Statement of Facts as to Craig David Davis — USA v. Davis (Dkt. 39, E.D. Va.)

Record facts

U.S. District Court for the Eastern District of Virginia · No. 1:24-cr-00040-PTG · Doc. 39 · 2024-08-28 · Docket on CourtListener

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FILED
IN THE UNITED STATES DISTRICT COURT FOR THR OEE! COURT

EASTERN DISTRICT OF VIRGINIA

Alexandria Division

AUG 2 8 2024

- CLERK, U.S. DISTRICT
UNITED STATES OF AMERICA | ALEXANDRIA, VIRGINIA.

Vv. Case No. 1:24-cr-40
CRAIG DAVID DAVIS

Defendant.

STATEMENT OF FACTS

l. The United States and the defendant, CRAIG DAVID DAVIS, (hereinafter,
“defendant” or “Davis”), agree that at trial, the United States would have proven the following
facts beyond a reasonable doubt with admissible and credible evidence:

2. From April 1, 2020, through at least February 2021, Davis devised and executed a
scheme to defraud loan programs authorized under the Coronavirus Aid, Relief, and Economic
Security (“CARES”) Act through misrepresentations and omissions of material facts and that
Davis used interstate wires that were transmitted into the Eastern District of Virginia to further this
scheme, in violation of 18 U.S.C. § 1343.

The CARES Act — Paycheck Protection Program and Main Street Lending Program

3s The CARES Act was a federal law enacted in or around March 2020 and designed
to provide emergency financial assistance expeditiously to millions of Americans who were
suffering the economic effects caused by the COVID-19 pandemic.

4. One source of relief provided by the CARES Act was the authorization of
forgivable loans to small businesses to help with payroll and other business expenses through the
Payroll Protection Program (“PPP”) overseen by the SBA. To obtain a PPP loan, a qualifying small

business had to submit a PPP loan application signed by an authorized representative of the
business. The PPP loan application required the business through its representative to acknowledge
the program rules and make certain affirmative certifications | The loan application required the
business to state, among other things, its monthly payroll expenses and number of employees.
These figures were used to calculate the amount of money the business was eligible to receive
under the PPP. In addition, the applicants were required to provide documentation showing their
payroll expenses. Lenders relied on the accuracy of the information contained in the PPP
applications and supporting documents.

5. Small businesses applied for PPP loans with private lenders, including banks, that
had been approved to participate in the program by the SBA. When lenders decided that
applications were ready for approval, the lenders sent an electronic communication to the SBA E-
Tran computer server in Sterling, Virginia, containing data from and related to the applications,
including the identities of the applicants and the amounts of the proposed loans. The SBA E-Tran
server processed the applications electronically. The SBA also used the E-Tran server to send
return communications to notify lenders that loans could be funded as part of the PPP program.
The lenders used their own funds to make the PPP loans, but the loans were guaranteed 100 percent
by the SBA.

6. The SBA required that PPP loan proceeds be used for certain expenses, including
payroll, rent, mortgage payments, and utility charges. A representative of a PPP loan recipient
could apply through its private lender for forgiveness of the principal and interest payments by
certifying that the business had used the loan proceeds as required during a specified time period
and that a specified percentage of the proceeds had been used for payroll.

7. The CARES Act also authorized the Main Street Lending Program (“MSLP”).

The MSLP was an emergency lending program established by the Federal Reserve Board (“FRB”)
and administered by the Federal Reserve Bank of Boston (“FRBB”). The MSLP was designed to
support lending to small and medium-sized businesses that were in sound financial condition
before the onset of the Covid-19 pandemic.

8. MSLP applicants, through their representatives, applied for their loans with private
lenders, such as banks, that had been approved by the FRBB for making MSLP loans. The
borrowers had to meet the eligibility requirements set by the MSLP and certify that they would
abide by the terms of the program. MSLP borrowers also had to meet any additional eligibility
requirements set by the private lenders and agree to comply with any additional terms set by those
lenders. The MSLP and the lenders required applicants to submit accurate financial information to
support their applications. The MSLP and the lenders also required that the loan proceeds be used
for business expenses, and the lenders often required more specific representations by the
representatives of the businesses. Lenders relied on the accuracy of the information contained in
the loan applications and supporting documents.

