U.S. Attorney’s Office has charged six people, including a former IRS revenue agent, with crimes in connection with fraudulent Payroll Protection Program (PPP) loan applications made on behalf of four businesses during the pandemic.
Central to the allegations is the role of Frank Mosley, 58, of Oakland, a former IRS Revenue Agent currently employed as a tax enforcement officer at the City of Oakland, California.
Between July 2020 and September 2021, Mosely and four other defendants, including his brother Reginald, allegedly fabricated documents to obtain PPP loans—the government loan program intended to help small businesses pay their staff during mandatory COVID lockdowns.
The loan applications stated that the four companies in need each employed between 19 and 49 employees. They turned out to be little more than shell companies with no payroll expenses, the attorney’s office said.
According to court documents, the defendants, including Mosely, secured approximately $3 million in loans under the PPP program.
In August 2020, the Mosley brothers submitted their first loan application. After receiving over $1 million in funds, Reginald Mosley allegedly recruited three acquaintances to join their scheme: the brothers would prepare the loan application, and in return, their partners would funnel back a percentage of the money to them.
The AG’s office is said to possess emails in which the brothers negotiated a kickback of at least 15 percent.
In an attempt to cover up their tracks, the brothers filed fraudulent payroll tax returns with the IRS, the AG’s office said.
A sixth defendant was also charged, allegedly for aiding and advising the brothers to apply for the loans.
“The charges presented in the informations are merely allegations and the defendants are presumed innocent unless proven guilty in a court of law,” the AG’s office added.
Five of the defendants are charged with conspiracy to commit bank fraud, which carries a maximum prison sentence of 30 years. Other charges include the filing of false tax returns, which can add another three years in prison maximum. In addition to a prison sentence, the court can order the defendants to pay restitution.
The defendants are scheduled to appear in court next week.
Poorly Implemented
In addition to being poorly implemented, with almost three-quarters of its benefits going to unintended recipients, such as top law firms and elite accounting offices instead of small businesses, the PPP program has been a target of individual fraud numerous times.
In July 2022, an Encino man was sentenced to 11 years of prison after attempting to obtain $27 million by submitting more than two dozen bogus loan applications.
In November 2022, A Riverside County man was sentenced to 8 years after defrauding the PPP for $6.6 million.
A month later, a Beverly Hills father and his son went to jail for fraudulently seeking more than $6.7 million in PPP support.
In February, an Encino man was sentenced to 4.5 years for spending $5 million of PPP loans on himself, purchasing Ferrari, Bentley, and Lamborghini cars.
The PPP program was a $953-billion business loan program established during the Trump administration under the CARES Act in 2020. It ran until March 31, 2021, the final deadline for loan applications.