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First Fraud Charges Involving Coronavirus Stimulus Loans Filed

Feds allege two men schemed to get relief money earmarked for small businesses

Handcuffs lying on american dollars, financial crime concept.
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In the first case of its kind, two men have been arrested and slapped with federal charges in Rhode Island for allegedly trying to obtain more than $500,000 in loans from a stimulus program enacted to help employers continue to pay workers during the pandemic.

The defendants are accused of applying for Small Business Administration (SBA) loans in April for four different businesses — restaurants and a wireless company — that either they did not own or were fake firms or entities that had no employees before the pandemic, according to court documents filed in Providence, Rhode Island.

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The men purported to have dozens of employees and sought loans totaling nearly $544,000, documents show. Altogether, some $659 billion in potentially forgivable loans are being made available through the Paycheck Protection Program (PPP), part of the COVID-19 economic relief enacted by Congress.

Officials on Tuesday assailed the men's alleged conduct as “unconscionable” and “reprehensible."

Capitalizing on a crisis

The head of the FBI in Boston said the men allegedly “tried to capitalize on the coronavirus crisis” by conspiring to fraudulently obtain loans “intended to help small businesses teetering on the edge of financial ruin."

The FBI official, Special Agent in Charge Joseph Bonavolonta, added: “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."

The defendants are David A. Staveley, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island. (Staveley also has aliases, Kurt David Sanborn or David Sanborn, court documents show.)

Multiple charges brought

Both men face charges including conspiracy to commit bank fraud and conspiracy to lie to influence the SBA.

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"Every dollar stolen from the Paycheck Protection Program comes at the expense of employees and small business owners who are working hard to make it through these difficult times,” Assistant Attorney General Brian Benczkowski of the Justice Department's Criminal Division said as the charges were announced.

Lives thrown into chaos

"Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic,” said U.S. Attorney Aaron Weisman in Rhode Island. “It is unconscionable that anyone would attempt to steal from a program intended to help hard-working Americans continue to be paid so they can feed their families and pay some of their bills.” Added Weisman: “Attorney General Barr has directed all U.S. attorneys to prioritize the investigation and prosecution of crimes related to coronavirus and COVID-19, and we are doing just that."

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Staveley and Butziger allegedly discussed via email the creation of fraudulent loan applications and supporting documentations to seek loans guaranteed by the SBA. It is also alleged that Staveley posed as his brother in real estate transactions.

In announcing the charges, the Justice Department thanked partner agencies including the FBI, the IRS Criminal Investigation unit, and the watchdog arms of the SBA and Federal Deposit Insurance Corporation (FDIC).

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