Statement of Offense in Support of Guilty Plea — No. 1:24-cr-00374 (Dkt. 13, D.D.C.)

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A statement of offense in support of guilty plea in United States v. Patrick Strauss, Case 1:24-cr-00374-RC, in the U.S. District Court for the District of Columbia, filed September 11, 2024 as Document 13. Strauss agrees to plead guilty to Count One of the Information, conspiracy to commit bank fraud in violation of 18 USC. § 1349. The stipulated facts state that Strauss owned Powergrid Real Estate LLC and that on or about July 10, 2020 he submitted a PPP loan application given to him by Individual 1 to Capital Bank to obtain a $331,367.92 loan in Powergrid's name, with supporting documents he knew to contain false information. They also state that on July 23, 2021 he submitted a forgiveness application that falsely claimed Powergrid had 16 employees.

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Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 1of8

                         UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA

 UNITED STATES OF AMERICA                  :        Criminal Number:

 PATRICK STRAUSS,

         Defendant.

             STATEMENT OF OFFENSE IN SUPPORT OF GUILTY PLEA

       Defendant Patrick Strauss agrees to admit guilt and enter a plea of guilty to Count One of

the Information, which charges Strauss with Conspiracy to Commit Bank Fraud in violation of 18

USC. § 1349. Pursuant to Federal Rule of Criminal Procedure } 1, the Government and Strauss,

with concurrence of his attorney, agree and stipulate that the Government would prove the

following facts at trial beyond a reasonable doubt:

                                      Background

                                    Relevant Persons

       1.     Defendant Patrick Strauss was a resident of the District of Columbia and the

o-ner and operator of Powergrid Real Estate LLC.

       2.     Kelly Winston was a resident of Maryland and employed as an accountant for

several businesses under the control of Individual | that operated in the District of Columbia.

Case 1:24-cr-00374-RC Document 13 Filed 09/11/24 Page 2 of 8

2. Individual 1 was a resident of Maryland and operated several businesses in the

District of Columbia that provide services to the District.
Relevant Entities

4. Powergrid Real Estate LLC (““Powergrid”), was a real estate business registered as
a corporation in Delaware on May 23, 2017, and operated in the District of Columbia.

5. Capital Bank, N.A. (“Capital Bank”) is a financial institution insured by the Federal
Deposit Insurance Corporation.

i The Small Business Administration

6. The United States Small Business Administration (“SBA”) was an executive
branch agency of the United States government that provided support to entrepreneurs and small
businesses. The mission of the SBA was to maintain and strengthen the nation’s economy by
enabling the establishment and viability of small businesses and by assisting in the economic
recovery of communities after disasters.

The Paycheck Protection Program

7. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a federal
law enacted in or around March 2020 and designed to provide emergency financial assistance to
the millions of Americans suffering the economic effects caused by the COVID-19 pandemic. One
source of relief provided by the CARES Act was the authorization of billions in forgivable loans
to small businesses for job retention and certain other expenses, through a program referred to as
the Paycheck Protection Program (“PPP”).

8. In order to obtain a PPP loan, a qualifying business must have submitted a PPP loan
application, which is signed by an authorized representative of the business. The applicant of a

PPP loan was required to acknowledge the program rules and make certain affirmative

Case 1:24-cr-00374-RC Documenti13 Filed 09/11/24 Page 3 of 8

certifications in order to be eligible to obtain the PPP loan. In the PPP loan application, the
applicant must state, among other things, its: (a) average monthly payroll expenses and (b) number
of employees. These figures were used to calculate the amount of money the small business is
eligible to receive under the PPP. In addition, businesses applying for a PPP loan must have
provided documentation showing their payroll expenses. To qualify for eligibility, businesses that
applied for a PPP loan needed to be in operation as of February 15, 2020.

9. A PPP loan application must have been processed by a participating financial
institution (the lender). If a PPP loan application was approved, the participating financial
institution funds the PPP loan using its own monies, which are 100% guaranteed by the SBA. Data
from the application, including information about the borrower, the total amount of the loan, and
the listed number of employees, was transmitted by the lender to the SBA in the course of
processing the loan.

10. PPP loan proceeds must have been used by the business for certain permissible
expenses—payroll costs, interest on mortgages, rent, and utilities. The PPP allowed the interest
and principal on the PPP loan to be entirely forgiven if the business spends the loan proceeds on
these expense items within a designated period of time and uses a certain percentage of the PPP
loan proceeds on payr«li expenses.

11. On December 27, 2020, the Economic Aid to Hard-Hit Small Business, Nonprofits
and Venues Act provided additional funding for the PPP and extended the application deadline to
March 31, 2021. The act enables borrowers to take a second draw PPP loan under the same general
terms as their first PPP loan up to a maximum loan amount of $2 million. The act reopened the
program to borrowers who did not previously receive a first draw PPP loan. To be eligible for a

second draw, borrowers must employ no more than 300 employees, demonstrate a 25% reduction

Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 4 of 8

in gross receipts during a calendar quarter in 2020, and have expended the full amount of their
jnitial PPP loan. Allowable expenses were expanded to include worker protection costs related to
COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and
certain supplier costs and expenses for operations. The expansion applies retroactively to first draw
PPP joans that have not been forgiven by the SBA.

12. On March 25, 2021, the PPP Extension Act of 2021 extended the application
deadline from March 31, 2021, to May 31, 2021. In addition to extending the PPP application
filing window by 60 days, the Extension Act provided an extra 30 days for the SBA to finish
processing applications received by the May 31, 2021, deadline.

