Court filing
Transcript of Jury Trial Testimony of John Miller — USA v. Crowther (Dkt. 129, M.D. Fla. No. 2:20-mj-01094, docketed in No. 2:20-cr-00114)
Filed March 30, 2021 in USA v. Crowther; one of 318 filings from this case.
Record facts
| Court | U.S. District Court for the Middle District of Florida |
|---|---|
| Filed | 2021-03-30 |
U.S. District Court for the Middle District of Florida · No. 2:20-cr-00114 · Doc. 129 · 2021-03-30 · Docket on CourtListener
Full text
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
UNITED STATES OF AMERICA, ) Fort Myers, Florida
)
) Case 2:20-CR-114-FtM-66MRM
Plaintiff )
) Wednesday, March 23, 2021
vs. )
) 1:38 p.m. to 3:51 p.m.
CASEY DAVID CROWTHER, )
) Courtroom 5D
Defendant )
_______________________________)
TRANSCRIPT OF JURY TRIAL TESTIMONY OF JOHN MILLER
HELD BEFORE THE HONORABLE JOHN E. STEELE,
United States District Court Judge
Official Court Reporter:
Jeffrey G. Thomas, RPR, CRR
2110 First Street, Suite 2-194
Fort Myers, FL 33901
Telephone: (239) 461-2033
(Proceedings reported by Stenotype; Transcript produced by
computer-aided transcription.)
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 1 of 74 PageID 761
2
A P P E A R A N C E S
COUNSEL FOR GOVERNMENT:
United States Attorney's Office
Middle District of Florida
United States Courthouse
2110 First Street
Room 3-137
Fort Myers, FL 33901
(239)461-2200
BY: TRENT REICHLING, ESQ.
MICHAEL V. LEEMAN, ESQ.
COUNSEL FOR DEFENDANT:
FisherBroyles LLP
2390 Tamiami Trail North
Suite 100
Naples, FL 34103
BY: NICOLE HUGHES WAID, ESQ
BRIAN E. DICKERSON, ESQ.
* * *
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 2 of 74 PageID 762
3
I N D E X
March 23, 2021 Vol. Page
1
4
Preliminary Discussions
- - -
WITNESSES FOR GOVERNMENT
WITNESS DIRECT CROSS REDIRECT RECROSS VOIR DIRE
NAME Vol. Pg. Vol. Pg. Vol. Pg. Vol. Pg. Vol. Pg.
JOHN MILLER 1
5
1
19
1
70
- - -
DEFENSE EXHIBITS ADMITTED
Vol. Page
1
46
Defendant's Exhibit G18 Admitted
1
52
Defendant's Exhibit G16 Admitted
- - -
Vol. Page
1
74
Certificate of Court Reporter
* * *
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 3 of 74 PageID 763
4
* * * P R O C E E D I N G S * * *
- - -
MR. REICHLING: At this time, the government calls
John Miller.
THE COURT: Right up here, please.
COURTROOM DEPUTY: Good afternoon.
Please raise your right hand.
Do you solemnly swear or affirm the testimony you are
about to give in the case before the Court will be the truth,
the whole truth, and nothing but the truth?
THE WITNESS: Yes.
COURTROOM DEPUTY: Thank you, sir.
If you wouldn't mind please taking a seat in the box?
And, once seated, would you please tell us your name,
and spell it?
THE WITNESS: Okay.
COURTROOM DEPUTY: Thank you, sir.
THE WITNESS: Do you want me to remove the mask?
THE COURT: You may if you feel comfortable doing
that.
THE WITNESS: Thank you.
My name is John Miller. J O H N. M I L L E R.
MR. REICHLING: May I proceed, Your Honor?
THE COURT: You may.
MR. REICHLING: Thank you, Judge.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 4 of 74 PageID 764
5
JOHN MILLER - DIRECT/REICHLING
JOHN MILLER,
called as a witness by the Government, and having been first
duly sworn, was examined and testified as follows:
DIRECT EXAMINATION
BY MR. REICHLING:
Q
Mr. Miller, where do you currently work?
A
I work at the Small Business Administration.
Q
Is that also referred to as the SBA?
A
Yes.
Q
And what do you do at the SBA?
A
I am the Deputy Associate Administrator in the SBA's
Office of Capital Access.
Q
And what does the Office of Capital Access oversee?
A
The office oversees all of the SBA's business and surety
guarantee programs.
Q
And does that include the Paycheck Protection Program?
A
Yes, it does.
Q
Now, could you explain to the jury -- well, first, are
you familiar with the Paycheck Protection Program?
A
I am.
Q
And how did the Paycheck Protection Program come about?
A
The program was established in the CARES Act, which was
the Coronavirus Aid, Relief, and Economic Security Act signed
into law on March 27th of last year.
Q
And, if you know, why was the Paycheck Protection
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 5 of 74 PageID 765
6
JOHN MILLER - DIRECT/REICHLING
Program included in the CARES Act?
A
Well, it was included because of the need to, as the
name implies, protect paychecks of American workers affected
during the pandemic.
Q
And when did the Paycheck Protection Program become
available to the public?
A
The program became available shortly thereafter. On
April 3rd, banks were allowed to begin lending money.
Q
And you mentioned banks lend money. Whose money goes
out the door? Is it the SBA's money, or is it the lender's
money?
A
No, it's not the SBA's money. It's the lender's money.
It's the bank or the lender.
Q
And who administers the program?
A
The SBA.
Q
And the initial time that the Paycheck Protection
Program was created, how much money was available under the
Paycheck Protection Program?
A
Under the Paycheck Protection Program, Congress
authorized $349 billion.
Q
And did there come a time where that $349 billion was no
longer available?
A
Yes. Yes. It went fast, within 14 days, so by
April 16th. April 16th, the program was out of money.
Q
And do you have a rough estimate as to how many Paycheck
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 6 of 74 PageID 766
7
JOHN MILLER - DIRECT/REICHLING
Protection Program loans were authorized by the SBA?
A
Well, all in all, I mean, we've authorized, now, close
to 8 million loans.
Q
Now, who was authorized to make these PPP loans?
A
Lenders. Banks, credit unions, farm credit agents --
farm credit organizations. Some non-bank lenders. Fintechs.
A lot of different lenders.
Q
And was this money guaranteed by the Small Business
Administration?
A
Yes.
Q
And could you explain the guarantee briefly, what's its
significant is?
A
Congress gave us the authority to temporarily guarantee
these loans at 100 percent, meaning if for some reason the
borrower could not pay the loan back to the lender, SBA would
step in and honor the guaranty if the lender requested it, and
we would pay the lender for the loss on the loan.
Q
And was this loan a forgivable loan?
A
It was.
Q
And was this forgivable in whole possibly?
A
Yes. That was the intent of the Act, was that, if used
properly, this loan is a fully forgivable loan for the
borrower.
Q
Could that explain the demand for the loan?
A
Absolutely.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 7 of 74 PageID 767
8
JOHN MILLER - DIRECT/REICHLING
Q
And were there requirements imposed upon borrowers with
regards to use of the money?
A
Yes. The use of the money was very limited. It was to
be used to pay payroll, to keep American workers employed. And
that would include pay plus benefits. Also, to pay very basic
non-payroll expenses for the business, such as making a
mortgage interest payment, making a rent payment, and making a
utility -- paying for utilities. To keep the operations of the
business going during the pandemic.
Q
And who was -- back in April of 2020, at least, who was
eligible to apply for a PPP loan?
A
Small businesses. So -- and that was determined in --
Congress wrote it into the statute, businesses with 500 or
fewer employees. And then, also, sole proprietors, independent
contractors, self-employed individuals.
Q
And how were they to apply for the loan?
A
They were to apply for the loan using an SBA Form 30 --
excuse me -- 2483, which is an SBA form that the borrower had
to complete and submit to a bank or a lender of its choice, and
then that's how they would apply. They would apply with the
bank, not with the SBA.
Q
Was there supposed to be -- was anything supposed to be
submitted along with the application to the lender?
A
Yes. The borrower had to also submit -- in addition to
filling out the application, they had to submit documentation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 8 of 74 PageID 768
9
JOHN MILLER - DIRECT/REICHLING
to support the amount of the loan request.
Q
And how was the amount of the loan request to be
determined?
A
The amount of the loan request was determined based upon
the prior year's payroll. So, because this was a payroll -- or
a Paycheck Protection Loan to keep American workers employed,
the prior year's -- prior 12 months' payroll was factored in,
and the average monthly payroll amount spent by the borrower
for payroll was then taken and multiplied by 2.5 to get the
amount of the loan. So you'd get the average monthly amount,
multiply that by 2.5, and that would be the maximum loan
amount.
Q
And why was this 2.5 multiplier used?
A
That was the -- close to the period that Congress
thought the pandemic was going to be of issue. Back then, it
was a more -- seen to be more of a short-term thing. Two and
half months.
Q
Now, were there various representations and
certifications contained on this standard SBA PPP application
that you referenced?
A
Yes. The borrower had to make certain representations
and certifications.
Q
And could you give us -- well, what were some of the
major certifications, I'd say, that the borrower had to make?
A
Well, the borrower had to certify that they were going
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 9 of 74 PageID 769
10
JOHN MILLER - DIRECT/REICHLING
to use the PPP loan proceeds for the -- for specific purposes:
To pay payroll, to pay mortgage interest, rent, or utilities.
Q
And let me ask you this: Was there another
certification regarding the necessity of the loan, or the need
for the loan?
A
There was. There was an economic necessity. So there
was a certification that the borrower had to say that the
uncertainty of the economic -- the uncertainty of the economic
necessity made the loan necessary to support the ongoing
operations of the business.
Q
And were there any representations on -- contained on
the application concerning the funds needing to be used for
business-related purposes?
A
Yes. There was a representation that the borrower would
only use the funds for business-related purposes.
