Colorado Man Gets Prison for Million-Dollar COVID-19 PPP Loan Fraud
DENVER – A Morrison, Colorado, man has been sentenced to federal prison for his role in a scheme to defraud the Paycheck Protection Program (PPP) during the COVID-19 pandemic. Richard Nieto, 39, will serve 46 months for wire fraud and money laundering after obtaining two fraudulent PPP loans.
Nieto initially applied for three PPP loans, seeking over $1.1 million. The U.S. Attorney’s Office for the District of Colorado (USACO) reported that two of these applications were approved, totaling $913,551.88.Along with his prison sentence, Nieto has been ordered to pay $962,438.85 in restitution.
Details of the COVID-19 PPP Loan Fraud
Instead of using the funds for business-related expenses as intended,Nieto diverted the money for personal gain. The USACO stated that he used the PPP loans to pay his home mortgage, purchase Bitcoin, contribute to an investment account, acquire gold and silver coins, and invest in a friend’s startup.
Acting United States Attorney J. Bishop Grewell emphasized the seriousness of the crime: “this is another case of someone using for personal gain a program meant to help people suffering during the COVID-19 pandemic. I want the public to know that we are aggressively prosecuting people who stole from this relief program.”
Elaborate Attempts to Secure Loan Forgiveness
Before making any payments on the loans, Nieto applied for loan forgiveness. To bolster his application, he created 87 fake payroll checks and pay stubs for a specific pay period and employee. Nieto claimed his companies withheld taxes to qualify for loan forgiveness, and one of his PPP loans was indeed fully forgiven.
Amanda Prestegard,Special Agent in Charge of the IRS-CI Denver Field Office,commented,”Mr. Nieto went to great lengths to abuse a program meant for hardworking small business owners, seeking only to enrich himself.”
Fabricated Information on Loan Applications
The USACO revealed that Nieto inflated the number of employees and average monthly payroll for his business, Denver Pro Painting & contracting, on his first loan application. For his second application, Nieto requested a loan for another business, DenPro, which had no payroll or employees and was not operational. He fabricated $1,771,601.04 in annual payroll in his fourth-quarter tax returns.
The USACO announced in January that it was investigating dozens of COVID-19 fraud cases, totaling approximately $75 million. Last month, two other Colorado residents were indicted for allegedly defrauding the U.S. government of nearly $1 million in COVID-19 relief funds. Report attempted fraud involving COVID-19 by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web complaint Form.
Key Takeaways From The Case
- Richard Nieto: Sentenced to 46 months for wire fraud and money laundering.
- Fraudulent Loans: Obtained two PPP loans totaling $913,551.88.
- Restitution: Ordered to pay $962,438.85.
- Misuse of Funds: Used loans for personal expenses, including mortgage payments and Bitcoin purchases.
- Fake Documents: Created 87 fake payroll checks to secure loan forgiveness.
COVID-19 Fraud Investigations Continue
This case is part of a broader effort to prosecute individuals who exploited the COVID-19 relief programs for personal enrichment. The Justice Department continues to investigate and prosecute these cases to ensure the integrity of the relief programs and to deter future fraud.
Did you know that the Paycheck Protection Program (PPP) was established as part of the Coronavirus Aid, Relief, and Economic security (CARES) Act to provide forgivable loans to small businesses struggling during the COVID-19 pandemic? These funds were intended to help businesses maintain payroll and cover essential expenses to prevent widespread layoffs and closures.
The Ongoing Battle Against COVID-19 Fraud
The prosecution of Richard Nieto highlights the ongoing efforts to combat fraud related to COVID-19 relief programs. as of late 2024, investigations have recovered meaningful amounts of fraudulently obtained funds. The Small Business Administration (SBA) and the Department of Justice continue to work together to identify and prosecute individuals and organizations that misused these vital resources.
Pro Tip: Businesses and individuals should always maintain meticulous records of all financial transactions, especially those related to government assistance programs. Openness and compliance are crucial to avoid potential legal issues and to ensure the proper use of taxpayer funds.
Resources for compliance and reporting
| Agency | Resource | Description |
|---|---|---|
| Small Business Administration (SBA) | SBA Website | Provides information on loan programs, compliance requirements, and fraud prevention. |
| Department of Justice (DOJ) | National Center for Disaster Fraud | Offers a hotline and online form for reporting suspected fraud related to disaster relief programs. |
| Internal Revenue Service (IRS) | IRS Website | Provides guidance on tax compliance and reporting requirements for businesses. |
Frequently Asked Questions About PPP Loan Fraud
- What is PPP Loan Fraud?
PPP loan fraud involves illegally obtaining or misusing Paycheck Protection program loans intended for legitimate business expenses during the COVID-19 pandemic. - What were the COVID-19 PPP loans intended for?
The COVID-19 PPP loans were designed to help small businesses cover payroll costs, rent, utilities, and other essential operating expenses to keep them afloat during the pandemic. - What is the penalty for COVID-19 PPP loan fraud?
Penalties for COVID-19 PPP loan fraud can include hefty fines, restitution orders, and imprisonment, depending on the severity of the offense. - How can I report suspected COVID-19 PPP loan fraud?
You can report suspected COVID-19 PPP loan fraud by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form. - What should I do if I suspect a business of COVID-19 PPP Loan Fraud?
If you suspect a business of COVID-19 PPP Loan Fraud, gather as much information as possible and report it to the appropriate authorities, such as the Department of Justice.
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