as a backhanded reference to PPP fraud: Police officers reportedly found video of Carter counting out the cash after the job calling it “just another day at the office.”

While this shocking story has yet to be adjudicated, many other cases of COVID fraud have already revealed the multiform ways in which Americans defrauded their fellow citizens by gaming federal relief plans.

Mercedes, mansions, and ‘Arkansas Mo’

Two brothers — Richard and Artur Ayvazyan — as well as Richard’s wife, Marietta Terabelian, defrauded the government of more than $20 million in PPP and EIDL funds. They used the names of disabled and elderly people, dead people, and foreign exchange students who had left the country long ago. They used the PPP proceeds to purchase luxury homes in Tarzana, Glendale, and Palm Desert, California. “They also used the funds to buy gold coins, diamonds, jewelry, luxury watches, fine imported furnishings, designer handbags, clothing and a Harley-Davidson motorcycle,” according to the Justice Department. Richard, Marietta, and sister-in-law Tamara Dadyan fled after their conviction in November 2021, but authorities captured them in Montenegro in February.

In late January, 46-year-old Moustapha Diakhate of Connecticut confessed that he used erroneous information to obtain $4 million in PPP funds for six business entities. He then used taxpayer funds to “pay off a loan he had been provided to purchase of a 2010 Porsche Panamera Turbo, and to purchase both a Mercedes and BMW. He also purchased a $50,000 certificate of deposit with PPP funds,” according to the DOJ.

A judge sentenced Maurice Fayne — better known as reality TV star “Arkansas Mo” of “Love & Hip Hop: Atlanta” fame — to 17 years in prison after Fayne admitted he defrauded the PPP program to cover the costs of a preexisting Ponzi scheme: He pretended to have a trucking business, for which he solicited investments. When the federal government announced its COVID relief program, he claimed the business employed 107 people and obtained a PPP loan worth $3.7 million. The Justice Department said Fayne admitted that he spent:

  • $40,000 for past-due child support;
  • $50,000 for restitution owed in a previous fraud case;
  • $65,000 in cash withdrawals;
  • $85,000 for custom-made jewelry;
  • $136,000 to lease a Rolls-Royce;
  • $230,000 to associates who helped him run a Ponzi scheme;
  • $907,000 to start a new business in Arkansas.

Some COVID-19 fraud schemes allegedly involved massive numbers of people scattered around the country. On February 1, the Justice Department announced that it had charged 22 people in Atlanta with a grand conspiracy to defraud the program of $3,899,377. Prosecutors say Mark Mason of Atlanta worked with Richard Mahee of New Jersey to ask people how much money they would like to receive from PPP. They allegedly created fraudulent tax documents to obtain that amount, and then took a portion of the proceeds as a “success fee.”

Similarly, last December, the Department of Justice charged Hamza Abbas of Texas and 14 others with perpetrating $35 million in PPP fraud. Prosecutors say the defendants tried to cover their tracks by writing checks to fictitious employees, but they laundered the money to themselves and their relatives.

Critics say this kind of fraud is inevitable in any massive federal spending program, especially one executed in such a rushed manner. “People take advantage of government money,” said Tom Schatz of Citizens Against Government Waste.

This is only the tip of the iceberg. Last December, the Secret Service estimated there is $100 billion in total fraud from all COVID relief programs that the government had not yet been prosecuted.

Furthermore, while COVID-19 relief is a large program, it is only one corner of a vast junkyard of federal waste. The federal government has admitted to making $2.3 trillion in improper payments between 2004 and 2020, according to a report from Federal law defines that term as “payments made by the government to the wrong person, in the wrong amount, or for the wrong reason.” And, of course, those are just the cases that are publicly known. The full scale of fraud is so vast as to remain unknown, or possibly unknowable.

While it is encouraging that the Biden administration has charged someone with accounting for the public’s money, it’s discouraging that he remains committed to budget-busting, multitrillion-dollar spending programs like the Build Back Better Act (which he recently renamed, “Building a Better America”). The definition of conservatism is learning from the past. But even a liberal Democrat like President Biden could look at the bipartisan waste, fraud, and abuse created by the federal COVID-19 relief fund and realize history will repeat itself.

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