9. When a lender decided that an applicant had met the requirements of the MSLP and
the lender, the lender sent information about the borrower and the requested loan amount
electronically to the FRBB through a special purpose vehicle it established, known as MS Facilities
LLC, to administer the loan program. Once a loan had been approved, MS Facilities sent the lender
a commitment letter stating, among other things, that MS Facilities would purchase 95 percent of
the loan. The lender kept five percent of the loan and was responsible for servicing the loan. The
MSLP deferred interest repayments until the second year of each loan, the first repayment of
principal until the third year of each loan, and the final repayment of principal until the fifth year
of each loan. All MSLP loans were made between July 2020 and January 2021 and were not

forgivable.
CONDUCT ALLEGED IN THE INDICTMENT
Davis and Bright Vanguard

10. At all times relevant to the Superseding Indictment and this statement of facts,
Davis was the chief executive officer and sole individual associated with Bright Vanguard, LLC
(“BV”). BV was based in San Antonio, Texas. Davis described BV to others, including financial
institutions and lenders, as a business engaged in the sale of computer software and hardware and
providing storage space to other businesses. In fact, BV did little if any legitimate business and

Davis used it primarily as a vehicle to commit the offenses detailed herein.

PPP Application to Bank-J

11. Atall times relevant to this Superseding Indictment and statement of facts, Bank-1
was a financial institution based in Oklahoma. It participated in the PPP program by making loans
to eligible applicants. It transmitted PPP loan applications, including an application made by Davis
on behalf of BV, to the SBA e-Tran server in Sterling, Virginia, using a computer server located
in Oklahoma.

12. On April 1, 2020, Davis submitted a PPP loan application to Bank-1 on behalf of
BV requesting $341,300. The application contained several material misrepresentations, including
a false Social Security Number for Davis and a false Employer Identification Number for BV.
Davis also falsely claimed that he had not pleaded nolo contendere to a felony offense within the
past five years. In fact, Davis pleaded nolo contendere to a felony offense in Texas in 2017.

13. Davis also falsely claimed that BV had thirteen employees. In support thereof,
Davis provided Bank-1 false IRS Form 941 documents for BV for all four quarters of 2019 and

the first quarter of 2020, as well as a payroll summary for the period of January 1, 2020, through
February 15, 2020. These documents falsely showed the BV had employees and payroll expenses.
In fact, BV had no employees or payroll expenses.

14. On April 21, 2020, Davis executed a loan agreement with Bank-1 on behalf of BV,
in which he falsely certified that the PPP loan proceeds would be used to retain employees and
that the information contained in BV’s application was true and correct.

15. On April 21, 2020, having been misled by the false information and certifications
Davis provided, Bank-1 sent an interstate wire transmission from its server in Oklahoma to the
SBA’s e-Tran server in Sterling, Virginia, seeking approval for a PPP loan to BV for $341,300.
Also on April 21, 2020, using the e-Tran server, the SBA transmitted an interstate wire to Bank-1
approving the loan and assigning it SBA loan number 9978187009.

16. On April 22, 2020, Bank-1 deposited $341,300 into an account at Bank-1 ending
in 2431 in the name of BV and controlled by Davis (‘the 2431 account”). The 2431 account had
a balance of zero prior to this deposit. On April 29, 2020, Davis transferred $101,432.55 to an
outside bank account ending in 3134 in the name of BV and controlled by Davis (“the 3134
account”).

17. On September 16, 2021, Davis submitted a PPP loan forgiveness application to
Bank-1 in which he made additional material misrepresentations, including that the PPP loan
proceeds were used to pay payroll costs and that the information provided in the application was
true and correct. Bank-1 denied Davis’s application to forgive the PPP loan and issued a notice of
default. The entire balance of the original loan remains unpaid.

