A man from the Santa Clarita Valley pleaded guilty on Tuesday to federal charges that he fraudulently obtained more than $ 1 million in Paycheck Protection Program (P3) loans for shell companies, said responsible.
Raymond Magana, 40, of Santa Clarita, pleaded guilty to one count of fraud in connection with a major disaster or emergency benefits, funds he obtained by filing tax documents for bogus companies with fraudulent employee benefits, according to a Justice Department official (DOJ) press release.
According to its plea agreement, in May and June 2020, Magana submitted PPP loan applications to banks, applications containing false statements about the number of employees and the amount of salary expenses.
The PPP allows small businesses and other eligible organizations to receive loans with a two-year term and an interest rate of 1%. Businesses are to use the proceeds from the PPP loan for salary costs, mortgage interest, rent and utilities, officials said.
The PPP allows for the forgiveness of interest and principal if companies spend the proceeds of these expenses within a specified time frame and use at least a certain percentage of the loan for salary expenses.
On June 3, 2020, Magana submitted a PPP loan application to Customer’s Bank for $ 940,416 for The Building Circle LLC, a company registered in its name. In that request, Magana falsely stated that the company’s average monthly payroll was $ 376,167 and that it employed 40 workers.
Magana admitted to submitting fraudulent tax documents showing $ 4,402,000 in annual salaries paid to 40 employees in 2019 and $ 852,000 paid in employee salaries in the first quarter of 2020.
According to an affidavit filed with a criminal complaint in this case.
Investigators later determined that Pico Rivera’s address listed as the headquarters of The Building Circle was a 980 square foot single-family home that appeared to be a residence and not a business. Ultimately, the loan application was approved and $ 940,416 was paid to Magana’s front company on June 4, 2020, the affidavit states.
Magana also admitted that he applied for and received a PPP loan of $ 360,415 for Forward Builders LLC, another shell company, using false tax documents and false employee information, and falsely claiming 1.73 million. dollars in employee wages.
When a bank manager contacted Magana after one of the business accounts receiving PPP funds was frozen due to suspicious activity, he told the bank “We have all the documents, we have been approved” and he refused to agree to return the incorrectly obtained PPP. funds, states the affidavit.
Nonetheless, the bank froze the $ 940,416 in the defendant’s bank account so that Magana could not access it, the plea agreement says.
The actual loss from both approved and disbursed loans was $ 360,415, according to the plea agreement.
In December 2020, Steven R. Goldstein, 36, of Northridge, Magana’s business partner, pleaded guilty to a single count, charging him with fraud in connection with a major disaster or emergency benefits. Goldstein has admitted to fraudulently obtaining $ 655,000 in PPP loans for his businesses by submitting false tax documents and false employee information. Goldstein’s sentencing hearing is scheduled for March 30.
United States District Judge Stanley Blumenfeld Jr. has scheduled a sentencing hearing for May 11, at which time Magana faces a statutory maximum sentence of 30 years in federal prison.
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