Bank Fraud Conspiracy

13. In the summer of 2020, Individual 1 approached Strauss to ask if he wanted to
apply, with Individual 1’s assistance, for a PPP loan in the name of Powergrid. At the time, both
Individual | and Strauss were aware that Powergrid did not qualify for a PPP loan because it did
not have any employees or payroll.

14, Individual 1 and Strauss agreed that Individual 1 would receive a portion of the
PPP funds if the loan application was approved and funded.

15. In July 2020, Individual 1 provided Strauss with a PPP loan application containing
materially false statements, including that Powergrid had 16 employees and an average monthly
payroll of $132,547.17, when in fact, as of July 2020, it had no employees and no payroll. In
addition, Individual | provided Strauss false and fraudulent supporting documents to submit with
the loan application, including: false financial statements for 2019 and for the first two quarters of

2020, false monthly payroll reports for May 2019 through March 2020, and false Employer’s

Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 5of8

Quarterly Federal Tax Return (Forms 941), for the second, third, and fourth quarters of 2019 and
first quarter of 2020.

16. Strauss understood that the application and supporting documentation given to him
by Individual 1 had been prepared by Winston, even though neither Individual 1, nor Winston,
requested, or received any information from Strauss that would be necessary to submit a complete
and accurate PPP loan application had Powergrid been eligible for a loan.

17. Individual 1 and Strauss agreed that Strauss would submit the PPP loan
application to Capital Bank to seek a loan in the amount of $331,367.92.

18. On or about July 10, 2020, Strauss submitied the PPP Loan application given to
him by Individual 1 to Capital Bank to obtain a $331,367.92 PPP loan in the name of Powergrid.
In addition, Strauss submitted to Capital Bank, with his application, supporting documents he
knew to contain false information.

19. Onor about July 22, 2020, as a result of a system failure by Capital Bank, Strauss,
through Winston and Individual 1, resubmitted Powergrid’s false and fraudulent PPP loan

application.
aA

20. On July 22, 2020, Capital Bank, based on the representations of Strauss, adjusted
the loan amount to $304,933. _

21. On July 22, 2020, the SBA and Capital Bank approved Strauss’s fraudulent PPP
loan application and funded the loan in amount of $304,900.

22. OnJuly 23, 2020, Strauss opened a Capital Bank business checking account ending
in -0211.

23. On July 24, 2020, Strauss electronically signed various loan documents including

a Promissory Note and Disbursement Request and Authorization.

Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 6 of 8

24. On July 29, 2020, the SBA and Capital Bank wired $304,900 into Powergrid’s
Capital Bank account ending in -0211.

25. On July 29, 2020, Strauss wired $304,800 from Powergrid’s Capital Bank account
ending in -0211 toa TD Bank account ending in -3426, also held by Powergrid.

26. On August 3, 2020, Strauss wired $124,000 from Powergrid’s TD Bank account
ending in -3426 to a Truist Bank account ending in -1820, held by a business associated with
Individual 1.

27. On June 4, 2021, Strauss forwarded Individual 1 an email containing a link to
Capital ‘Bank’s PPP loan forgiveness application for Powergrid.

28, On June 25, 2021, Strauss emailed Individual | regarding the status of Powergrid’s
loan forgiveness application. Individual 1 responded that Winston would complete and submit the
application.

29. On July 20, 2021, Strauss forwarded an email to Winston and Individual 1 from
Capital Bank requesting “a summary paycheck or an FTE [(Full Time Equivalent)] snapshot
document from ADP” for the period of January 1, 2020, through October 23, 2020.

30. On July 20, 2021, at the direction of Individual 1. Winston prepared false and
fraudulent Employer’s Quarterly Federal Tax Return (Forms 941) in support of Powergrid’s PPP
loan forgiveness application.

31. On July 23, 2021, Strauss submitted a Form 3508EZ to Capital Bank on behalf of
Powergrid seeking forgiveness for his PPP loan. The application falsely claimed that Powergrid
had 16 employees at the time Strauss received the PPP loan, when in fact it had no employees.

The application also falsely claimed that, for the period of July 27, 2020, through October 23,

Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 7 of 8

2020, Powergrid spent the full amount of the second draw loan, $304,900 on payroll costs, when
in fact it had no payroll.costs.
32. As a result of the false Form 3508EZ submission and supporting documentation,

Capital Bank and the SBA forgave Powergrid’s PPP loan.

Respectfully Submitted,

MATTHEW M. GRAVES
UNITED STATES ATTORNEY

QC). Lethetesn
ZOSHUA S. ROTHSTEIN

Assistant United States Attorney
NY Bar No. 4453759

DATED: July 24, 2024

Case 1:24-cr-00374-RC Document13 Filed 09/11/24 Page 8of8

DEFENDANT'S ACCEPTANCE

The preceding statement is a summary, made for the purpose of providing the Court with
a factual basis for my guilty plea to the charge against me. It does not include all of the facts
know". iv me regarding this offense. | make this statement knowingly and voluntarily and because
I am, in fact, guilty of the crimes charged. No threats have been made to me nor am | under the
influence of anything that could impede my ability to understand this Statement of Offense fully.

I have read every word of this Statement of the Offense. Pursuant to Federal Rule of
Criminal Procedure 11, after consulting with my attorney, | agree and stipulate to this Statement
of the Offense, and declare under penalty of perjury that it is true and correct.

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Patrick Strauss
Defendant 4lu / Zu24

ATTORNEY’S ACKNOWLEDGMENT

1 have read this Statement of Offense and reviewed it with my client fully. 1 concur in my
clicnt’s desire to adopt and stipulate to this Statement of the Offense as true and accurate.

Date: sy Le, to —>f (Noses

Dwight oe

Counsel for/Defendant Patrick Strauss

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