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Law360 (September 3, 2020, 8:08 PM EDT) -- A New Jersey attorney was arrested Thursday on charges of submitting bogus applications to lenders on behalf of purportedly education-related entities in order to obtain about $9 million in loans under a federal business assistance program in response to the coronavirus outbreak, and then using the money for personal expenses, prosecutors said.
Jae H. Choi has been accused of making up hundreds of workers, manipulating bank and tax records and falsifying a driver's license on three applications seeking roughly $3 million each in funding under the Small Business Administration's Paycheck Protection Program, according to the U.S. Attorney's Office for the District of New Jersey.
Among other spending, Choi allegedly used the PPP loan proceeds to buy a nearly $1 million house, cover about $30,000 in improvements at that residence and deposit roughly $3 million into his wife's personal investment account, prosecutors said.
The 48-year-old Cliffside Park, New Jersey, resident has been charged with three counts of bank fraud and a single count of money laundering.
Prosecutors said Choi had the applications submitted to three different lenders in April on behalf of three businesses that allegedly provide educational services, according to the complaint against him. The first two applications were submitted in Choi's name and listed him as the owner of the entities, while the last application was submitted in his brother's name, the complaint says.
In an April 3 application to one lender for Smart Learning Inc., Choi claimed the business had an average monthly payroll of about $1.2 million and 170 employees, the complaint says.
To back up those payroll numbers, the application included a payroll summary report listing the alleged employees and a purported Employer's Annual Federal Unemployment Tax Return for 2019, which claimed Smart Learning paid about $13.9 million to its staff last year, the complaint says.
But records indicate that neither that form nor other tax filings were submitted to the Internal Revenue Service for the business for 2019, the complaint says.
On April 20, Choi falsely claimed to the lender in an email that "he just told 150 of his Smart Learning employees that they were losing their jobs because the PPP loan had not yet come through, that he had 'watched grown men and women crying,' and that he sincerely hoped that the Lender 1 employee he was emailing 'would never find [themselves] in this kind of situation,'" the complaint says.
As part of an April 10 application to a second lender for Homeschool Buyers Club, Choi provided Social Security numbers and names for 182 employees, the complaint says.
However, based on Social Security Administration records, "only eleven of those individuals' names matched the social security numbers provided," the complaint says. For those 11 individuals, the wages provided to the lender were greater than what the business reported to SSA for the same period, the complaint says.
Choi also provided Social Security numbers and names for 167 contractors as part of the application, but only one of those names matched the Social Security numbers, according to SSA records, the complaint says.
"Many of the social security numbers provided by Choi for employees in the PPP application to Lender 2 were the same numbers provided for contractors, but were associated with different names," according to the complaint.
An April 23 application to a third lender on behalf of Educloud contained fraudulent information as well, the complaint says.
For example, the driver's license provided to verify the identity of Choi's brother was a falsified copy of Choi's New Jersey driver's license, the complaint says. The name and date of birth on the license was altered from Choi's to his brother's, the complaint says.
Choi did not immediately respond to a request for comment Thursday.
The government is represented by Assistant U.S. Attorney Andrew Macurdy and Trial Attorney Andrew Tyler.
Counsel information for Choi was not immediately available.
The case is USA v. Jae H. Choi, case number 2:20-cr-00793, in the U.S. District Court for the District of New Jersey.
--Editing by Abbie Sarfo.
For a reprint of this article, please contact reprints@law360.com.
