New federal task force in Spokane takes aim at businesses, people committing COVID-19 fraud

A new team of federal investigators and prosecutors is using old laws to build new cases alleging theft of government funds intended to help people weather the COVID-19 pandemic.

“It all ran out really quickly, because there was incredible need,” said U.S. Attorney for Eastern Washington Vanessa Waldref, referring to the billions of dollars loaned in the immediate days following government shutdowns. “But there was also a lot of incredible fraud, and a lot of deserving businesses did not get the funds they needed.”

Waldref, who took office in October, said she recognized in her office the expertise needed to bring large fraud cases, such as those targeting payday loan lenders, would-be historic properties developers and contractors working at the Hanford nuclear clean-up site. A conversation with Weston King, special agent-in-charge of the Seattle Field Office of the Small Business Administration, led to the development of a task force assigning those investigators and attorneys to cases involving theft of the money set aside by Congress in coronavirus aid.

The task force follows U.S. Attorney General Merrick Garland’s announcement in May that the Justice Department would prioritize investigation and prosecution of COVID-19 fraud cases. Dan Fruchter, an assistant U.S. attorney in the Eastern Washington district who is one of five prosecutors working on cases, said the division of labor will lead to faster investigations and prosecutions.

“That really is the goal, to get from our investigative lead to the completion of the investigation in weeks instead of months and years,” Fruchter said.

The office has publicly announced one indictment and one resolution of a case involving a contractor providing occupational health services to workers at the Hanford site. The case involved the alleged theft of $32,400 by Roshon E. Thomas, whom the government says formed a company in July 2020 and filed documents indicating that its income had been harmed by a pandemic that was proclaimed four months before his company was founded.

Thomas applied for an Economic Injury Disaster Loan through that company, citing the costs of payroll and goods for a company the government alleges didn’t exist . The program allowed a front of cash of up to $10,000. Thomas has pleaded not guilty to a two-count indictment of wire fraud and is awaiting trial.

The Hanford contractor, HPM Corporation, admitted to falsifying documents about their Paycheck Protection Program application, a separate program that allowed forgiveness for loans if the firm could prove it spent the majority of its loan on payroll costs. HPM has agreed to pay $2.9 million in restitution and penalties.

The cases were prosecuted under the False Claims Act and the federal criminal law outlawing wire fraud. Both laws were written in the 19th century, one by President Abraham Lincoln to give the federal government the ability to go after military contractors who provided subpar or nonexistent supplies to fight the Civil War. Wire fraud has its origins in the 1870s, when federal lawmakers began to express concern that the mail service was being used by people in cities to swindle rural Americans, according to a February 2019 study by the Congressional Research Service.

Functionally, COVID-19 cases are similar to other types of fraud, Fruchter said. Cases can come to federal investigators’ attention when company formation documents are filed after the date of the pandemic, as is alleged in Thomas’ case. They can also be received through tips from employees or evidence of lavish spending, such as in one Florida case where a 29-year-old man was arrested and indicted following the purchase of a $318,000 Lamborghini sports car.

An added wrinkle in many cases is identity theft, where a person will steal the identity of a person or business in order to file a fraudulent claim for aid, Fruchter said.

“That’s a huge problem for the victim. Their credit might be ruined, and they might have to pay the money back,” he said. “Those are the kind of cases that we really prioritize.”

Waldref said the task force, modeled in part on a similar effort in Oregon, is intended to help protect the interests of small business owners in the region. The Small Business Administration awarded more than 195,000 loans totaling $18.3 billion, according to publicly available statistics. The average amount of a loan was less than $100,000, and the average company size was 10 employees.

“In Eastern Washington, we don’t have huge cities and we still have vibrant businesses that are really able to make our communities wonderful,” Waldref said, “and those are exactly the businesses who did not receive the funds that would have been so critical to help them survive the pandemic.”

Those suspecting COVID-19 relief fraud in Eastern Washington are encouraged to contact the Justice Department’s National Center for Disaster Fraud Hotline, at (866) 720-5721, or to file a complaint electronically at justice.gov/disaster-fraud/ncdf-disaster-complaint-form.