Q
Now, who received and reviewed the PPP application and
the supporting documents?
A
The bank, the lender, would have received the
application from the borrower with all the supporting documents
to substantiate that loan amount.
Q
And why was the lender tasked with reviewing all of this
information?
A
Well, the lender was delegated authority by Congress to
make these loans. So, because of the need to get the money out
as quickly as possible, Congress wanted the lender to be able
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 10 of 74 PageID
770
11
JOHN MILLER - DIRECT/REICHLING
to make the decision quickly, based upon the information the
borrower provided, and then fund the loan.
Q
Now, after reviewing this documentation, what was the
lender expected do?
A
The lender was expected to confirm that they had the
borrower's certifications, that they also confirmed that they
had the documentation to support the loan amount and do a
good-faith check of the loan amount based upon the
documentation. And then, with that, then the borrower then --
or, excuse me, the lender then had to apply for the SBA
guarantee for the PPP loan.
Q
And how -- just briefly, how would the lender apply for
this SBA guarantee?
A
They had to fill out another form, called the 2483 --
2484, which was the lender application for a PPP loan guaranty.
And, once they filled that application out, they had to
electronically transmit the data to the SBA so SBA could issue
a loan number.
Q
And, typically, how long would the lender have to wait
to get this SBA loan number?
A
It was very quick. Almost instantaneous. The system
checks the data for some very -- for completeness, and then
returns a loan number to the lender.
Q
And why is this loan number of importance to the lender?
A
Well, without this loan number, the lender doesn't have
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 11 of 74 PageID
771
12
JOHN MILLER - DIRECT/REICHLING
a guaranty, and it can't make a legitimate Paycheck Protection
Program loan.
Q
Other than the standard PPP applications that we talked
about, did the SBA require other documents to be completed
between the lender and the borrower?
A
Yes. The SBA required that the lender and the borrower
sign -- or the borrower sign a promissory note with the lender,
which is basically the loan document that requires repayment of
the loan.
Q
Now, after receiving the PPP loan funds -- and this is
back in April. We'll get to any changes that were eventually
made to the program -- how many weeks did the borrower have to
use the money?
A
The borrower had to use the money within -- it was an
eight-week period. So they had eight weeks with which to pay
the money, because we needed to get the money out to American
workers as quickly as possible.
Q
And were there limits on what the borrower could use the
PPP funds for?
A
The majority of the funds were required to go and
protect those paychecks, so make payroll; and then, also, some
very basic necessities of a business to keep them operating,
which I mentioned earlier: Making mortgage interest payments,
making rent, and utility payments.
Q
And was there a benchmark or percentage that had to go
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 12 of 74 PageID
772
13
JOHN MILLER - DIRECT/REICHLING
towards each, at least back in the initial phases of the PPP
program?
A
Yes. At least 75 percent of the proceeds had to be
spent on payroll. Pay plus benefits. And the remaining
25 percent could be used for the mortgage interest, rent, and
utilities.
Q
Could the forgiveness on the payroll expenses be
reduced?
A
Yes.
Q
And how could they be reduced?
A
Well, because the intent was to make sure that
businesses kept people employed, if the borrower reduced the
number of employees during that covered period by more than
25 percent, that could impact the forgiveness amount. There
was an incentive to keep people on the payroll. The other way
was if they reduced the pay of the employees. So if they cut
the employees' pay too far, that would also reduce the amount.
And that was also 25 percent.
Q
Was there a cap on individual salaries for each member
of the payroll, so to speak, each worker?
A
Yes. Yes, there was. The maximum annual pay was capped
at $100,000. So if somebody was making, for example, $150,000
a year, the way that the loan was calculated, they had to
remove the $50,000 and calculate the loan based upon the
hundred thousand dollar annualized salary.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 13 of 74 PageID
773
14
JOHN MILLER - DIRECT/REICHLING
Q
And that's with regard to applying for forgiveness?
A
Well, that was with regard to applying for the loan
amount, as well. In determining the amount of the loan. And
it would also apply to forgiveness.
Q
Now, when did this eight-week period involving the use
of funds and having to use it within eight weeks, when did that
change?
A
That changed by another law passed by Congress and
signed by the President on June 5th of 2020.
Q
And what was the name of that law, if you recall?
A
That law was the Paycheck Protection Program Flexibility
Act.
Q
And what changed? Could you just briefly explain the
major changes that were done?
A
The two major changes were the amount of forgiveness,
the minimum amount of . . . that needed to be spent on payroll
went from 75 percent down to 60 percent. So now, as long as a
borrower spent 60 percent of the loan proceeds on payroll, they
could be completely forgiven. And, as well as that, the
covered period, which is the period in which the borrower can
make -- has to use the loan funds -- increased from eight weeks
up to 24 weeks. Also, the maturity of the loan increased, as
well, from two years up to five years.
Q
Could you briefly explain how a borrower would apply for
forgiveness?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 14 of 74 PageID
774
15
JOHN MILLER - DIRECT/REICHLING
A
A borrower would apply for forgiveness after the funds
were spent during the covered period, at the end of the covered
period, by filling out a forgiveness form, called the
Form 3508. 3508.
Q
And does that form contain additional certifications
concerning the use of funds?
A
Yes, it does.
Q
And are those the same certifications that are contained
on the original application with regards to what the money can
be used for?
A
Yes. In addition, the borrower states that they
knowingly -- they do not knowingly misuse the funds. They used
them for the authorized purposes.
Q
And what else did they submit to the lender along with
this application?
A
Well, they would submit all the evidence that they spent
the money on the payroll -- what they spent the money for
during that covered period. So it could be payroll invoices,
payroll records, utility bills, invoices for that, evidence
that they paid mortgage interest, and rent.
Q
What does the SBA expect of the lender when they receive
this information? Are they supposed to do any additional work
in reviewing additional documents, or is that what the lender
is supposed to do?
A
Well, the lender is supposed to make a good-faith effort
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 15 of 74 PageID
775
16
JOHN MILLER - DIRECT/REICHLING
in reviewing the borrower's forgiveness documentation, all the
certifications, check the calculations that was on the 3508,
make sure that things were calculated properly, and then, in
doing that, the lender would then make a decision as to whether
they wanted to forgive the loan in whole, or in part, or not at
all.
Q
Was the lender expected to look at the borrower's bank
records at all to see if they -- see how they used the funds?
A
Yes.
Q
Well, what I mean is, are they supposed to conduct an
audit, for instance, of the borrower's bank accounts, to
determine what happened to that money after it was lent to
them?
A
Well, no, no. Because they were allowed to make a
good-faith effort, the bank was not required to actually do
some sort of a forensic audit on the borrower's information.
Q
Now, after the lender makes this recommendation --
they're making it to the SBA, I suppose; correct?
A
Yeah. Actually, the lender makes the decision. They
make the forgiveness decision, and the decision is submitted to
the SBA. So, in a way, you could kind of call it a
recommendation, but it is the lender making the decision, and
then that decision is sent into the SBA.
Q
And does the SBA have the right to review that decision?
A
Yes. Yes.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 16 of 74 PageID
776
17
JOHN MILLER - DIRECT/REICHLING
Q
And is there -- are there certain -- a certain amount of
loans that the SBA conducts additional reviews on
automatically?
A
Yes. There's an obligation to review, SBA is required
to review, all loans of $2 million or more. And then SBA may
review any other loans below $2 million, in its sole
discretion, at any time.
Q
And what's particular about these $2 million plus loans
as far as the SBA review?
A
Well, the $2 million plus loans had to -- had to go
through a check for the economic certification, the economic
loan necessity certification, which was that certification I
mentioned earlier, that the economic uncertainty that the
borrower was facing made this loan necessary for the operations
of the business. And so all loans over $2 million have to fill
out, actually, an economic necessity questionnaire, and submit
that, and then SBA will make a determination as to whether or
not the borrower actually needed the money.
Q
Now, when did the SBA, or Treasury . . . sort of roll
out this additional guidance on $2 million plus loans, if you
recall?
A
It was in the latter part of April.
Q
Now, if it is determined, at any time, that the borrower
was originally ineligible for a PPP loan, is forgiveness
possible?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 17 of 74 PageID
777
18
JOHN MILLER - DIRECT/REICHLING
A
No. No. If the borrower is ineligible, the
forgiveness -- the loan forgiveness -- the loan cannot be
forgiven. It's not eligible for forgiveness.
Q
And would an example of that be that the borrower didn't
need the money?
A
Yes, that would be one example. If it's determined
during a forgiveness review, after looking at the
questionnaire, that the borrower did not need the money, then
the loan would not be forgivable.
Q
And what about if it's determined that the borrower
falsely stated he would use the funds for certain purposes as
the certification was that you had indicated earlier?
A
If the borrower lacked an adequate basis for any of the
certifications, including these -- the use of loan proceeds,
that also could lead to an ineligible finding, that the
borrower was ineligible for the PPP loan, and then the loan
would be ineligible for forgiveness.
Q
Has the SBA issued guidance concerning the knowing
misuse of -- knowing misuse of PPP proceeds?
A
Yes.
Q
And what is the -- what is that guidance?
A
It would be an Interim Final Rule.
Q
And could you just briefly tell the jury what that
guidance is concerning the knowing misuse of funds?
A
Yeah. Well, the knowing misuse of funds also is in
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 18 of 74 PageID
778
19
JOHN MILLER - CROSS/DICKERSON
the -- it's not only in the Interim Final Rules, it's also in
the form itself. And the knowing misuse of funds would mean
that, if a borrower knowingly misused the funds for
unauthorized purposes, they would be subject to prosecution.
MR. REICHLING: One moment, Your Honor? If I may
briefly confer with counsel?
THE COURT: You may.
(Mr. Reichling and Mr. Leeman confer privately.)
MR. REICHLING: No further questions at this time,
Your Honor. Thank you.
