Feds arrest 2 men in first fraud case involving PPP loan program for small businesses hurt by coronavirus

WASHINGTON – Two New England men have been charged with illegally trying to procure hundreds of thousands of dollars in federal Paycheck Protection Program loans, the first fraud case in the nation involving the massive effort to rescue small businesses from the coronavirus crisis.

David A. Staveley, aka Kurt D. Sanborn, 52, of Andover, Massachusetts, and David Butziger, 51, of Warwick, Rhode Island, are charged with conspiring to seek forgivable loans guaranteed by the Small Business Administration.

They 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, according to a news release from the U.S. Department of Justice on Tuesday.

Congress created the PPP in March as part of the CARES Act, the federal response to the COVID-19 pandemic that has forced social distancing steps that have forced millions of small businesses to contract or close entirely. They have allocated more than $660 billion for the program which has approved loans for some 4 million businesses.

The program offers loans of up to $10 million to eligible businesses. The loans are completely forgiven if at least 75% of the money is spent on keeping or rehiring employees. The rest must be spent on business-related expenses such as rent or utilities.

Under the new framework, any PPP loan above $2 million would be audited and reviewed before they are forgiven. Large businesses who already received a loan have until May 7 to return the money or they could face penalties.

Staveley and Butziger are charged with conspiracy to make false statement to influence the SBA and conspiracy to commit bank fraud. Additionally, Staveley is charged with aggravated identity theft. Butziger is charged with bank fraud.

“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,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “The Criminal Division is committed to working with our law enforcement partners to root out abuse of the important relief programs established under the CARES Act.”

“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 L. Weisman for the District of 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.”