Indian-origin engineer charged in US with over $10 million COVID-relief fraud

An Indian-origin engineer in the US has been charged with fraudulently seeking more than USD 10 million in loans under a coronavirus relief programme set up to help small businesses.

Shashank Rai, 30, allegedly sought millions of dollars 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, in fact, no employee worked for his alleged business.

Rai, who lives in Texas, is charged with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA.

"As alleged, Rai fraudulently pursued millions of dollars in loans intended for legitimate small businesses suffering the economic hardships of the COVID-19 pandemic," Assistant Attorney General Brian Benczkowski of the Justice Department's Criminal Division said.

US Attorney Joseph Brown of the Eastern District of Texas described Rai's behaviour as "very brazen", saying those who submit these applications for loans or other assistance need to understand that there are people checking on the representations made, and those representations are made under oath and subject to the penalties of perjury.

"Federal agencies are watching for fraud, and people who lie and try to cheat the system are going to be caught and prosecuted," he said.

Inspector General Jay Lerner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG) said the charges hold Rai responsible for his actions to "swindle money out of a federal program intended to help those in need during a pandemic crisis".

"When an individual cheats the Paycheck Protection Program out of money, it deprives hard-working Americans and deserving small businesses," Lerner said.

According to court documents unsealed Wednesday in the US District Court in Beaumont, Rai allegedly 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 submitted to the first lender, Rai allegedly sought USD 10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of USD 4 million.

In the second application, he allegedly sought approximately USD 3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately USD 1.2 million.

According to court documents, the Texas Workforce Commission provided information to investigators of having no records of employee wages having been paid in 2020 by Rai or his purported business, Rai Family LLC.

In addition, the Texas Comptroller's Office of Public Accounts reported to investigators that Rai Family LLC reported no revenues for the fourth quarter of 2019 or the first quarter of 2020.

Materials recovered from the trash outside of Rai's residence included handwritten notes that appear to reflect an investment strategy for the USD 3 million, which is the amount of money that he allegedly sought from the second lender.

The CARES Act is a federal law enacted in March this year and is 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 authorisation of up to USD 349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP.

In April 2020, Congress authorised over USD 300 billion in additional PPP funding.