PPP Loan Application to Bank-2
18. At all times relevant to this Indictment and statement of facts, Bank-2 was a

financial institution based in Utah. It participated in the PPP program by making loans to eligible
applicants. It transmitted PPP loan applications, including an application made by Davis on behalf
of BV, to the SBA e-Tran server in Sterling, Virginia, using a computer server located in Utah.

19. On April 27, 2020, Davis submitted a PPP loan application to Bank-2 on behalf of
BV requesting $354,000. The application contained several material misrepresentations, including
a false Social Security Number for Davis and a false certification that BV had not been the recipient
of any other PPP loans. In fact, BV received a $341,300 PPP loan from Bank-1 on April 22, 2020.
Davis again falsely claimed that he had not pleaded nolo contendere to a felony offense within the
past five years. In fact, Davis pleaded nolo contendere to a felony offense in Texas in 2017.

20. Davis also falsely claimed that BV had seventeen employees. In support thereof,
Davis provided Bank-2 false IRS Form 941 documents for BV for all four quarters of 2019 and
the first quarter of 2020, as well as a payroll summary for the period of January through December
2019. These documents falsely showed the BV had employees and payroll expenses. In fact, BV
had no employees or payroll expenses.

21. On April 28, 2020, Davis executed a promissory note with Bank-2 on behalf of BV,
in which he falsely certified that the PPP loan proceeds would only be used for purposes authorized
under the PPP and that the information contained in BV’s application was true and correct.

22. On April 28, 2020, having been misled by the false information and certifications
Davis provided, Bank-2 sent an interstate wire transmission from its server in Utah to the SBA’s
e-Tran server in Sterling, Virginia, seeking approval for a PPP loan to BV for $354,000. Also on
April 28, 2020, using the e-Tran server in Sterling, Virginia, the SBA transmitted an interstate wire
to Bank-2 approving the loan and assigning it SBA loan number 6350327200.

23. On May 1, 2020, Bank-2 deposited $354,000 into a checking account at an outside

bank ending in 8071 in the name-of BV and controlled by Davis (“the 8071 account”).
24. On February 25, 2021, Davis applied to Bank-2 for a second draw PPP loan for
$498,220. In this application, Davis made several material misrepresentations. Once again, he used
the same false Social Security Number and he falsely claimed that he had not pleaded nolo
contendere to a felony offense within the last five years. Davis also presented false IRS Form 941
documents showing his payroll expenses for all four quarters of 2020. The information in these
forms was not only false, but it conflicted with the information Davis provided Bank-2 in
connection with his original PPP loan. Moreover, Davis provided Bank-2 an IRS Form 941V
document that contained a false Employer Identification Number for BV. Bank-2 denied Davis’s
application for a second draw PPP loan.

25.  Theentire balance of the original PPP loan issued by Bank-2 to BV remains unpaid.

MSLP Loan Application to Bank-3

26. Beginning on July 3, 2020, Davis sought to obtain a loan from Bank-3 on behalf of
BV. Davis engaged Bank-3 largely through a loan broker, C.G. At all times relevant to the
Superseding Indictment and this statement of facts, Davis caused C.G. to provide Bank-3 with
documents containing materially false information about BV’s business.

27. On July 7, 2020, C.G. informed a loan officer from Bank-3, B.M., that BV was
interested in obtaining an MSLP loan. Throughout July 2020 and continuing through December
2020, C.G. provided Bank-3 documents related to BV’s business that he received from Davis.
These included, among other things, business tax filings, specifically IRS Form 1120S documents,
for BV for years 2017, 2018, and 2019. These documents were fabricated, they were never filed
with the IRS, and they falsely indicated the extent of BV’s business. In particular, the 1120S form

for BV for 2019 falsely indicated that BV had approximately $25,821,173 of gross income. B.M.
and Bank-3 relied on this document, among others, in determining whether to grant BV’s
application for an MSLP loan.