THE COURT: All right. Thank you.
Mr. Dickerson, is this yours?
MR. DICKERSON: This is mine, Your Honor.
THE COURT: All right.
MR. DICKERSON: May I proceed, Your Honor?
THE COURT: Yes, you may.
MR. DICKERSON: Thank you, Your Honor.
CROSS EXAMINATION
BY MR. DICKERSON:
Q
Good afternoon, Mr. Miller.
A
Good afternoon.
Q
My name is Brian Dickerson. I'm one of the defense
lawyers for Mr. Crowther.
You just testified about eligibility purposes for the
actual PPP program; correct?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 19 of 74 PageID
779
20
JOHN MILLER - CROSS/DICKERSON
A
Correct.
Q
And you're citing some IFRs, the Interim Final Rules?
A
Yes.
Q
How many Interim Final Rules are there currently?
A
I believe there are 31.
Q
Okay. And may I ask why there's so many Interim Final
Rules?
A
There have been a lot of changes to the program. There
have been some changes that Congress made, like when they
passed legislation; and, if the program changes, then the rules
need to change to go along with it. There have also been --
due to the emergency nature of the program, it was very
important that we got the first IFR, which contains the basics
for the program, so that lenders could begin getting capital
out. We couldn't possibly hold that until we had all of the
details of the program, and so that's why additional IFRs were
submitted, created, and provided. And there's been further
legislation -- in fact, I believe there is a IFR that was just
posted last week.
Q
You're correct. So when was the first IFR?
A
The first IFR was posted on April 2nd.
Q
And that IFR is an Interim Final Rule; is that correct?
A
That's right.
Q
And that's a regulation that the SBA, in partnership
with the Department of Treasury, is putting together as far as
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 20 of 74 PageID
780
21
JOHN MILLER - CROSS/DICKERSON
the SBA's interpretation of the CARES Act; correct?
A
That is correct.
Q
It may be wrong; correct?
A
I can't speculate on that.
Q
All right. Are you aware of another government agency
saying that the SBA was wrong in its interpretation of the
CARES Act?
A
No, I'm not.
Q
You're not familiar with the May 8th Flash Report from
the Office of Inspector General of the SBA?
A
Yes, the Inspector General -- yes, I am aware of the
Inspector General.
Q
Why don't you tell the ladies and gentlemen of the jury
what the Inspector General's responsibility is?
A
The Inspector General's responsibility in all government
agencies is oversight.
Q
So that's an Inspector General assigned to the SBA;
correct?
A
Yes. And it's also -- it's to prevent waste, fraud, and
abuse in programs.
Q
And the Inspector General -- Office of Inspector
General, called OIG; correct?
A
Correct.
Q
The OIG for the SBA came out with a report in May, did
they not?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 21 of 74 PageID
781
22
JOHN MILLER - CROSS/DICKERSON
A
They may have. I mean, they do issue quite a few
reports.
Q
I guess are you familiar with the OIG's -- it's called
the Flash Report -- that came out in May of 2020?
A
There have been other IG reports since then, so I don't
recall. I don't recall what they mentioned in that particular
report.
Q
I didn't ask that, I said are you familiar with it. Are
you aware of it?
A
I'm sure I looked at it, but I don't recall . . . I
can't attest to the fact that I reviewed it.
Q
All right. I'll come back to that when we get to it.
So let's go back to March 27th. President Trump signs
the CARES Act into law, active law; correct?
A
Correct.
Q
What guidance did any of the banks have, let's say the
next day, March 28th, as far as how to actually implement the
PPP program?
A
I can't think of any guidance that they would have had
at that point in time. They . . . . It wouldn't have had --
the guidance that -- there may have been a fact sheet that was
issued, but the IFR that was posted April 2nd would have been
the initial guidance for the program. Official guidance.
Q
And was it up to, then, the banks, at that point in
time, May 28th -- March 28th, until that first IFR, to actually
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 22 of 74 PageID
782
23
JOHN MILLER - CROSS/DICKERSON
figure out how to implement, read the 200-plus-page CARES Act?
A
Well, they could read the 200-page CARES Act, but there
is not nearly that many pages that apply to this program. Only
a couple of pages. Only a few pages.
Q
How many pages?
A
Well, I have it on -- I don't have the actual written,
but it's not 200 pages. It's maybe ten?
Q
And those ten pages apply to specifically what's called
the Paycheck Protection Program?
A
Paycheck Protection Program; correct.
Q
Now, with regard to this April 2nd IFR -- I'm sorry.
Yeah. April 2nd. When was it actually published to the banks
and the public itself?
A
It was posted on the Treasury and the SBA website on
April 2nd. And then it was blasted out that -- to all the
banks and the trades that the actual IFR was out there.
Q
And which IFR number is that; do you know?
A
I don't know the number.
Q
Do you know when that IFR was actually published in the
actual register for the Treasury Department?
A
It was published -- it was published in the Federal
Register on April 15th.
Q
Right. So if someone was an applicant, they would have
to actually go to the Treasury Department website to actually
see the April 2nd notice. The IFR.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 23 of 74 PageID
783
24
JOHN MILLER - CROSS/DICKERSON
A
Well, they would have to -- if there was a borrower,
yes, they would have to go to either the SBA's website or the
Treasury Department's website. And we've had a lot of traffic.
Borrowers were looking at the SBA website very, very
frequently.
Q
Why do they go to the SBA website?
A
Because there was a lot of media around the SBA carrying
out this loan. Even the President mentioned it.
Q
And is the SBA website something the public is supposed
to rely upon?
A
Well, I would -- yes, I would hope so.
Q
What I'm getting at is, the SBA website is a government
website.
A
Correct.
Q
Controlled by SBA under someone's authority at the SBA's
office.
A
That's correct.
Q
So the information on the SBA's website is -- should be
truthful.
A
Should be.
Q
Should be accurate.
A
Should be.
Q
And should be able to be relied upon.
A
That's correct.
Q
Does the SBA have its own Facebook page, as well?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 24 of 74 PageID
784
25
JOHN MILLER - CROSS/DICKERSON
A
I believe we have a Twitter, I'm not sure if we have a
Facebook page.
Q
Let's just call it social media.
A
Yes.
Q
SBA has social media pages. Sites.
A
There is, yes.
Q
Who controls those sites?
A
That would be our -- I believe our communications office
within the SBA.
Q
All right. So was part of the SBA's protocol in
educating the public in the PPP program using social media,
Twitter, and Facebook, as well?
A
If it was an official SBA -- yes; if it was an official
SBA Twitter, yes.
Q
I'm not talking about other Twitters, I'm talking it's
an official SBA Twitter page, or an official SBA Facebook page.
A
Yes. Official SBA web page, or Twitter page, put out by
the headquarters office.
Q
And then I believe there was also many district offices
that have their own website, as well; correct?
A
Well, they have -- they all are supposed to be using the
headquarters web page. And then there is content that would be
approved by the headquarters office.
Q
So if there's content on -- since we're the South
Florida District; correct?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 25 of 74 PageID
785
26
JOHN MILLER - CROSS/DICKERSON
A
Yes, I believe so.
Q
Right. And do you know where the main office is?
A
It's in Miami.
Q
Yes. I just told you. So. They have their own sub web
page from the SBA; correct?
A
They would have -- yes. There's a district office web
page for all of the 68 offices, but they all feed from the
master web page. That's my understanding. I'm not --
definitely not that well versed in the SBA's website.
Q
Okay. But the South District website, the SBA website,
again, is materials being pushed out to the public to explain
the PPP program.
A
Well, the south . . . if there's something that is put
out by the website, it is supposed to be cleared through the
headquarters office.
Q
All right. So if there's something on the website --
A
Doesn't mean it was cleared, but it should be cleared.
Q
How do we know if it was cleared?
A
You don't. You wouldn't know.
Q
So me, as John Doe citizen, I'm not going to know
whether it's cleared or not; correct?
A
You probably wouldn't. That's correct.
Q
And then wasn't that part of also having the local
district offices educate the public on what the program was?
A
Yeah. The district offices were given materials with
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 26 of 74 PageID
786
27
JOHN MILLER - CROSS/DICKERSON
which to educate the public.
Q
Did the national office have some type of training for
these local district offices?
A
Yes, they did.
Q
And what type of training is that?
A
The . . . there are webinars. I believe they were given
materials --
Q
When you say -- sorry to interrupt, but when you say
webinars, there's webinars hosted by the national office for
the district offices?
A
For the district offices; correct.
Q
That wasn't something that, again, John Doe public could
attend; that was just for the district offices?
A
That was for the district offices; correct. There may
have been also, then, webinars for the public; but we're
talking about the district offices.
Q
Right. That's correct. And would those district
offices -- did they have their own social media pages?
A
You know, I really am not an expert on the -- on the
district offices, and what they're allowed to post, or the web
pages.
Q
What's your position right now, sir, with the SBA, so I
understand?
A
I'm over the business loan programs. And I'm not over
those district offices at all. So I'd like to -- I'd like to
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 27 of 74 PageID
787
28
JOHN MILLER - CROSS/DICKERSON
answer your question, but I don't know what they are authorized
to and not authorized to post, as far as whether they have
their own social media account.
Q
Okay. But it was the SBA that was wanting the district
offices to reach out and promote to the public what this basis
of the PPP program was; correct?
A
That is one of the district office's responsibilities,
to reach out to the public, and to the lenders, as well as
the -- of course, the headquarters office also put out
information to the lenders and to the public; but the district
office is the local boots on the ground so to speak.
Q
And that local office, is it reliable to the public?
A
It should be. Yes.
Q
Okay. And that's one of the purposes of having it;
right?
A
Yes. It's to have a local presence, and to help small
businesses needing assistance, or to counsel -- there's
counseling that happens there. Yes, that is the purpose of the
local office.
