Photo by Austyn Elizabeth Ford
A federal grand jury returned a four-count indictment yesterday against Christopher A. Mazzei, age 44, and Erin V. Mazzei, age 41, of Arroyo Grande, California. The indictment charges the defendants with wire fraud, money laundering, and conspiracy in connection with a scheme to defraud the government of forgivable Paycheck Protection Program (PPP) loan funds intended for COVID-19-related relief.
The indictment alleges that Christopher and Erin Mazzei, husband and wife, submitted applications for PPP funds to a Hawaii financial institution and two other financial institutions on behalf of three purported businesses, each time utilizing interstate wires. For each application, the Mazzei’s allegedly created false Internal Revenue Service (IRS) tax returns and payroll records, which they presented as authentic and submitted to the banks to support their claims for PPP loan funds. According to the indictment, as a result of the false and fraudulent applications, the Mazzei’s received $1,365,000 in PPP loan funds, which they then used for personal purposes, such as to purchase multiple sport utility vehicles and a home in Kapolei, Hawaii, among other things.
The CARES Act is a federal law enacted on March 29, 2020, 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 authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on the PPP loan to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses at least a certain percentage of the PPP loan proceeds on payroll expenses.
“Our entire community suffers when federal funds appropriated to provide critical pandemic relief are illegally diverted for personal gain,” said U.S. Attorney Clare E. Connors. “We will pursue and prosecute those who defraud programs that provide a financial lifeline to struggling small businesses in Hawaii and across the United States during the COVID-19 pandemic.”
“As the country continues to battle the effects of the COVID-19 pandemic, these indictments are an unfortunate reminder that there are always those who will stoop low to unjustly enrich themselves, even at the cost of those suffering around them,” said Special Agent in Charge Bret Kressin, IRS Criminal Investigation (IRS:CI), Seattle Field Office. “Financial fraud against government assistance programs is not victimless, as it directly steals resources from those who truly need it. Today’s court actions serve notice that IRS:CI will continue to protect our communities by investigating those who choose to commit these crimes.”
“The allegations described in this indictment represent significant abuse of the Paycheck Protection Program that was created to assist small businesses that were suffering the economic hardships caused by the pandemic,” said Special Agent in Charge Jeffrey D. Pittano, of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG). “The FDIC OIG will continue to work with our law enforcement partners in the District of Hawaii, and elsewhere throughout the country, to investigate those who seek to take advantage of Federal relief programs and threaten to undermine the integrity of our Nation’s financial institutions.”
“Today’s indictment sends a clear message that those who exploit and defraud financial institutions and the government’s pandemic relief funds will be brought to justice,” said Cory Nootnagel, Acting Special Agent in Charge, Western Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and Bureau of Consumer Financial Protection.
A federal indictment is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The investigation was conducted jointly by IRS Criminal Investigation, the FDIC Office of Inspector General, and the Office of Inspector General for the Board of Governors of the Federal Reserve System, with assistance from the Small Business Administration Office of Inspector General and the U.S. Treasury Inspector General for Tax Administration. Assistant U.S. Attorney Gregg Paris Yates is handling the prosecution.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across the government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it 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 at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.