In 2021, amid the pandemic that paralyzed the U.S. economy, Lawrence A. Walker told federal officials he needed help covering a $105,000 payroll for his 13 employees and collected more than $262,000 in federal Covid-19 relief assistance.
In reality, Walker’s Baltimore-based “Nutscola Street Promotions LLC” was not in operation at the time and had no employees.
According to prosecutors, Walker pocketed the Paycheck Protection Program (PPP) loan funds and used the money, among other things, to:
• purchase a Mercedes Benz S550V4, valued at about $76,000.
• rent and fully furnish a downtown luxury apartment at The Zenith, overlooking the Camden Yards baseball stadium.
The details were disclosed in June as the 63-year-old Walker pleaded guilty in U.S. District Court to conspiracy to commit wire fraud and agreed to pay back a money judgment of $262,252 as well as restitution of $262,252.
He’ll also have to return $30,000 in cash found hidden in a garbage bag inside a heater in his bedroom.
It’s just a fraction of the money clawed back over the last year by the U.S. Attorney’s Office for Maryland, which is investigating Covid-19 scams as one of three “strike forces” established across the country by the Department of Justice (DOJ).
The initiative has uncovered at least $40 million in federal relief fraud in Maryland and has charged more than 20 defendants, exposing schemes to use the money for luxury goods, expensive vacations, guns and drugs, the office reported last week.
“We cannot and will not tolerate those who would take advantage of a global pandemic by stealing funds and defrauding programs intended to help Americans who were suffering during the pandemic,” said U.S. Attorney Erek L. Barron, outlining the strike force’s accomplishments to date.
Strike force prosecutors currently have 19 civil Covid relief fraud cases pending in Maryland, with about $30 million in potential losses identified, Barron said.
Nationally, the crackdown has resulted in criminal charges filed against 371 defendants for offenses related to over $836 million in alleged Covid fraud, according to the DOJ.
Even so, the enforcement action has, by the government’s own estimates, only scratched the surface.
The exact amount of stolen relief funds is unknown, but the Small Business Administration’s inspector general recently estimated that more than $200 billion — or at least 17% of the roughly $1.2 trillion in pandemic loans the agency doled out — had been disbursed to “potentially fraudulent actors.”
The federal effort targets fraud, waste and abuse related to relief programs enacted by Congress, including those created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Along with Maryland, U.S. attorney’s offices in California and Miami were selected to focus on the problem. Teams in New Jersey and Colorado were later added.
The investigations focus on the Economic Injury Disaster Loan (EIDL) program and Unemployment Insurance (UI) programs, as well as the PPP program and include many examples of large-scale, multi-state fraud.
Keon Ball, for instance, was sentenced last year to more than five years in federal prison for wire fraud conspiracy and aggravated identity theft.
Prosecutors said the Baltimore man submitted fraudulent PPP loan applications to obtained $256,664 in government-backed funds for non-existent businesses.
Each application included fake Internal Revenue Service forms and false information about purported wages paid to phantom workers.
His scheme, which used the identifying information of more than 10 victims, caused a loss of $750,000, prosecutors said.
A search by law enforcement of his upscale apartment in Baltimore turned up “multiple counterfeit identification documents, including three fraudulent licenses, a card reader, re-encoder, blank white plastic card stock, hologram overlays and a firearm which Ball was prohibited from possessing.”
Some of the alleged scammers are well-known to the public. Wire fraud and other crimes related to alleged CARES Act fraud are pending against 45-year-old David Epstein of Owings Mills.
Epstein is the CEO of PEI Staffing, which has appeared on the Baltimore Business Journal’s list of the region’s fastest growing companies. Prosecutors in June charged him with submitting false information to obtain a $1.3 million PPP loan and then using the money to buy a Mercedes Benz and install a pool at his home.
Another high-profile individual being prosecuted is former Baltimore State’s Attorney Marilyn Mosby.
Mosby was indicted in January 2022 for failing to disclose taxes she owed when applying for mortgages to buy two Florida condominiums and for lying about financial hardship due to Covid to tap retirement funds she used to buy the properties.
Her trial is currently scheduled for November 2.
ID Theft and Ghost Guns
Fraudsters also took advantage of states’ ability under the CARES Act to provide unemployment benefits for workers impacted by the pandemic, Barron’s office said.
Many of the defendants charged in Maryland used individuals’ personal information to fraudulently obtain identity documents and access unemployment benefits.
Twin brothers and co-defendants Jerry and Jaleel Phillips, for instance, were accused of illegally obtaining more than $1 million in relief money using fake names, including prosecutors say, “Allen Gator.”
Jerry “Tian Juzo” Phillips, 25, was sentenced in June to seven years in prison for wire fraud conspiracy, aggravated identity theft and illegal possession of a machine gun. He was ordered to pay $1.23 million restitution.
Jaleel Phillips, 25, pleaded guilty to his role in the conspiracy and was sentenced to 30 months in prison and ordered to pay $1.42 million.
According to the plea agreement, a search of Jerry Phillips’ residence “recovered more than 25 fake driver’s licenses from multiple states and multiple identification documents from different jurisdictions with Jerry Phillips’ photograph and the same alias,” prosecutors said.
Also recovered were four “ghost guns” that Jerry Phillips purchased online, using an alias.
One of these weapons was modified into a machine gun.
Phishing and Malware
As part of the pandemic scam crackdown, Maryland prosecutors say they have also shut down fraudulent websites used to collect the personal information of individuals visiting the sites to be used for phishing attacks, deployment of malware or other illegal schemes.
The seized websites were almost identical to the names of authentic websites, including Covid vaccine manufacturers, retailers and a purported Covid-19 treatment.
Often the fake domains mimicked the stylistic designs and language of the real website.
Individuals now visiting the websites see a message informing them the sites have been seized by the federal government.