Court filing
TRANSCRIPT of Trial Day 4 as to Eric Dean Sheppard held on 11/30/2023 before Judge Beth… — USA v. SHEPPARD (Dkt. 310)
Record facts
| Court | U.S. District Court for the Southern District of Florida |
|---|---|
| Filed | 2025-02-25 |
U.S. District Court for the Southern District of Florida · No. 1:22-cr-20290-BB · Doc. 310 · 2025-02-25 · Docket on CourtListener
Summary
Transcript of Trial Day 4 for November 30, 2023 in United States of America v. Eric Dean Sheppard, Case No. 1:22-cr-20290-BB-1, before the Honorable Beth Bloom and a jury of 12 in the U.S. District Court for the Southern District of Florida, Miami Division. It is Doc. 310, entered on the docket February 25, 2025, and covers pages 1 through 239. The court sets the day's schedule, with a lunch break from 11:30 to one and proceedings ending at 4:30, and takes up a scheduling problem affecting a juror. Counsel also discuss admitting one set of records under a business record certification because the witness who would have introduced them had to leave. The index records the continued direct examination, cross-examination and redirect examination of one government witness, with five defense exhibits admitted.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 1:22-cr-20290-BB-1
UNITED STATES OF AMERICA,
Plaintiff,
November 30, 2023
9:00 a.m.
vs.
ERIC DEAN SHEPPARD,
Defendant.
Pages 1 THROUGH 239
______________________________________________________________
TRANSCRIPT OF TRIAL DAY 4
BEFORE THE HONORABLE BETH BLOOM
UNITED STATES DISTRICT JUDGE
And a Jury of 12
Appearances:
FOR THE GOVERNMENT: UNITED STATES ATTORNEY'S OFFICE
AIMEE C. JIMENEZ, AUSA
ANA MARIA MARTINEZ, AUSA
99 Northeast 4th Street
Miami, Florida 33132
FOR THE DEFENDANT: SALE & WEINTRAUB, PA
JAYNE C. WEINTRAUB, ESQ.
2 South Biscayne Boulevard, 21st Floor
Miami, Florida 33131
NELSON MULLINS
JONATHAN ETRA, ESQ.
CHRISTOPHER C. CAVALLO, ESQ.
2 South Biscayne Boulevard, 21st Floor
Miami, Florida 33131
COURT REPORTER: Yvette Hernandez
U.S. District Court
400 North Miami Avenue, Room 10-2
Miami, Florida 33128
yvette_hernandez@flsd.uscourts.gov
ALSO PRESENT: Special Agent Sarah Halleran
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 1 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
I N D E X
Certificate..................................... 239
W I T N E S S
ON BEHALF OF THE GOVERNMENT:
PAGE
JAMMIE HUTCHESON
CONTINUED DIRECT EXAMINATION BY MS. JIMENEZ
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CROSS-EXAMINATION BY MR. ETRA
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REDIRECT EXAMINATION BY MS. JIMENEZ
210
E X H I B I T S
DEFENDANT'S EX. NO.: OFFERED ADMITTED
L-50
75 75
C-5
92 92
L-51
92 92
C-10
166 166
C-1
181 182
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 2 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
(Call to order of the Court, 9:00 a.m.)
THE COURT: Hi. Good morning to everyone.
Go ahead and have a seat for a moment.
Let me acknowledge the presence of the Defendant.
Hope everyone had a nice evening and a good morning so
far.
I do want to address a couple matters in terms of
scheduling. Today recall that we will end early. I have an
11:30 Zoom meeting, so we'll have an hour-and-a-half lunch
break from 11:30 to one. But we were able to reschedule a
hearing this afternoon so we can go until 4:30. And then at
4:30 I will need counsel table for a hearing. So that will be
the schedule today.
As well, I do want to readdress the issue with the
juror who is unable to be here tomorrow, as well as Monday
morning. To the extent that the parties would agree, we can
excuse that individual, bring in one of the alternates.
Otherwise, unfortunately, we will not be in session tomorrow
and will not be in session on Monday, December 4th, until one
p.m. to accommodate that juror's travel back and forth from
Knoxville.
MS. JIMENEZ: The Government has no objection to that
proposal, Your Honor.
THE COURT: To which proposal?
MS. JIMENEZ: Well, obviously the Court's schedule is
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 3 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the Court's schedule. But in terms of excusing the witness --
I'm sorry -- the juror, and allowing one of the alternates to
take his place, we have no objection to that. In fact, we were
looking back to our notes, and I think we had raised the issue
of removing that juror for cause, and then --
MS. MARTINEZ: Due to his travel.
MS. JIMENEZ: -- due to his travel. And then things
moved so quickly, we didn't come back to that, unfortunately.
MS. MARTINEZ: We are looking, just to make sure that
we can fit in our witnesses. And we have had witnesses flying
in, unfortunately, and then flying back all the way to the West
Coast of the country, and then going to fly back -- okay. So
we could keep them -- so it's quite a hardship on the human
beings, the witnesses.
MS. JIMENEZ: We have had a pileup of out-of-town
witnesses waiting. The ACAP SME witness, Mr. Ian Zalewski, had
to leave yesterday evening, is unavailable today. We are -- I
mean, we could bring him back potentially next week.
We would like to incorporate the ACAP SME records.