Q
And you stated that part of the . . . rush -- I mean,
I'm calling it a rush; if I'm wrong, tell me -- that May 27th
to April 1st was -- the purpose of the program was to get the
money out; right?
A
That's right. It was an emergency program in the middle
of a pandemic like we've never seen before.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 28 of 74 PageID
788
29
JOHN MILLER - CROSS/DICKERSON
Q
Well, probably the start of the pandemic. The start?
A
Yes. Yes, yes, it was.
Q
And $349 million is allocated; right?
A
349 billion.
Q
Billion, correct?
A
We've gotten used to the B number; yes.
Q
That allocation, I think you said it, but I want to make
clear, that's not actually money going out from Congress to the
actual businesses.
A
That's correct.
Q
That money is being held here so, when the lenders lend
money to those businesses, and when those lenders either submit
that forgiveness application that the borrower submitted,
that's when that money is then used to pay the forgiveness.
A
That's correct. The money was used to pay -- will be
used to pay -- is being used to pay forgiveness. It will also
be used to honor guaranties if the borrower can't pay the loan
back and doesn't get the forgiveness.
Q
Right. So there's two times that pot is used.
Forgiveness is submitted to the lender, lender submits to SBA,
SBA approves it and goes here you go lender, you're getting
paid back, that loan can be partially or completely forgiven;
correct?
A
The loan can be partially or completely forgiven.
Q
So that's that one tier. The second tier is, if the
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 29 of 74 PageID
789
30
JOHN MILLER - CROSS/DICKERSON
borrower just doesn't pay the loan back and doesn't play for
forgiveness as well.
A
Yes. If the lender can then submit, for -- a request
for SBA to honor that guaranty, and if the lender fulfilled its
obligations, then yes, that money would then be used to pay
that guaranty for that loan.
Q
And what do you mean if the lender fulfilled its
obligations?
A
Well, there's certain things that the lender has to do
too. You know, they had to execute a promissory note, for
example, that we talked about earlier.
Q
Well, we haven't talked about them. You guys talked
about them. I'll get to the promissory note.
A
So, yeah, there are certain things that the lender had
to do.
Q
And that promissory note wasn't provided by SBA to the
lender to provide to the borrower. That promissory note was up
to the lender's responsibility to create; correct?
A
That is correct.
Q
So when you have the totality of the documents that the
lender is supposed to, under their duty, either create or
utilize, and then provide to the borrower for the borrower to
sign, how many documents are there?
A
Well, SBA doesn't dictate how the lender -- how many
documents the lender uses. They would use -- we only dictate
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 30 of 74 PageID
790
31
JOHN MILLER - CROSS/DICKERSON
that they have a promissory note. It would be up to the lender
then to determine what other types of loan documents they
wanted to obtain.
Q
Okay. So promissory note is the only requirement that
the SBA actually tells the lender it has to utilize.
A
No, no.
Q
Of the lender's documents, not SBA documents.
A
That's the only document that the SBA told the lender
they had to execute with the borrower. Or that the -- that's
the --
Q
I don't think execute is the right word. What would be
the right word?
A
That's the only document that the SBA told the lender
that they had to use with the borrower.
Q
So then the lender didn't have to use an SBA
certification form?
A
Well, that was part of the borrower application.
Q
Okay. That's what I'm getting at. That's what I'm
trying to get, the realm of documents -- maybe that was my
fault. The realm of documents. So here is the SBA saying here
is the documents, lender, you need to have completed for you,
lender, to be able to then have an eligible participant, and
show the forgiveness requirements; and then you also need, I
think I'm hearing, this promissory note to go with it. So I'm
trying to figure out what the universe of documents are.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 31 of 74 PageID
791
32
JOHN MILLER - CROSS/DICKERSON
A
Okay. Are you talking for when the lender applies to
get the PPP loan guaranty?
Q
No, I'm not talking about the loan guaranty; I'm talking
about the specific documentation the lender's going to have
with the borrower.
A
Well, the specific documentation that the lender is
going to have with the borrower, they need to have the
borrower's PPP loan application form, which is the 2483. They
also need to have documentation that supports the amount of the
loan. So that would be like payroll documentation from the
previous 12 months.
Q
That's the backup data. Correct?
A
Well, it's documentation that --
Q
Well, that's my fault. I'm trying to figure out the
loan documents.
A
Okay.
Q
Not the backup documents. What are, specifically, the
loan documents? So we have the borrower's application --
A
The borrower's application, which is the 2483, along
with those certifications that the borrower had to check.
Q
And what form is the certifications?
A
It's on that 2483.
Q
Okay. And if . . . . How many pages is that?
A
I don't remember off the top of my head, but I would --
I would just guess maybe three.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 32 of 74 PageID
792
33
JOHN MILLER - CROSS/DICKERSON
Q
So we've got that. What's next?
A
They also have to have a note. The lender has to
execute a note.
Q
And that's it.
A
But the note does not have to be submitted with that
application in order to get the loan guaranty.
Q
Why is that?
A
Because it's not required. The lender has to obtain the
note -- well, let me tell you why it's not required. Because
the lender has to get the loan guaranty before they execute the
note.
Q
Really.
A
Yes.
Q
The lender has to get the actual application.
A
The lender would need to apply for the PPP loan
guaranty.
Q
For each individual loan?
A
For each individual loan, they need to submit -- I
wonder if we're talking about the same thing here. Are we
talking about a loan to a borrower, a PPP loan to a borrower?
Or are we talking about how does a lender get approved to do
business with SBA?
Q
I'm not -- the prior. I'm not talking about the lender
being approved, I'm talking about the lender and the process
with the actual borrower.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 33 of 74 PageID
793
34
JOHN MILLER - CROSS/DICKERSON
A
All right. The lender needs to submit to the SBA --
they need to submit data, so that what they would have to have
in their possession in order to submit that data is they are
supposed to have the borrower's application, the Form 2483, and
all the certifications, and then they also have to have the
backup documentation to support the loan amount that the
borrower is requesting, which is the 2.5 times the monthly
payroll.
And then they need to do a check of that information,
and check to make sure that the loan amount looks accurate.
And then they need to transmit data to the SBA. That is on the
Form 2484, the lender application for guaranty.
Once they have that guaranty, once they have an SBA loan
number that comes back to the lender, the lender then has
ten days to disburse the loan.
And typically a loan -- when a loan is disbursed, that's
the same day the borrower would sign that promissory note. The
borrower would go into the bank, sign the promissory note, say
I promise to pay back a hundred thousand dollars, and the bank
would disburse the money. That's typically how that would
work.
Q
Except we're in COVID, so a lot of people weren't going
to the banks, since the banks weren't open --
A
Well, that's true. Very good point. Very few people
were going to the banks. So we were accepting electronic
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 34 of 74 PageID
794
35
JOHN MILLER - CROSS/DICKERSON
signatures, and there was a lot of electronic signatures, and
DocuSign, much like a home mortgage or anything else, was being
used extensively.
Q
In fact, that's part of the CARES Act where they said
they would accept electronic signatures.
A
Yes. And SBA said they would accept electronic
signatures before that, as well.
Q
And I heard you answer questions for Mr. Reichling as
far as that approval process, that guaranty approval process, I
heard it's 15 to 30 seconds, and everybody uploads -- the
lender uploads the data manually from the 2483 form into the
SBA portal. Is that how you understand it?
A
There are several different ways. That's one way, they
can manually enter it, but --
Q
I hate to interrupt you, but we have to go back to
April 1st, April 2nd, through April 15th. That's the
applicable time here. Back then, wasn't the manual way the
only way to do it?
A
No. Some banks would have already had what they call
API calls, where they automatically upload data from their
system into the E-Tran system because banks were already
familiar with the E-Tran system. I should say SBA participants
were already familiar with SBA's E-Tran system. So, with a
couple of quick modifications for the data that was required
for the PPP loan, they could have -- they could have had an API
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 35 of 74 PageID
795
36
JOHN MILLER - CROSS/DICKERSON
where the data is transferred instead of having to go and type
all the information in.
Q
And how many -- do you know how many banks were able to
do the electronic versus the manual?
A
I don't.
Q
Okay. And how many seconds after that data is either
uploaded manually -- or let's say somebody did have the API
call E-Tran system. What's the timeframe on the review and
response back?
A
Well, the data isn't reviewed. The system would check
it for -- there would be some system edits, to make sure it's
complete, that there's a name, an address, things like that.
And then, if the data is complete, then it would send back a
loan number. I don't know the exact time, but I don't think
what you said would be inaccurate. What did you say,
30 seconds?
Q
15 to 30 seconds.
A
It's possible.
Q
But again, SBA isn't reviewing the data, it's just doing
that system check.
A
They system is -- that's right. The system, there could
be business rules in it. I don't know what those business
rules were, but there were some validations that it had to go
through.
Q
So then once that 2483, which that's the only form that
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 36 of 74 PageID
796
37
JOHN MILLER - CROSS/DICKERSON
needs to be submitted to the SBA -- I get the backup data, but
that's the only form that needs to be submitted from the lender
to the SBA to obtain the approval for the guaranty.
A
I think you said 2483.
Q
Yes.
A
No; it's 2484.
Q
Oh, that's the lender app?
A
That's the lender app, yes.
Q
But then, for the lender to actually get approved for
each SBA application, aren't they uploading a 2483?
A
No. The lender is -- for each loan application, the
lender is uploading the 2484.
Q
And that's a document the lender creates; right?
A
The 2483 is submitted by the borrower. For each unique
borrower, there's also a unique lender application for the
guaranty for that one individual loan. That's the 2484.
Q
2483 the borrower is completing, giving to the bank.
The bank then, whether they that that debt, or whatever it is,
creates this 2484 --
A
They fill it out; right.
Q
And then they submit that to the SBA and get that 15 to
30-second delay before it's here is the SBA guaranty.
A
That's correct.