28. Davis also provided B.M. and Bank-3 a document labeled “Transaction by
Account” that purported to show the extent of BV’s business and customers in 2019. In particular,
it falsely showed that BV’s customers included companies such as AT&T, Exxon, and Haliburton.
It also falsely indicated that BV had approximately $25,821,172 of gross income in 2019. B.M.
and Bank-3 relied on this document, among others, in determining whether to grant BV’s
application for an MSLP loan.

29. On October 29, 2020, Davis caused B.M. and Bank-3 to receive a document
showing BV’s current debts. This document falsely indicated that BV had only three outstanding
loans: one Economic Injury Disaster Loan (“EIDL”) from the SBA for $150,000; one PPP loan
for $337,000; and one commercial loan for $600,000. Davis did not disclose any other debts,
including his recent PPP loan from Bank-2.

30. On December 3, 2020, Davis executed an MSLP loan agreement with Bank-3 on
behalf of BV for $10,000,000. In so doing, he falsely certified that he had no undisclosed debts
and that the information he provided Bank-3 accurately reflected BV’s current financial condition.
The parties agreed that approximately $752,000 of the loan would be used to satisfy BV’s EIDL
loan and its commercial loan. The parties also agreed to hold back approximately $1,500,000 of
the loan for future disbursal.

31. | OnDecember 8, 2020, Bank-3 deposited approximately $7,547,241.55 into a Bank-
3 checking account ending in 8144 belonging to BV and controlled by Davis. Davis transferred
nearly all of the proceeds to other accounts he controlled. The proceeds were not used to support

any legitimate business operations of BV.
32. As a further condition of the loan, Bank-3 required Davis to submit audited
financial reports of BV. On June 1, 2021, Davis submitted a false and fabricated financial audit
report for BV to Bank-3. Bank-3 did not accept this report, and so on June 14, 2021, Davis
submitted a second false and fabricated financial audit report for BV to Bank-3. Bank-3 rejected
this report as well, insisting instead that Davis obtain a financial audit report for BV from an
accountant recommended by Bank-3. Davis did not obtain this report, and on November 12, 2021,
Bank-3 provided Davis and BV a notice of default for, among other reasons, failure to disclose
known debts and failure to provide audited financial statements.

33. The entire balance of the loan from Bank-3 to BV remains unpaid.

RELEVANT CONDUCT

False Invoice Scheme to Defraud Commercial Equipment Financing Companies

34. In addition to the scheme described above, from at least 2019 through the present,
Davis conspired with several individuals, including Co-Conspirator #1 (“CC1”), to defraud
equipment financing companies by submitting invoices that falsely evidenced the sale of computer
servers and related equipment. To further and execute the scheme, Davis and his co-conspirators
submitted and caused the submission of fraudulent invoices to financing companies reflecting
substantial sales of computer equipment to customers. The customers then entered into financing
agreements with the lenders, promising to make regular payments to satisfy their debts.

35. The customers frequently asserted that they received and were satisfied with the
equipment described in the fraudulent invoices. Once the financing agreement was approved, the
lender remitted the sales price reflected in the invoice to the vendor—often BV or another company

controlled by Davis’s co-conspirators.
36. | Unbeknownst to the lenders, the sales never occurred. After receiving the loan
proceeds, Davis, CC1, and their conspirators would provide the majority of the proceeds to the
customer and retain 10% to 25% of the loan proceeds for themselves. This “kick back”
arrangement was never disclosed to the lenders.

37. | Through this scheme, Davis and his conspirators, including CC1, caused more than
$60,000,000 of fraudulently induced lending from at least fifteen different lenders across 359
separate loans. Many of Davis’s customers who received percentages of the loan proceeds have
made payments on the loans while others have defaulted.

Davis, CCl, and Senergy Consulting

38. As part of this scheme, Davis and his co-conspirators encouraged CC] to acquire a
Colorado-based “aged shelf company” — that is a company that existed as a legal entity but had no
meaningful business operations — known as Senergy Consulting Group, Inc. (““Senergy”).

39. CCI acquired Senergy on January 3, 2020, and registered it in Maryland as a
foreign corporation authorized to conduct business. Senergy purported to be an information
technology and computer equipment sales company. In fact, Senergy did not actually sell computer
servers and related equipment or provide consulting services.

