By Kevin Deutsch
A Coral Springs man pleaded guilty this week in Ohio for leading a nationwide scheme to fraudulently obtain over $35 million in COVID-19 Paycheck Protection Program loans, federal prosecutors said.
According to court documents, Phillip J. Augustin, 52, conspired to obtain millions of dollars in fraudulent PPP loans guaranteed by the Small Business Administration. Along with James R. Stote, 55, of Hollywood, Augustin first obtained a fraudulent PPP loan for his company, Clear Vision Music Group LLC, using falsified documents, prosecutors said.
After submitting that PPP application, Augustin and Stote immediately began working to obtain larger PPP loans for themselves and their associates, prosecutors said.
“They recruited additional PPP loan applicants and prepared and submitted fraudulent loan applications for them in exchange for a share of the loan proceeds,” according to a press release from the Department of Justice. “The applications they submitted for all of the loans in the scheme relied on fake payroll numbers, falsified IRS forms, and phony bank statements. They submitted or facilitated at least 79 fraudulent loan applications worth at least $35 million and planned to submit more.”
Stote and Augustin pleaded guilty to conspiracy to commit wire fraud. Each faces a maximum penalty of 20 years in prison at sentencing.
In a connected case, Diamond Smith, 37, of Miramar, who paid kickbacks to Augustin and Stote for their help with PPP fraud, was sentenced this week to 20 months in prison after pleading guilty Aug. 4 to conspiracy to commit wire fraud, prosecutors said.
Smith, a recording artist, admitted to obtaining a PPP loan of $426,717 for his company, Throwbackjersey.com LLC, using falsified documents and false information. After that loan, Smith sought and obtained another PPP loan of $708,065 for his other company, Blue Star Records LLC, using falsified documents and false information.
Smith admitted to using PPP loan proceeds at the Seminole Hard Rock Hotel and Casino and on luxury items, including a Ferrari. Authorities said they seized the Ferrari at the time of Smith’s arrest.
According to prosecutors, Smith admitted that he paid more than $250,000 to Augustin and Stote as kickbacks for their assistance in preparing and submitting the fraudulent loan applications.
Smith was ordered to pay $1,111345.23 in restitution and $1,134,782 in forfeiture in addition to his term of imprisonment, prosecutors said.
Juan Antonio Gonzalez, U.S. Attorney for the Southern District of Florida, signaled that more PPP fraud prosecutions from his office are coming.
“Our work is not done,” Gonzalez said in a prepared statement. “We will continue to hold accountable those who wrongfully obtain funds intended to help struggling small businesses survive the current health and economic crisis.”
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
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