A 40-year-old man from Virginia was pleaded guilty on Friday for carrying engaging in a COVID-19 related loan fraud scheme that resulted in unlawful gains of nearly $197,000. Joseph Cherry, from Norfolk, Virginia, engaged in a scheme to procure COVID-related loan benefits using the Small Business Administration (SBA) and associated lenders.
Cherry is said to have hidden his criminal record in his loan applications faces a maximum penalty of 30 years in prison. He was previously convicted of federal felony charges in 2009 for his involvement in money laundering and fraud for running an illegal scheme from 2005-2008.
Defrauding the CARES Act
While conventional SBA funding programs exist, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was signed into law in March 2020 as a response to the massive economic fallout due to the COVID-19 pandemic. It established numerous new temporary programs and also provided for the extension of other programs for addressing the economic ramification of the pandemic.
These programs include the Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP). It was using these programs that Cherry carried out his scheme. In the months of March and April 2020, he presented numerous applications for EIDL and PPP loans. Along with plans to defraud the programs, Cherry also falsified information regarding his income, claimed businesses, and most importantly, his criminal record.
Making Away With Nearly $197,000
According to court documents, Cherry's first loan application was using the business name Global Concepts, which he said was a company that sold clothing. The repeat offender also claimed that business was commenced in 2015. However, official records state that Cherry had not attempted to register with the Virginia State Corporation Commission until January 2020, was successfully registered only in April.
The court documents also stated that Cherry made false claims that the business earned over 1 million in gross revenue in the 12 months prior to the pandemic. Additionally, he is said to have applied for at least two more loans under the name of a business called Contra Surplus LLC. Interestingly, despite registered in 2018, it was considered inactive due to unpaid registration fees.
Through his false applications, Cherry fraudulently, yet successfully procured a loan amounting to $196,900 from the US Treasury that was deposited into a bank account that he set up at Langley Federal Credit Union. During a brief period in April 2020, Cherry withdrew over $100,000 as cash and a cashier's check. Additionally, he made numerous purchases that the court deemed "inconsistent with the purposes of the PPP and EIDL programs."