Q
And that guaranty, again, is for whether it's going to
be forgiven, or whether or not the lender loses money because
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 37 of 74 PageID
797
38
JOHN MILLER - CROSS/DICKERSON
the borrower doesn't pay it back.
A
Well, the guaranty isn't for whether it's forgiven. The
PPP, Paycheck Protection Program, allowed for the loan to be
forgiven; but the guaranty is for whether or not it's paid
back.
Q
Okay. But part of that allocation of the funds, the
249 billion, was for the forgiveness and the guaranty if it
wasn't paid back?
A
The 349 billion authorized by Congress was for those --
that would be for those purposes; correct.
Q
So if a borrower has never filed for forgiveness, what's
the status of that loan in the SBA's eyes?
A
Well, it would depend. If they haven't filed for
forgiveness, then the loan is on deferment. And I can explain
that if you would like.
Q
Yeah, go ahead. Explain it.
A
Okay. The loan is on deferment, meaning no payments are
due. So no payments are due on that loan until SBA makes its
forgiveness decision and either forgives the loan or not.
Now, the loan will come off of deferment status at some
point even if the borrower does not submit the application for
forgiveness, and then the borrower will have to begin making
loan payments.
Q
And isn't that ten months after the conclusion of the
covered period?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 38 of 74 PageID
798
39
JOHN MILLER - CROSS/DICKERSON
A
Yes.
Q
So the cover period in what, December 31st?
A
It depends on when the loan was disbursed.
Q
So if we're talking about April it's disbursed --
A
Yes.
Q
-- we're going 24 weeks from that time period.
A
Yes. Which is six months.
Q
And then, from there, we've got a ten-week calendar as
far as when that loan becomes due.
A
Ten month.
Q
Yeah.
A
Yes; ten months after that is when the deferment period
would end and the borrower would have to make loan payments
unless the loan has been forgiven.
Q
And if the borrower doesn't submit for forgiveness,
then, after that ten-month period, then the borrower has to
start paying on that promissory note; correct?
A
Then the borrower has to pay on that promissory note;
correct.
Q
Now you said that was a temporary program. When does
the guaranty end on that loan?
A
The guaranty would stay with the loan for the life of
the loan.
Q
So, as long as the borrower is paying on that loan,
there no guaranty that's going to kick in.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 39 of 74 PageID
799
40
JOHN MILLER - CROSS/DICKERSON
A
That's right. The guaranty won't kick in as long --
until if the borrower defaults on the loan, that's when the
guaranty would kick in. Or if the loan is called earlier. If
demand is made on the borrower to repay the loan? For example,
if the proceeds were used in an inappropriate manner? Then SBA
can require that the loan be fully due and payable. And then,
at that point in time, the borrower would have to either pay
the loan, and if they didn't pay the loan, then the SBA
guaranty could be requested by the lender.
Q
Where is that language where the SBA can make that
demand for the repayment?
A
There's language in the IFRs. I think it could be the
loan review. I can't recall exactly the IFR, but it does say
the SBA may require repayment of the loan.
Q
But you don't know in which document that's in.
A
I don't have the exact one.
Q
Do you know whether that language is required to be in a
document with the borrower?
A
I think as long as -- if it's a program requirement, it
could be in the promissory note. But if it's a program
requirement, I don't know that it would need to be in the
document with the borrower.
Q
So it doesn't matter if the lender never conveyed that
to the borrower, the borrower is supposed to make sure they
know all the IFRs that Treasury and SBA is publishing?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 40 of 74 PageID
800
41
JOHN MILLER - CROSS/DICKERSON
A
Well, the lender -- you know, the lender would typically
convey information like that to the borrower.
Q
But it would be in a lender documentation, not
necessarily an SBA documentation?
A
It could be the IFRs. They could share that document
with the borrower.
Q
Well, I get share, but there's, I guess, not a form by
the SBA that that's required by.
A
There was no form for the note, no.
Q
Is the -- have you heard of a notice of Paycheck
Protection Program forgiveness document?
A
I don't know that one off the top of my head. Is there
a different explanation?
Q
There's not a form number, that's all I'm getting at.
A
It's not a form number?
Q
No.
A
When you say notice, does it say procedural notice?
MR. DICKERSON: Actually, can I take a step back,
Your Honor?
THE COURT: You may.
MR. DICKERSON: May I approach, Your Honor?
THE COURT: You may.
(Counsel provides evidence to the witness.)
BY MR. DICKERSON:
Q
Now, I don't want you to read that, John, as far as the
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 41 of 74 PageID
801
42
JOHN MILLER - CROSS/DICKERSON
content, out loud. I just want you to look at it, see if that
document -- if you think that is an SBA document, or whether
that is a lender document.
(Witness examines evidence.)
A
I don't recognize this document as an SBA document.
Q
So is this -- if it's not an SBA document, is this
probably one of the documents where the lender is making its
own documentation with regard to that promissory note?
A
This appears to be lender documentation; correct.
Q
And the lenders are given guidance on the program, but
they're also given their own ability to make their own
documentation to secure their interests in the loan that they
have with the borrower; correct?
A
Yes.
Q
And that was an important part of this, is the lender's
documentation with the borrower so that the lender has a
promissory note so that the lender can protect its interest
with the borrower.
A
Yes. Lenders have -- may have their own formats of
documentation that they use. It depends upon the state, it
depends upon the lender. And the lender was free to use its
own documentation as long as it did not conflict with the
Paycheck Protection Plan rules. And if it did, then the PPP
rules would apply.
Q
And what do you mean, conflict with the PPP rules?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 42 of 74 PageID
802
43
JOHN MILLER - CROSS/DICKERSON
A
Well, if any of the lender's documentation conflicted
with the laws or the requirements of the program, then the --
if it was in disagreement, then the requirements of the program
would apply.
Q
Okay. So if a borrower goes to the lender, has the
lender's documents, executes the lender's documents, you're
saying that, even in that case, the borrower -- if the lender
documents are wrong, the borrower still has to make sure that
the borrower is complying with all of these IFRs?
A
The borrower is still required to be in compliance with
the Act. So, yes, if there's a mistake in the documentation,
then the lender -- it may be an issue with the lender.
Q
Okay. But the borrower still has to comply with the
lender documentation, the promissory note and the supporting
documents; correct?
A
The borrower would need to -- also need to comply with
the documentation with the lender.
Q
Okay. So if the documentation from the lender says one
thing, SBA thinks that it's not the same that -- the loan
documents are not the same as the SBA requirements, the
borrower has to comply with the lender and the interpretation
of the SBA of the PPP program?
A
Yes. And it would also depend upon the actual -- you
know, what the issue is. What this particular issue is.
Q
All right. Well, we'll get to that issue. First,
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 43 of 74 PageID
803
44
JOHN MILLER - CROSS/DICKERSON
though, I'm going to get you back to the Flash Report.
Flash Report, Small Business Administration's
implementation of Paycheck Protection Program issued by the
Office of Inspector General on May 8th, 2020.
Is an OIG report a public record?
A
Yes, they do issue it publicly.
Q
And, when they publish that on the OIG's website, that
is for the public to all be able to review, kind of like those
internal rules; correct?
A
Correct.
Q
And it's Report 20-14 for May 8th, 2020. I'm assuming
that won't refresh your recollection on that, at all.
A
OIG always numbers all of their reports.
MR. DICKERSON: Okay.
Your Honor, may I? Thank you.
THE COURT: You may.
MR. DICKERSON: May I approach, Your Honor?
THE COURT: You may.
(Counsel provides evidence to the witness.)
BY MR. DICKERSON:
Q
Again, sir, I don't want you to read that out loud, I
just want you to look at that document. I'm not expecting you
to read the entire thing. It's 40 pages. I just want you to
be able to look at that and see if it refreshes your
recollection at all as far as what the OIG found in their
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 44 of 74 PageID
804
45
JOHN MILLER - CROSS/DICKERSON
report.
(Witness examines evidence.)
A
Okay.
Q
Does that refresh your recollection at all?
A
Some -- some of it does, yes.
Q
And what does that recollection -- what does it refresh?
A
Well, they stated --
MR. REICHLING: Your Honor, objection. This is
improper questioning. He hasn't asked him what he needs to
have his memory are refreshed on.
THE COURT: You need to ask him a specific question,
not just tell me what you remember.
MR. DICKERSON: First he was --
THE COURT: You don't need to argue with me, just
refresh your question.
MR. DICKERSON: Thank you, Your Honor.
BY MR. DICKERSON:
Q
Does reading that document right there, the little bit
that you read, does that refresh any of your recollection as to
what the SBA/OIG opined as far as how the SBA was interpreting
the CARES Act?
A
I don't see anything in here about interpretation of the
CARES Act.
Q
So, reading that, do you not see that it actually
discusses the Act.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 45 of 74 PageID
805
46
JOHN MILLER - CROSS/DICKERSON
A
It does discuss the Act.
MR. DICKERSON: Your Honor, I would move to admit
this document. G18.
THE COURT: I'm sorry, the number again?
MR. DICKERSON: G18. Defendant's G18. It is a
public record. The witness has stated it's a public record
available on line. Federal government agency record.
THE COURT: G18. Okay.
MR. DICKERSON: I'll get you a copy, Your Honor.
THE COURT: All right. Hang on a second. It's not
on my list yet. We can just add it.
Any objection?
MR. REICHLING: Judge, we'd object to relevance.
THE COURT: May I see it, please?
MR. DICKERSON: Yes.
(The Court reviews a document provided by
Mr. Dickerson.)
THE COURT: All right. Thank you.
The objection is overruled, and G18 will be admitted.
MR. DICKERSON: Thank you, Your Honor.
(Defendant's Exhibit G18 admitted.)
MR. DICKERSON: May I publish it, Your Honor?
THE COURT: You may.
