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Law360 (May 13, 2020, 9:10 PM EDT) -- A Texas engineer is accused of using a fake company to file for $13 million in forgivable loans under the Coronavirus Aid, Relief, and Economic Security Act that are meant to help small businesses during the pandemic, according to federal court documents unsealed Wednesday.
Shashank Rai, 30, of Beaumont, is facing multiple charges of fraud and making false statements to a financial institution for allegedly seeking loans from two different banks as Rai Family LLC, which doesn't exist. In his applications, he claimed he employed 250 people on a monthly payroll of between $1.2 million and $4 million, according to a U.S. Department of Justice news release.
Rai's applications raised suspicions after the Texas Workforce Commission alerted investigators that there were no records of him or his business paying employee wages in 2020. The business also didn't report revenues for the fourth quarter of 2019 or the first quarter of 2020, according to the Texas Comptroller's Office of Public Accounts.
"The behavior in this case was very brazen," U.S. Attorney for the Eastern District of Texas Joseph D. Brown said in the release. "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 penalties of perjury."
Rai allegedly submitted two applications to unnamed lenders seeking $10 million in loans from one and $3 million from another. For the larger loan, he claimed his business paid an average of $4 million to employees monthly. He changed that number to $1.2 million monthly for the second loan, according to the release.
Investigators also found handwritten notes in the trash outside his residence that allegedly spell out an investment strategy for the $3 million loan, according to the release.
The CARES Act was enacted March 29 and provides emergency financial assistance to Americans during the COVID-19 pandemic. One type of relief offered under the act is forgivable loans that small businesses can use to pay employee wages and other expenses. The act was originally authorized to give out $349 billion in loans, but Congress authorized an additional $300 billion in funds in April.
In another case Wednesday, federal prosecutors in Georgia accused a reality TV personality who stars in "Love & Hip Hop: Atlanta" of spending $1.5 million from a coronavirus small-business relief loan on a Rolls-Royce, jewelry and child support, charging him with federal bank fraud, but Maurice Fayne, aka Arkansas Mo, said he's "fighting them 100%."
The government is represented by Lou Manzo and L. Rush Atkinson of the DOJ's Fraud Section and Frank Coan of the U.S. Attorney's Office for the Eastern District of Texas.
Counsel information for Rai wasn't immediately available.
The case is USA v. Rai, case number 1:20-mj-00095, in the U.S. District Court for the Eastern District of Texas.
--Editing by Orlando Lorenzo.
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