Indian American pleads guilty of over $10 million Covid-19-relief fraud

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The CARES Act was enacted on March 29, 2020, to provide emergency financial assistance to Americans suffering the economic effects due to the Covid-19 pandemic.

Shankar Rai, 30 of Beaumont, Texas, pleaded guilty of seeking more than $10 million in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

An Indian American engineer pleaded guilty to the charge of seeking over $10 million in loans under the coronavirus relief aid program set up to help small businesses, said the US Department of Justice (DOJ).  On Thursday, Shankar Rai aged 30 of Beaumont, Texas, pleaded guilty of making false statements to banks.

Rai was charged on May 13, through a federal criminal complaint with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the Small Business Administration (SBA). He pleaded guilty of seeking more than $10 million in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act from two different banks by claiming to have 250 employees earning wages when no employee worked for his cited business. 

According to court documents, Rai made two fraudulent claims to two different lenders to seek loans guaranteed by the SBA for Covid-19 relief through the Paycheck Protection Program (PPP).  In the application to the first lender, Rai sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million.  In the application to the second lender, he sought around $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.

According to information provided by the Texas Workforce Commission stated there are no records of employee wages being paid in 2020 by Rai or his purported business. Also,  the Texas Comptroller’s Office of Public Accounts said that Rai Family LLC reported no revenues for the fourth quarter of 2019 or the first quarter of 2020.

Other court documents include materials recovered from Rai’s trash that include handwritten notes that indicate an investment strategy for the $3 million, which is the amount of money that he sought from the second lender.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division said: “The department and our law enforcement partners will remain vigilant in our efforts to protect critical CARES Act relief programs from fraud and abuse.”

“When an individual cheats the Paycheck Protection Program out of money, it deprives hard-working Americans and deserving small businesses,” said Inspector General Jay N Lerner of the Federal Deposit Insurance Corporation Office of Inspector General.

The CARES Act was enacted on March 29, 2020, to provide emergency financial assistance to Americans suffering the economic effects due to the Covid-19 pandemic.  One of the sources of relief provided by the Act is the authorization of forgivable loans to small businesses for job retention and certain other expenses, through the PPP. The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1%.    

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