40. Davis and CCl worked directly together on at least three fraudulent loans to
equipment financing companies. Those loans are discussed in more detail below.

Lender-1 Loan - $89,261.80

41. Davis provided a customer-business (“Customer-1) a fraudulent invoice that falsely
indicated the sale of $89,261.80 of computer equipment by Senergy to Customer-1. On April 2,

2020, Customer-1 executed an equipment financing agreement with Lender-1 to finance the

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purchase of the equipment indicated on the fraudulent invoice. Customer-1 provided Lender-1 the
invoice he received from Davis to support his application.

42. On April 6, 2020, Lender-1 executed the equipment financing agreement with
Customer-1 for $89,305. On April 7, 2020, Lender-1 deposited $89,261.80 into a checking account
ending in 0107 (“the 0107 account”), which CC1 opened in the name of Senergy and which CC1
controlled.

43. On April 8, 2020, CC1 wired $84,261 from the 0107 account to the 3134 account,
controlled by Davis. CCl and Davis engaged in these acts and transactions to further their
conspiracy to defraud equipment financing companies.

44. Between April 16-21, 2020, Davis provided Customer-1 at least three checks to

deliver the money Customer-1 sought to obtain by participating in this scheme.

Date of the Amount Date Cashed
Check

4/16/20 $23,097.20 4/20/2020
4/17/20 $23,816.44 4/21/2020
4/18/20 $23.289.44 4/21/2020
Total: $70,203.08

Lender-2 Loan - $499,923.66

45. Davis caused Lender-2 to receive a fraudulent invoice that falsely indicated the sale
of $485,362.78 of computer equipment from BV to Senergy. Also included with the invoice
purchase price was a referral fee to Davis/BV for $14,560.88. On March 22, 2021, CC1 executed
an installment purchase agreement with Lender-2 on behalf of Senergy to finance the purchase of
the equipment falsely indicated in the invoice.

46. On March 23, 2021, Lender-2 deposited $499,923.66 into the 8071 account.

Between April 21 and June 8, 2021, Davis caused at least twelve wires to transmit funds from

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accounts he controlled to a checking account ending in 1285 controlled by CCI (“the 1285
account”). These wires totaled approximately $461,106.73. Davis provided this money to CC] in
connection with CC1’s involvement in this conspiracy.

Lender-3/Lender-4 Loan - $224,177.28

47. On July 29, 2021, Davis caused a false invoice to be submitted to Lender-3 showing
the sale of $224,177.28 of computer equipment from Senergy to BV. That same day, Davis caused
an installment purchase agreement with Lender-3 to be executed to finance the purchase of the
equipment falsely indicated on the invoice. Also on July 29, 2021, Davis executed a written
acknowledgement that their installment purchase agreement with Lender-3 would be assigned to
Lender-4 and that all payments due under the agreement were to be made to Lender-4.

48. On August 4, 2021, Lender-4 deposited $224,177.28 into the 0107 account,
controlled by CC1. That same day CC1 executed the following financial transactions:

a. CCl transferred $150,000 from the 0107 account to the 1285 account;

b. CCl transferred $150,000 from the 1285 account to a checking account ending in
1951 that CC1 controlled (“the 1951 account”);

c. CC1 wired $150,000 from the 1951 account to a checking account ending in 4000
that Davis controlled.

49. BV and Davis failed to make any payments to Lender-4. As such and in accordance
with the assignment agreement, Lender-3 re-purchased the installment payment agreement on
December 8, 2021, for $238,333.82. Davis and CC1 engaged in the transactions described above
to further their conspiracy to defraud equipment financing companies.

Other Executions of the Scheme involving Davis

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50. Davis participated in numerous additional executions of this scheme, including the

following examples.
Lender-2 Loan with Customer-2 - $207,930.18

51. Davis provided a second business-customer (“Customer-2”) a fraudulent invoice
that falsely indicated the sale of $207,930.18 of computer equipment from BV to Customer-2. On
August 6, 2020, Customer-2 executed an installment payment agreement with Lender-2 to finance
the purchase of the equipment described in the fraudulent invoice. Customer-2 provided the
invoice he received from Davis to Lender-2 to support his loan application.

