Clifton Pape, 47, and Sally Jung, 59, have each pleaded guilty to wire fraud violations before U.S. Magistrate Judge Caroline Craven. As part of their plea agreements, Pape and Jung have agreed to forfeit $680,710.31 and pay up to $3,223,870 in restitution.
The couple pleaded guilty to wire fraud violations in the Eastern District of Texas, on Friday May 6, 2022
According to court documents, Pape and Jung operated a sophisticated telemarketing scheme under the name My Buddy Loans from a house in Cleveland, Texas. In exchange for a fee, My Buddy Loans took personal identifying information from victims and promised to file an application for an agricultural grant, which they said was available to those who owned as little as one acre of land. Instead, Pape and Jung actually filed fraudulent EIDL applications with the SBA that contained the victims’ personal identification information. Based on these fraudulent applications, the SBA issued more than $1.56 million in EIDL Advances to people who were not eligible. Pape and Jung also submitted applications for an additional $1.44 million in EIDL Advances that were not funded because--among other reasons--the congressionally appropriated funds for the EILD Advance program were exhausted.
Pape and Jung used Square’s credit and debit card processing service to charge third parties the fee. Pape and Jung completed at least 700 successful charges, obtaining at least $700,000 in fees. Pape and Jung then transferred the proceeds of the fraud scheme into a bank account they controlled. On one occasion, Pape used the fraud proceeds to pay a traffic ticket. On another occasion, Pape and Jung used more than $3600 from the fraud scheme to pay for a stay at La Cantera Resort in San Antonio. A picture from that stay shows Pape and Jung celebrating over sparkling wine and other beverages.
“This investigation closed down one of the largest COVID fraud schemes in the country in terms of the number of fraudulent EIDL applications,” said U.S. Attorney Brit Featherston. “Well intended and needed economic assistance (taxpayer dollars) was brazenly stolen from legitimate deserving applicants. We are asking those with information about the My Buddy Loan fraud scheme, including those who believe they may be victims, to call the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or file a complaint using the NCDF Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.”
“Predators that perpetuated schemes to steal vital funds aimed at mitigating the economic damage to the nation’s small businesses will be brought to justice,” said SBA Inspector General Hannibal Ware. “OIG continues to root out fraud and protect the integrity of SBA’s programs. I want to thank the U.S. Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”
“Clifton Pape and Sally Jung used My Buddy Loans to exploit the Small Business Administration’s Economic Injury Disaster Loan program (EIDL) while also defrauding hundreds of individuals whom they misled,” said Special Agent in Charge William Smarr of the U.S. Secret Service Dallas Field Office. “The Secret Service stands ready with our law enforcement partners, like the SBA Office of Inspector General, to combat pandemic fraud. The Secret Service will continue to aggressively investigate and prosecute those who violate the public trust and exploit federal relief programs for their own personal gain.”
The CARES Act is a federal law enacted in March 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization or EIDL advances and low-interest loans to small businesses to meet financial obligations and operating expenses that could have been met had the disaster not occurred. Under the EIDL program applicants were eligible for a forgivable advance of up to $10,000 if the applicant had ten or more employees.
A federal grand jury returned an indictment charging Pape and Jung with federal violations on Feb. 10, 2021. They each face up to 30 years in federal prison. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office
This case is being investigated by the U.S. Secret Service and the Small Business Administration-Office of Inspector General and prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.
____________
RELATED ARTICLE - Jan 15, 2021
A Liberty County, Texas, man and woman have been charged with filing hundreds of fraudulent Economic Injury Disaster Loan (EIDL) applications with the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the Eastern District of Texas, said U.S. Attorney Stephen J. Cox.
Charges were filed with U.S. District Court in TEXarkana.
Clifton Pape, 45, and Sally Jung, 58, both of Cleveland, TX, allegedly operated a COVID relief fraud scheme known as My Buddy Loans, that garnered them more than $775,000 in fraud proceeds and resulted in at least $1.3 million in loss to the United States. Pape and Jung are charged by way of a federal criminal complaint.
At a time when small businesses -- the engines of our economy in East Texas -- most needed the help that the Small Business Administration was rushing to provide, these individuals took advantage of members of the public, depleting the available resources for small businesses and lining their own pockets with fraudulent gain,” said Cox.
According to court documents filed in U.S. District Court, Pape and Jung operated under the name My Buddy Loans. In exchange for $1,082.50, My Buddy Loans took personal identifying information from third parties and promised to file a federal application for a $10,000 agricultural grant. Instead, Pape and Jung actually filed EIDL applications with the SBA that contained false information.
For example, in June and July 2020, Pape and Jung filed 222 EIDL applications, all of which purported to be for businesses with exactly 10 employees -- the minimum number of employees required to obtain the maximum EIDL advance of $10,000. From those 222 applications, the SBA issued 130 EIDL advances in the amount of $10,000 -- $1.3 million total.
“We encourage members of the public and the banking community to stay vigilant, watching for fraud as another round of COVID relief begins. It is a priority of the Department of Justice to deter and prosecute this type of fraud
____________
Link to Criminal Complaint - Filed 01/12/21
Comments