(Evidence was published via the projector.)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 46 of 74 PageID
806
47
JOHN MILLER - CROSS/DICKERSON
BY MR. DICKERSON:
Q
So I want to direct your attention to the first page.
This is a document discussing the comparison by the SBA Office
of Inspector General as to the interim rules and how they
actually compare with the actual CARES Act in accuracy;
correct?
A
There are . . . yes. There are . . . there are
comparisons between SBA's Interim Final Rule and the Act in
this document.
Q
And the section on what we found is talking about,
"Though OIG found that the SBA's Interim Final Rules for
implementing the PPP and the SBA's FAQs mostly align with the
Act, we identified the following areas, however, where they do
not fully align with the Act's provisions;" is that correct?
A
That's what it says.
Q
And one of those provisions is the loan proceed's
eligibility for forgiveness.
A
Yes.
Q
Guidance on loan deferments.
A
Yes.
Q
And the first one, prioritizing underserved and rural
markets; correct?
A
Yes.
Q
Have you been able to review the document, to actually
get down to Appendix 2, the comparison between the CARES Act,
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 47 of 74 PageID
807
48
JOHN MILLER - CROSS/DICKERSON
the Interim Final Rule, and the related frequently asked
questions?
A
I'm there now.
Q
Okay. So did you ever review this document in your
capacity at the SBA?
A
I . . . I did not review the entire document. I did
review parts of the document.
Q
All right. Now, looking at this entire 40-page
document, does that refresh your recollection as to the
concerns that SBA/OIG had with the eligibility and the applying
by the SBA of their Interim Final Rules in compliance with the
CARES Act?
A
Yes. I see some of the items that they're raising here.
Q
Did you happen to recollect those items, or do you need
to review the documents?
A
I can see the items right here in the text.
Q
Right. Which page are you on, sir?
A
I'm on Page 5.
Q
And what do you understand the findings to be?
A
The . . . .
MR. REICHLING: Objection, Your Honor. What's the
question? I'm trying to understand. He's asking for his
opinion under the guidance as contained in the exhibit. I
don't think he's laid the proper predicate to ask that
question.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 48 of 74 PageID
808
49
JOHN MILLER - CROSS/DICKERSON
MR. DICKERSON: I'll rephrase, Your Honor.
THE COURT: Okay.
BY MR. DICKERSON:
Q
With regard to the loan proceeds eligible for
forgiveness, do you have any independent memory of what that
issue was by the SBA, and what the recommendation was to the
SBA?
A
You know, the administrator, in consultation with the
secretary, determined that the minimum amount of proceeds for
forgiveness should be the 75 percent. And the Office of
Inspector General is saying that that was not . . . they --
well, let's see here. They point out that that was different
than what was in the Act.
Q
So you have the SBA Office of Inspector General pointing
out that the interim rule interpretation by the SBA was not in
compliance with the Act.
A
I don't know that they're saying it was not in
compliance with the Act, but they are saying that that was not
in the Act.
Q
How about it's not aligned with the Act? And I'll take
you back up to the first page.
A
Okay.
Q
What we found.
A
Yeah, it mostly aligned with the Act, but there were
some areas that did not fully align.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 49 of 74 PageID
809
50
JOHN MILLER - CROSS/DICKERSON
Q
Right. And the one area is the loan proceeds.
A
Loan proceeds eligible for forgiveness.
Q
Okay. Thank you. You can put that document down.
Can you un-publish me, please? Thank you.
So Mr. Reichling asked you the questions about the loan
time period, the covered time period, extending from
eight weeks to then 24 weeks on the June 5th date; correct?
A
Correct.
Q
That's also when the law affirmatively said that payroll
was 60 percent as far as the forgiveness.
A
Correct.
Q
Where do you rely upon your statement that 60 percent of
the money had to be used for payroll as one of the eligible
purposes of the loan?
A
It would be in -- well, it would be in an IFR. I'd have
to look for it. But it would be in the -- likely in the IFR
that was provided right after the June 5th law was passed. It
may also be in the . . . in some of the forms, the 2483 if it
was revised, and the forgiveness form.
Q
So was the 2483 form revised? Are there different
versions of it?
A
There are a few different versions because of changes in
the law.
Q
So if somebody signed the application on April 3rd,
April 13th, that would be different than an application after?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 50 of 74 PageID
810
51
JOHN MILLER - CROSS/DICKERSON
A
Yes. In fact, a good example is, in January, under the
Economic Aid Act, there is a second draw loan that was created,
so we had to create a second draw loan application. But the
loan application that was in effect at the time the application
was made was the -- is the governing document. So that
wouldn't change the requirements for the borrower.
MR. DICKERSON: May I get another document,
Your Honor?
THE COURT: You may.
MR. DICKERSON: May I approach the witness,
Your Honor?
THE COURT: You may.
(Counsel provides evidence to the witness.)
BY MR. DICKERSON:
Q
Again, Mr. Miller, if you'd just look at that. Don't
read anything at this point in time. That is an IFR; correct?
A
Yes, this is an IFR, Interim Final Rule.
Q
And, for the record, which IFR number is this, as far as
the IRN number? Or you can use the SBA document number,
whichever one you prefer.
A
The IRN number is 1505-AC75.
Q
And that's for the Department of Treasury IRN number;
correct?
A
Yes.
Q
And then there is an SBA IRN number as well; correct?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 51 of 74 PageID
811
52
JOHN MILLER - CROSS/DICKERSON
A
Yes.
Q
And what is that?
A
3245-AH65.
Q
And then these IFRs are posted on the Federal Register,
they're publicly available, this is a government document;
correct?
A
Yes, these are available, and it is a government
document.
MR. DICKERSON: Your Honor, we move -- defense moves
to have G16 admitted.
THE COURT: Any objection to G16?
MR. REICHLING: No, Judge.
THE COURT: G16 will be admitted.
(Defendant's Exhibit G16 admitted.)
MR. DICKERSON: May I publish, Your Honor?
THE COURT: You may.
MR. DICKERSON: Thank you.
(Evidence was published via the projector.)
BY MR. DICKERSON:
Q
Sir, so this is one of the IFRs that you're talking
about that has the direction to follow; correct? For the
public?
A
That's correct.
Q
If you would, go to the second page, middle column,
where it says, "This rule." If you would just read that to
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 52 of 74 PageID
812
53
JOHN MILLER - CROSS/DICKERSON
yourself first.
(Witness examines evidence.)
Q
Okay, sir. Do you recall reviewing this IFR when it was
published?
A
Yes.
Q
And, when you reviewed this when it was published, what
was your understanding of this IFR?
A
This IFR was a consolidated IFR that was issued after
the passage of the -- well, it's for loan forgiveness and loan
review as provided by the Economic Aid Act.
Q
And we haven't talked about the Economic Aid Act yet.
What is that?
A
The Economic Aid Act was another of the stimulus . . .
stimulus acts, or programs, that was passed by Congress and
signed by the President. I believe it was signed at the end of
December.
Q
Okay. And so this IFR is saying anything from the
Economic Aid Act overrides any conflicting past, previous
guidance in the FAQs, and the SBA will be revised in the FAQs;
correct?
A
It does state SBA will be revising the FAQs. It
overrides any conflicting guidance in the FAQs. So, if there
wasn't conflicting guidance, then the other guidance would
stand. And it says that the SBA will be revising the FAQs to
conform.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 53 of 74 PageID
813
54
JOHN MILLER - CROSS/DICKERSON
Q
Do you understand what this interim rule, as far as how
it changed the forgiveness application process, or eligibility
of forgiveness?
A
It did -- it did make some changes; but, generally
speaking, the process is very similar.
Q
Did it expand what was eligible for forgiveness?
A
It expanded -- I don't know that it expanded what's
eligible for forgiveness, but there were some additional
expenditures passed under the Act that were eligible . . . that
were eligible for forgiveness.
Q
And do you know what those are?
A
Off the top of my head, they were expenditures for
things such as accounting -- kind of an accounting software,
supply chain expenditures that were for vital supplies that
businesses needed. There were also some -- it would cover
expenditures for worker protection equipment, like these
shields; if a restaurant or something had to expand into the
parking lot, or add a ventilation system. All the things we
know now that we didn't know at the time the CARES Act was
created, so they had to add some additional expenses.
They even added property damage from the summer of
unrest that occurred in 2020 during the riots. So if
businesses suffered damage, those could be forgiven.
Q
And that aspect of the damage from the riots, that had
nothing do with COVID, as far as the CARES Act, the original
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 54 of 74 PageID
814
55
JOHN MILLER - CROSS/DICKERSON
CARES Act; correct?
A
That's correct.
Q
So, again, the rules, regulations, are changing.
A
The rules and the regulations do change. Especially
when Congress changes the laws.
Q
And this retroactively applies to anybody that took out
a loan even on that first available date back in April of 2020.
A
For forgiveness, yes.
Q
For forgiveness.
A
But not for the loan application itself.
MR. DICKERSON: Okay.
Will you un-publish me, please?
One second, Your Honor?
BY MR. DICKERSON:
Q
I think you said 31 IFRs?
A
Yes.
Q
Do you know, are all of them touching on eligible
forgiveness?
A
No, I don't believe all of them are. Some of them are
very narrow.
Q
Narrow focuses to a certain business?
A
Yes, that's -- that could be certain industry, certain
business type.
Q
Okay.
A
Certain tax filer type.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 55 of 74 PageID
815
56
JOHN MILLER - CROSS/DICKERSON
Q
But all the IFRs are public documents.
A
Yes.
Q
What is SBA Form 1846; do you know?
A
I'd have to take a look at it.
(Mr. Dickerson confers with Mr. Reichling privately.)
MR. DICKERSON: May I approach the witness,
Your Honor?
THE COURT: You may.
(Counsel provides evidence to the witness.)
BY MR. DICKERSON:
Q
Again, Mr. Miller, I don't want you to read out loud, I
just want you to look at that document.
