COVID-19 relief fraud case: Nearly 20 Arizonans accused of engaging in $3.5M scheme
Nearly 20 Arizonans accused of engaging in $3.5M scheme, authorities allege
In Phoenix, a crackdown on fraudsters who swooped in on billions of COVID-19 relief funding is now underway, and FOX 10 Investigative Reporter Justin Lum takes a look at a case where 20 defendants reportedly racked up at least $3.5 million.
PHOENIX - A crackdown on fraudsters who swooped in on billions of COVID-19 relief funding is underway in the United States, as well as in the Phoenix area.
The fraud happened early on in the pandemic, and we're looking at a federal case rooted in the Phoenix area after a grand jury indictment of 20 defendants was prosecuted by the U.S. Attorney's Office in Arizona.
The defendants are accused of using fraudulent applications to obtain millions of dollars in Small Businesses Administration (SBA) loans.
It's still an active case, but the U.S. Secret Service spoke exclusively to FOX 10, and say the leaders of this group are facing federal charges after they allegedly targeted the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan programs within a span of four months.
The defendants reportedly racked up at least $3.5 million.
"This is a great thing. A great victory that's going to save companies that are incredible companies that are going to need some help because of what happened," said former President Donald Trump when the programs were announced. The programs were much-needed financial relief at the forefront of the COVID-19 pandemic.
On March 27, 2020, Trump signed the CARES Act. The emergency bill provided more than $2 billion to individual citizens, healthcare facilities and businesses facing uncharted territory at the time.
Two years later, the Department of Justice is now taking action on alleged fraud linked to more than $8 billion in pandemic relief across the nation.
"Each case is different but all of them involve either some type of wire fraud, some type of bank fraud, some type of identity theft or identity fraud, some type of money laundering," explained Frank Boudreaux Jr., special agent in charge of the U.S. Secret Service at the Phoenix Field Division.
He says his office is investigating several active cases related to COVID-19 relief fraud.
"All these funds come from taxpayer money, so we’ve all worked hard, and we’ve all contributed to this, and we all have to pay higher taxes or more taxes than we want to because there has been a big criminal element involved in this," Boudreaux Jr. said.
An alleged organized operation takes millions
This is a major case unfolding in the U.S. District Court of Arizona as 20 people are accused of conspiracy, wire fraud and money laundering. Most of them living across the Phoenix area, and were indicted in December 2021.
According to prosecutors, the main players in this case are brothers Nino Mihilli and Nikolas Mihilli, along with Ernest Lerma, Gerald Blaise and Devonte Stanton, who recruited co-conspirators to submit false applications for COVID-19 relief loans.
The others prosecutors say are involved are Veno Kassab, Antonio Herrera, Kenneth Herrera, Dhivakar Krishnan Veeraragavan, Daniel Ortiz, Stephen Dison, Vanessa Ortiz, Brandon Scott Hearvey, Robert Scott Adams III, Ariana Elizabeth Vazquez, Marquon Germain Watson, Maly Virginia Bahena Galiz, Jordan Nathaniel Poland, Zonnie Elton Collum, Renyeh Catherine Carter.
What the indictment says is false are the claims in gross earnings, cost of goods sold and the number of employees.
The scheme allegedly involves the dependents getting "kickbacks" after funding, and Boudreaux Jr. says there are so many cases like this throughout the Phoenix-area.
"They’re recruiting people because they may have an existing name, a bank account that they use, but they’re basically coaching them on how to get the loan and taking the percentage of the amount on the loan that they get," Boudreaux Jr. said.
Documents show the money would come from the SBA, Wells Fargo and Kabbage, an authorized SBA lender. This comes after defendants electronically submit applications using the names of their LLC's, or limited liability companies.
"A lot of these companies were created during the pandemic," Boudreaux Jr. said. "They were created to get the pandemic relief."
We learned some defendants formed 11 new LLC's during the beginning of the pandemic, and there's a common theme between the applications.
Nearly all of them were submitted through an internet provider address registered to "Mak Wireless" a company registered to Nino Mihilli. Investigators say he's the main recruiter in the alleged conspiracy.
Court documents show wire transactions from the SBA to defendants ranged from $10,000 to $150,000.
Nino and Nikolas Mihilli received more than a million dollars in funds from the SBA, cashier check deposits, or transfers from alleged co-conspirators.
This reportedly all happened from May to September 2020 as federal agencies pumped out relief money in the early stages of the pandemic.
Appearing in federal court regarding the conditions of his release, 28-year-old Devonte Stanton is one of the accused recruiters in the COVID relief scheme. Documents show his accounts received a total of $230,000 from other defendants.
Law enforcement sources say Stanton was seen in a rap music video flaunting stacks of cash. The song titled, "In Scam We Trust."
When asked if Stanton would like to comment on the allegations, he said he declined to comment.
He was then asked if he recruited people to fraudulently apply for SBA loans. His response, "Why would I do something like that?"
'Don’t think that there’s not a trail'
As for the scheme costing American taxpayers billions of dollars, Boudreaux Jr. warns Arizonans to stay away from social media scams.
"If someone approaches you with the idea that you can take out one of these loans to make money, you’re at risk of putting yourself in jail. It’s a crime. So don’t think it’s a victimless crime, don’t think that you’re not gonna get caught, don’t think that there’s not a trail," he warned.
The trial for this large fraud case is set for May 2023.
In early March 2022, the DOJ announced that Associate Deputy Attorney General Kevin Chambers will serve as director for COVID-19 fraud enforcement. He says he wants to focus on high-scale criminal enterprises and foreign actors who tried to profit from the pandemic.
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