§2. On August 7, 2020, Lender-2 deposited $207,930.18 into the 3134 account,
controlled by Davis.

Lender-5 Loan with Customer-2 - $112,260.35

53. Davis provided Customer-2 a fraudulent invoice that falsely indicated the sale of
$112,260.35 of computer equipment from BV to Customer-2. On August 12, 2020, Customer-2
executed a commercial finance agreement with Lender-5 to finance the purchase of the equipment
described in the fraudulent invoice. Customer-2 provided the invoice he received from Davis to
Lender-5 to support his loan application.

54. On August 14, 2020, Lender-5 deposited $112,260.35 into the 8071 account,
controlled by Davis.

55. Between August 14-26, 2020, Davis provided Customer-2 with at least six checks,
written from accounts Davis controlled, to deliver the money Customer-2 sought to obtain by

participating in this scheme.

Date of the Amount Date Cashed
Check

8/14/20 $32,156.71 8/14/20
8/17/20 $33,144.70 8/17/20

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8/18/20 $34.137.22 8/18/20
8/20/20 $36,531.77 8/20/20
8/21/20 $29,999.61 8/21/20
8/26/20 $25,813.44 8/26/20
Total: $191,790.45

56. Davis undertook these acts with Customer-2 to further his conspiracy and scheme
to defraud equipment financing companies.

Lender-5 Loan with Customer-3 - $293,004.79

57. Davis provided a third business-customer (“Customer-3”) a fraudulent invoice that
falsely indicated the sale of $284,470.67 of computer equipment from BV to Customer-3. Also
included with the invoice purchase price was a referral fee to Davis/BV for $8,534.12. On
September 11, 2020, Customer-3 executed an installment purchase agreement with Lender-2 to
finance the purchase of the equipment described in the fraudulent invoice. Customer-3 provided
the invoice he received from Davis to Lender-2 to support his loan application.

58. On September 14, 2020, Lender-2 deposited $293,004.79 into the 3134 account,
controlled by Davis.

59. Between September 22-29, 2020, Davis provided Customer-3 with at least six
checks, written from accounts Davis controlled, to deliver the money Customer-3 sought to obtain

by participating in this scheme.

Date of the Amount Date Cashed
Check

9/22/20 $37,909.42 9/22/20
9/23/20 $38,061.43 9/23/20
9/25/20 $35,061.43 9/25/20
9/26/20 $36,177.57 9/26/20
9/28/20 $39,985.18 9/28/20
9/29/20 $39,985.16 9/29/20
Total: $227,180.19

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60. Davis undertook these acts with Customer-3 to further his conspiracy and scheme
to defraud equipment financing companies.

61. This statement of facts includes those facts necessary to support the plea agreement
between the defendant and the United States. It does not include each and every fact known to the
defendant or to the United States, and it is not intended to be a full enumeration of all of the facts
surrounding the defendant’s case.

62. The actions of the defendant, as recounted above, were in all respects knowing and
deliberate and committed with an intent to defraud, and were not committed by mistake, accident,

or other innocent reason.

Respectfully submitted,

Jessica D. Aber
United States Attorney

Glenn Leon
Date: Chief, Fraud Section

Drew Bradylyons
Assistant United $fates Attorney

| bdr _ 2

“David A. Peters
rial Atorney, Fraud Section

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oe

After consulting with my attorney and pursuant to the plea agreement entered into this day
between the defendant, Craig David Davis., and the United States, I hereby stipulate that the above
Statement of Facts is true and accurate, and that had the matter proceeded to trial, the United States

would have proved the same beyond a reasonable doubt.

aoe

Craig David Davis.

I am Craig David Davis’s defense attorney. I have carefully reviewed the above Statement
of Facts with him. To my knowledge, his decision to stipulate to these facts is an informed and
voluntary one.

—-

Pndthan Simms, Esq.
Attorney for Craig David Davis.

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