(Witness examines evidence.)
A
I see there are several documents here.
Q
Yeah. So that is loan documentation for what we're
dealing with here, this case. I'm going to direct you
to . . . . Look at the bottom. It says SBA Form 159. At the
footer?
A
I saw it before. I know it's in here.
(Witness examines evidence.)
A
There it is.
Q
And again, I don't want you to read it. I want you to
see is that a form that's required, or is that something the
lender has chosen?
A
That's something the lender chose, because the form is
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 56 of 74 PageID
816
57
JOHN MILLER - CROSS/DICKERSON
not required for PPP.
Q
Okay. And then, after that form, there's another
document. Heading is "CARES Act Disclosure." Is that a
document that the SBA requires, or is that a document the
lender has chosen to use?
A
That is a document that the lender has chosen.
Q
So again, if this documentation is not accurate, it is
the lender's responsibility with the borrower; correct?
A
That is correct.
Q
And then, after that document, SBA Form 1846, is that a
standard document that needs to be with the application, or is
that a lender chosen document?
A
This appears -- it's a standard document, but it was not
required, and -- but the lender chose to use it.
Q
I'm almost done here.
THE COURT: Do you want the record to reflect any
exhibit numbers for those?
MR. DICKERSON: Yeah, that would be a good idea,
Your Honor.
Let me get the right number for it.
May I go check, Your Honor?
Exhibit I, Your Honor.
THE COURT: Thank you.
BY MR. DICKERSON:
Q
Looking at the remaining section of that -- those
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 57 of 74 PageID
817
58
JOHN MILLER - CROSS/DICKERSON
documents, do you see anything else in here that is SBA
required; or is it, in your opinion, all documents that the
lender had created?
A
The first document in the stack appears to be the
promissory note, so that would have been required by SBA.
Q
But that is a lender drafted document; correct? Or is
that an SBA form?
A
It does not have an SBA form number on it. It may . . .
it may contain the identical language to the SBA form of
promissory note, but that would not have been required. I
couldn't tell you. But there's no SBA form number on it, so I
can't say that it is an SBA form.
Q
So there was an SBA form that actually had a form style
promissory note.
A
There is an SBA form number that has a form style
promissory note.
Q
And so the lender could have used that form; correct?
A
They could have. But they were not required to.
Q
And is it your understanding that that form is accurate
as it applies -- that promissory note form is accurate as it
applies to the CARES Act?
A
Yes, it should be accurate as it applies to the CARES
Act.
Q
Was FICA and FUCA supposed to be included in the
calculation for the payroll when you did the -- as you
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 58 of 74 PageID
818
59
JOHN MILLER - CROSS/DICKERSON
described it -- the past year monthly average for payroll
multiplied by 2.5?
A
No. There are certain allowable expenses, and some that
weren't. I don't remember, off the top of my head, if those
were included. But there's a list of them on the form.
Q
Okay. And you're saying there's a list of them on the
form today or the form that was used on April 1st?
A
I believe there is a list of those allowable expenses.
It may be in the IFR or on the form.
Q
I'm not talking allowable expense, I'm talking about
when the lender was doing the calculation.
A
Right. I think that was listed in the original IFR.
Q
So you could include FICA and FUCA.
A
No. The expenses are listed on the original IFR.
Q
Right. What I'm asking --
A
The allowable expenses, and I don't recall what they all
are.
Q
I'm not talking allowable expenses. I'm talking when a
borrower is doing the calculation that you described to see
what the number is that they're eligible for.
A
Yes.
Q
Was FICA and FUCA, tax, federal tax, was that allowed to
be included in that calculation of average payroll?
A
And that's what I would have to look at the IFR to
determine. I keep saying expense. I mean what was allowable
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 59 of 74 PageID
819
60
JOHN MILLER - CROSS/DICKERSON
in the calculation is listed, and I would have to look at that.
Q
Okay. And you were asked by the government about
economic necessity. What are the guidelines for the economic
necessity for applying for the PPP program?
A
It was a certification by the borrower. So it would
have been a certification that the borrower had to make at the
time of application.
Q
So it's subjective.
A
Yes. It's in the eyes of the borrower. Correct.
Q
So it's in the eyes of the borrower as of the date of
the application?
A
As of the date of the application.
Q
All right. And what SBA document states that the
borrower can only use the PPP money for business-related
purposes?
A
Their certifications in the 2483. There is also
information, I believe, in the IFR. The first IFR. In
addition to others.
Q
And . . . just give me a second, sir. I'll see if I
have that.
A
In addition, I would just add that any 7A loan proceeds
would be under that Act . . . that loan proceeds for 7A would
be required to be used for business purposes. They're not used
for personal.
Q
And was the PPP required to be -- have an isolated
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 60 of 74 PageID
820
61
JOHN MILLER - CROSS/DICKERSON
account, a segregated account?
A
When you segregated account.
Q
So when the lender then provided the funds to the
borrower, was it required to be in a segregated account?
A
The Act -- I don't recall anything requiring that.
Q
And so if the borrower commingled it by not having a
separated account, but just went directly to the operating
account, that was permissible.
A
I don't know about when you say commingling, but the --
Q
Well, let me define it. Commingling is I have $500,000
in my account right now. The bank then deposits the PPP money
into that $500,000 account. Now I have -- let's say it's a
million-dollar loan -- a $1.5 million balance.
A
That would be permissible.
Q
So there's no requirement to have a standalone account,
and it can be commingled with the other bank account.
A
If your definition of commingling, yes, is that it's
deposited into an account with other funds, then yes.
Q
Okay. And then, for the loan, the borrower had, at
first, eight weeks to use the loan proceeds for the eligible
purposes if they wanted forgiveness.
A
That's correct.
Q
And then it extended to 24 weeks.
A
Yes. Under the Flexibility Act, it was extended.
Q
So if that money from the bank is deposited in the
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 61 of 74 PageID
821
62
JOHN MILLER - CROSS/DICKERSON
account, and they use all the money within the first 30 days,
it's done. They don't go again. Right?
A
That's correct.
Q
If they hold onto that money, and they don't spend those
proceeds until week 20 through 24, that's still eligible for
forgiveness.
A
Yes.
Q
But if a company doesn't file for forgiveness, they just
repay that loan; correct?
A
That's correct.
Q
And that's a one-percent loan.
A
It is a one-percent loan. That interest rate at that
low of an interest rate is highly unusual, and it was because
of the emergency nature of the funds during the pandemic.
Q
And part of the CARES Act was to stimulate the economy;
correct?
A
There were certain parts of the CARES Act that were to
stimulate the economy. Paycheck Protection Plan was really to
pay workers.
Q
So if a recipient, a borrower of the money, ends up
using more than the money they received from the PPP loan in
paying payroll, that was satisfying that purpose.
A
Could you rephrase the question?
Q
Sure.
A
I want to make sure I understand what you're saying.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 62 of 74 PageID
822
63
JOHN MILLER - CROSS/DICKERSON
Q
If a borrower.
A
Yes.
Q
Recipient of a loan.
A
Correct.
Q
Receives its money from the PPP program through its
lender after signing the promissory note, and it spends more in
payroll over that 24 week period than it actually received,
that was fulfilling the purpose of the CARES Act and the PPP
program.
A
That would be acceptable.
Q
Yes.
A
Yes, that would be acceptable, that they spend more
money on payroll than they received. But they had to spend the
payroll -- the money that they received on payroll, as well.
Q
I thought you just said it didn't have to have like a
segregated account. Are you saying it has to be earmarked?
A
It has to be spent for those purposes.
Q
All right. So if my lender on the PPP program gives me
money, and I put it in my right pocket, then I can only use
that right pocket for the payroll?
A
You should be able to demonstrate to your lender that
you used that money for the payroll.
Q
The definition, and maybe I'll just ask you, do you know
what the definition with the IFR as far as proceeds being used
over the covered period?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 63 of 74 PageID
823
64
JOHN MILLER - CROSS/DICKERSON
A
I'm not sure I follow.
MR. DICKERSON: All right.
If you want, Your Honor, this would be a great time
for a break. Then I can get my documentation.
THE COURT: All right. I think that's a good idea.
Let's take our afternoon recess, 15 minutes or so.
Please do not discuss the case among yourselves, or
allow anyone else to discuss with you or in your presence.
About 15 minutes we'll get started.
(At 3:17 p.m., the jury was escorted from the
courtroom.)
THE COURT: All right. Fifteen minutes.
(At 3:17 p.m., court was recessed.)
AFTER RECESS
(At 3:35 p.m., court was reconvened.)
THE COURT: Everybody ready for the jury?
MS. WAID: Yes, Your Honor.
MR. DICKERSON: Yes, sir.
MR. REICHLING: Yes, sir.
THE COURT: Bring the jury, in please.
(At 3:35 p.m., the jury was escorted into the
courtroom.)
THE COURT: Be seated, please.
And you may proceed.
MR. DICKERSON: Thank you, Your Honor.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 64 of 74 PageID
824
65
JOHN MILLER - CROSS/DICKERSON
BY MR. DICKERSON:
Q
So, Mr. Miller, we took the break, we were talking about
the period of 24 weeks, and using the money received from the
lender to pay for payroll over that time. I'm just getting us
back to where we were talking about, okay?
A
Okay.
Q
If you would, look at Defendant's Exhibit 16 I provided
you before. That's the February interim rule?
A
Got it.
Q
Okay. And, as we discussed, this interim rule,
retroactively applied to the complete Paycheck Protection
Program; correct?
A
Yes. As long as it didn't -- if there were any -- if
there was any conflicting guidance, this would over . . . this
would . . . this guidance would be in effect.
Q
So it's safe to say, like when a new guidance comes out,
if it does apply to a previous guidance, the new guidance
applies?
