South Florida ring busted, punished in COVID-19 business fraud case stretching to Ohio




  • In US
  • 2022-05-24 20:25:46Z
  • By Miami Herald
 

As soon as Congress passed a coronavirus rescue plan for small businesses totaling $650 billion, a South Florida-based ring wasted no time applying for dozens of bogus loans and pocketing millions of dollars in illicit proceeds, U.S. authorities say.

Two years later, the fraudulent loan network headed by James Richard Stote has been busted and punished, with Stote sentenced this month to 10 years in prison and ordered to pay back more than $10 million to the U.S. government and lending banks.

One of Stote's associates, Phillip Augustin, was also imprisoned this month for seven and a half years and ordered to repay nearly $6 million, court records show. And on Monday, a supporting player, Ross Charno, was sentenced to two years in prison and ordered to pay back almost $3.7 million.

Charno's defense attorney, Brian Bieber, said his client was relieved that the federal judge viewed "his culpability as much less than others involved in this case" and took his entire life into account, not just this "horrible mistake."

While the COVID-19 conspiracy case was made in Cleveland, Stote and his associates orchestrated the scheme to fleece the Small Business Administration's Paycheck Protection Program from their home base in Broward County by applying for about 80 loans through banks in Ohio, according to their plea agreements. The banks reviewed and approved the ring's loan applications, totaling almost $36 million, and the Small Business Administration promised to guarantee them as long as the funds were properly used for employee payrolls and other costs.

But neither their loan applications nor their business expenses were legitimate, according to federal prosecutors. Stokes and his associates fabricated everything, they said.

"This case was motivated by greed at a time when millions of Americans were suffering from the economic impact of a global pandemic," prosecutors said in sentencing memos filed in federal court in Cleveland. "As the pandemic spread, so too did fraud related to the PPP program and other programs designed to provide critical economic assistance."

According to an FBI criminal affidavit, Stote and his associates joined the SBA loan racket in spring 2020 and collaborated with an unnamed business person who was cooperating with investigators in the criminal case against them.

"[The] defendants obtained these PPP loans both for their own companies and for others' companies," the FBI affidavit says. "When they obtained PPP loans for other companies, [they] expected to receive - and did receive - sizable kickbacks. To inflate the size of these PPP loans, and their corresponding kickbacks, [they] relied on a variety of false statements, including by submitting falsified bank statements and tax forms."

In addition to helping the unnamed businessman in securing "fraudulent" PPP loans through the Ohio banks, Stote and his associates were accused of obtaining other loans from the emergency SBA program for such companies as PM Autobody in Miami ($652,470), OMP Enterprises in Fort Lauderdale ($244,062) and USA Homes and Remodeling in Hollywood ($702,720), according to the affidavit.

The FBI's case was built not only on fabricated bank statements and tax returns that appeared identical in many loan applications, but also on text messages, emails and recorded phone calls between the confidential business person, Stote and his associates. An undercover agent also interacted with Stote and the others, the affidavit says.

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