A
Generally yes. Except for situations that refer to
loan -- the loan application itself, which would be governed by
the time -- the rules in effect at the time the loan
application was submitted.
MR. DICKERSON: Okay. If you would, look to . . .
it's the fourth page.
And if I may publish again, ma'am.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 65 of 74 PageID
825
66
JOHN MILLER - CROSS/DICKERSON
And Section 4, the very top.
(Evidence was published via the projector.)
BY MR. DICKERSON:
Q
That is talking about the forgiveness requirements;
right?
A
Yes.
Q
And am I reading this right? "Borrower shall be
eligible for forgiveness of their PPP loan in an amount equal
to the sum of the following costs incurred and payments made
during the covered period."
A
That is what it says; yes.
Q
And so that is the sum of total costs of the payroll and
other following costs during the covered period. It says,
"Shall be eligible;" correct?
A
Yes, it does say, "Shall be eligible".
Q
All right. Not a may, it's a shall.
A
Right.
Q
And, in the SBA world, what does the word "shall" mean?
A
That is probably -- there's probably a legal
interpretation there.
Q
I'm not asking for a legal interpretation. I'm saying,
in the SBA world, what does "shall" mean?
A
I believe it means will.
Q
Okay.
A
A subject -- it does say subject to several important
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 66 of 74 PageID
826
67
JOHN MILLER - CROSS/DICKERSON
limitations though. I want to point that out. Right before
that.
Q
And where does it say the limitations?
A
That same sentence. "Section 7A of the Small Business
Act provides that, subject to several important limitations,
borrower shall be eligible for forgiveness."
Q
Right but this was an add-on to the 7A; correct?
A
That's correct.
Q
And correct me if I'm wrong, 7A SBA loans are directly
from the SBA to the actual borrower?
A
No, they are not. They are guaranteed loans, as well.
Q
Okay. So, when is the SBA proceeds ever come into play
with regard to a 7A loan, is it only during either the guaranty
when there's a default, or with a Paycheck Protection Program
when there's actually forgiveness?
A
Yes. The government funds would only come into play for
a 7A loan in the event of a guaranty purchase, as you
suggest -- or when a guaranty is honored. Or in the case of
the Paycheck Protection Program forgiveness. Some of the
funds, though, are also issued to lenders for processing loans.
They are paid a fee in the PPP loan. I just want to point that
out.
Q
But, with a borrower who has not defaulted on the loan,
and a borrower who has not applied for forgiveness, there's no
SBA proceeds applied to that loan.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 67 of 74 PageID
827
68
JOHN MILLER - CROSS/DICKERSON
A
Not to the loan; correct. There would have been
proceeds applied to the lender for making that loan.
Q
That goes to the lender.
A
That goes to the lender. Correct.
Q
But no SBA proceeds going to the borrower.
A
No SBA proceeds going to the borrower; correct.
Q
And do you have any direct knowledge or information
about the Target Roofing PPP application?
A
None. No.
Q
And none about the forgiveness eligibility, nothing;
right?
A
No. I don't know if a forgiveness application was
submitted.
Q
You don't even know if a forgiveness application was
submitted.
A
That's correct, I do not know.
Q
Okay. And you made a comment about if the SBA . . . I
think -- I don't want to paraphrase it, so correct me if I'm
wrong. If an applicant uses the proceeds knowingly wrong, the
SBA will ask them for repayment?
A
Actually, if the SBA -- I'm not sure that that's what I
said.
Q
All right. Well, tell me. I want your words.
A
Okay. If -- if the SBA -- if a borrower knowingly uses
the proceeds for an unauthorized purpose, the borrower could be
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 68 of 74 PageID
828
69
JOHN MILLER - CROSS/DICKERSON
held legally liable. Could be prosecuted. Such as for charges
of fraud.
Q
Okay.
A
Are you getting to when payment in full could be
required? Is that what you want to be --
Q
Yeah, sure.
A
That would occur if the SBA finds that a borrower is
ineligible, which could also stem from a knowing misuse of
funds.
Q
So knowing misuse of funds would qualify as ineligible
for the SBA to be able to demand the money back from the
borrower.
A
It would depend upon the facts and circumstances of the
case, but if there's an inadequate basis for the borrower to
make the certifications that the borrower attested to in the
PPP loan application, then SBA could declare the borrower to be
ineligible for the loan.
Q
Is that a could or will standard for the SBA?
A
That's a could.
Q
What's the difference between could and will?
A
Well, again, it depends upon the facts and circumstances
of the case. The loan review would look at the case, and they
would make the determination based upon weighing all of the
facts and circumstances of that issue.
Q
And are you aware that the SBA has not requested or
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 69 of 74 PageID
829
70
JOHN MILLER - REDIRECT/REICHLING
demanded any repayment from Target Roofing or Casey Crowther?
A
I am not aware of that.
MR. DICKERSON: Nothing further, Your Honor.
THE COURT: All right. Thank you.
Any redirect from the government?
MR. REICHLING: One moment, Judge.
I have a few questions, Your Honor. I'm going to go
the old fashioned way and use ELMO.
THE COURT: Go ahead.
MR. REICHLING: It's a good thing I trimmed my nails
before coming to court today. So I'll put it up on the
projector if I need to use it.
REDIRECT EXAMINATION
BY MR. REICHLING:
Q
I just have one or two, maybe three, four questions for
you. Could be more, I guess. Famous last words, right?
Mr. Dickerson commented on the February, 2021, IFR
concerning the expansion of costs that were eligible for
forgiveness. Could you explain why the SBA expanded the costs
eligible for forgiveness in February of 2021? Specifically,
the topics that you discussed previously. I believe it had to
do with various things because of the pandemic and stuff like
that.
A
Yes. Well, I don't think I explained, but I may have.
Q
Could you explain now then?
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 70 of 74 PageID
830
71
JOHN MILLER - REDIRECT/REICHLING
A
Well, the Act. The Act specified those additional
costs. So the Economic Aid Act, which was signed by the
President, I believe, December 27th, 2020, added additional
authorized expenditures that could be covered with the PPP loan
proceeds because they were, again, proceeds tied to the
emergency . . . the emergency of the pandemic.
Q
Okay. I'm going to project Defense Exhibit G16 on the
ELMO here, and I'd like you to take a look at it. I think this
is the original copy. So if you don't mind looking at it on
the screen, perhaps --
A
Okay.
Q
-- in front of you. Could you read off some of these
covered operations expenditures that you were referring to that
have changed between the beginning of the PPP and now, in
February of 2021 -- I guess we're in March, now, of 2021.
A
Yes. Covered operations expenditures is a payment for
any business software, cloud computing service that facilitates
business operations, products, or service deliver. The
processing payment or tracking of payroll expenses, human
resources, sales and billing functions, or accounting and/or
tracking supplies, inventories, records and expenses.
Q
What about, I think it's Sub 6 there?
A
Covered property damage costs. A covered property
damage cost is a cost related to the property damage in
vandalism or looting due to public disturbances that occurred
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 71 of 74 PageID
831
72
JOHN MILLER - REDIRECT/REICHLING
in 2020 that was not covered by insurance or other
compensation.
Q
And could you read Sub 7?
A
Covered supplier cost. A covered supplier cost means an
expenditure made by a borrower to a supplier of goods for the
supply of goods that, A, are essential to the operations of the
borrower at the time at which the expenditure is made; or B, is
made pursuant to a contract, order, or purchase order; 1, in
effect at the time before the covered period with respect to
the applicable covered loan; or 2, with respect to perishable
goods in effect before or at the time during the covered period
with respect to the applicable covered loan.
Q
And then I'm just going to want you to read this last
covered portion here about covered worker protection
expenditures; and, if you want, you can just briefly explain
what this section's about. You don't have to go into detail
and read the entire section.
A
Okay. Well, this is what I mentioned earlier, things
like these shields. And it goes on -- actually, if you want to
flip the page, it gives some better examples.
Q
Okay. Let me show you that right now.
A
Yeah. So modifications that businesses had to make in
order to survive. Essentially, the purchase, maintenance,
renovation, they could have added a drive-through window
facility; indoor, outdoor, or combined air pressure ventilation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 72 of 74 PageID
832
73
system or filtration system, physical barriers like sneeze
guards, expansion of an indoor/outdoor combined business space.
I don't know about in Florida, but in Maryland, where
I'm from, restaurants, if they couldn't expand to the outside,
they really would have gone out of business. So this covered
that.
Q
Generally what are these expenses for?
A
Well, these expenses are for . . . to operate a business
that's struggling during the pandemic and protect employees and
workers.
Q
Did this expansion of eligible uses of PPP money for
certain business expenses expand to include personal property
like a boat?
A
No.
MR. REICHLING: No further questions, Judge.
THE COURT: Any recross?
MR. DICKERSON: No, Your Honor.
THE COURT: You may stand down. Thank you.
THE WITNESS: Thank you.
(The witness left the witness stand and left the
courtroom.)
-- -- -- -- -- -- -- --
(Thereupon, at 3:51 p.m., the testimony of John Miller
was concluded.)
-- -- -- -- -- -- -- --
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 73 of 74 PageID
833
74
CERTIFICATE
I CERTIFY THAT THE FOREGOING TRANSCRIPT IS A TRUE AND ACCURATE
TRANSCRIPT FROM THE ORIGINAL STENOGRAPHIC RECORD IN THE
ABOVE-ENTITLED MATTER.
Dated this 24th day of March, 2021.
_
JEFFREY G. THOMAS, RPR, CRR
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:20-cr-00114-JES-M_M Document 129 Filed 03/30/21 Page 74 of 74 PageID
834File and source
- File
- gov.uscourts.flmd.381779.129.0.pdf
- Size
- 229,958 bytes
- SHA-256
- dfa8f9616b385aab660ec5ae143a688a409ec976b05608e7da71fbebdbabcf83
- Original
- PACER (login required)