They are essentially a mirror of the Northeast Bank records
that will come in through Mr. David Toye, the Northeast Bank
witness. We've asked Defense counsel to agree to allow those
records to come in. We have a business record certification
from ACAP SME. I think that there's no issue on that.
MR. ETRA: On the business records exception issue
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 4 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
alone, we've worked -- we think we've worked -- we've worked
that out.
THE COURT: All right. So his presence is not
necessary, Ian Zalewski? Is that correct, Mr. Etra?
MR. ETRA: For the admission of the evidence, correct,
Your Honor.
MS. JIMENEZ: We have to see whether -- whether we can
cover everything we need to cover with Mr. Toye. We hope to be
able to do that.
THE COURT: All right. Well, I think we're back to
the original issue, and that is the scheduling of this trial.
MS. MARTINEZ: So we have no objection to excusing
Juror Number 13, as we all anticipated would happen on the
basis of his travel.
THE COURT: On behalf of the Defendant?
MS. WEINTRAUB: Your Honor, I apologize if it's
causing a problem for the Court, but my client is adamant that
he does not want to excuse this juror. And quite candidly,
Your Honor, the Defense counsel agree not to excuse him. We
all knew this going into it, and it was agreed to.
MS. MARTINEZ: No. I think it was just missed. We
completely covered that he was going to be excused for cause,
and I think it just -- we went quickly and we all missed it.
THE COURT: All right. Well, I don't think it enures
to the benefit or detriment of either party, but it's a
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 5 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
decision that each party needs to make.
So to that extent, we will not be in session tomorrow.
And I will ask the courtroom deputy to make sure that this
juror is able to be here on Monday at one p.m., and we'll see
if we can fit this trial in by the anticipated date. And
that's really incumbent upon the length of time that the
parties are taking with regard to these witnesses.
So both sides ready to proceed?
MS. MARTINEZ: Yes, Your Honor.
MR. ETRA: Yes, Your Honor.
THE COURT: We have all our jurors?
COURT SECURITY OFFICER: All rise for the jury -- yes,
Your Honor.
MS. JIMENEZ: Oh. I'm sorry. One other issue, Your
Honor. Government's Composite Exhibit 17, that was put in
evidence by the witness Jammie Hutcheson, we're replacing it.
It was supposed to contain all of the PayPal records. It only
contained a portion. The Defense has all of the records. So I
think that they agreed to substitute the exhibit with the one
that we have now, the composite, which should contain all of
the records.
THE COURT: All right. But that's reflected in the
exhibit number, correct?
MS. JIMENEZ: Yes.
THE COURT: All right. Do we have Ms. Hutcheson?
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 6 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Yes.
THE COURT: All right. Let's bring Ms. Hutcheson
forward.
(Pause in proceedings.)
THE COURT: Hi. Good morning.
Okay. Ms. Hutcheson is present. We can bring in the
jury.
(Before the Jury, 9:05 a.m.)
THE COURT: Hi. Good morning, Ladies and Gentlemen.
Good to see you.
Please be seated, everyone.
Thank you for being so prompt, and we are ready to get
right back to work with the direct examination of Jammie
Hutcheson.
Ms. Hutcheson, let me remind you you were previously
placed under oath.
MS. JIMENEZ: Thank you.
DIRECT EXAMINATION [CONTINUED]
BY MS. JIMENEZ:
Q.
Ms. Hutcheson, let me go back to just a couple of exhibits
relating to the first loan application submission from April of
2020.
MS. JIMENEZ: Can we pull up Exhibit 17-8, please.
BY MS. JIMENEZ:
Q.
There was -- do you remember seeing 17-8 yesterday?
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 7 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
It's a payroll report. There was a second page to this
document. I wanted to show that to you as well. Did you
receive this record as well?
A.
Yes, we did.
Q.
All right. Now, what is the name of this report?
A.
It is Payroll Wages Report for the period of February 2020
to February 2021.
Q.
Does this report also have a withholdings column?
A.
Yes, it does.
Q.
All right. I also wanted to show you --
MS. JIMENEZ: If we can turn to the ELMO, please.
COURTROOM DEPUTY: Is this in evidence?
THE COURT: I'm sorry. The monitor is not working?
COURTROOM DEPUTY: In the corner?
But first, is this in evidence?
MS. JIMENEZ: It is part of Composite Exhibit --
THE COURT: It's in evidence.
So there's one monitor?
UNIDENTIFIED JUROR: This one's not working.
THE COURT: All right. If we could call.
COURTROOM DEPUTY: Is it on?
THE COURT: Can you just make sure that it's actually
on, the light is on.
Okay.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 8 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Can we switch back -- I'm sorry -- to
17-8 for a moment, so the jurors could view the exhibit,
please.
BY MS. JIMENEZ:
Q.
All right. So the -- this is Exhibit 17-8, correct,
Ms. Hutcheson?
A.
Yes, it is.
Q.
All right. There was a second page to this exhibit that we
did not go over yesterday. And the title of this report?
A.
"Payroll Wages Report."
Q.
And this record also has a column for withholdings,
correct?
A.
Yes, it does.
Q.
Okay.
MS. JIMENEZ: Now, if we can switch to the ELMO. This
is part of Composite Exhibit 17. And for the record, it is
Bates Stamp Number 11288 through 11293.
BY MS. JIMENEZ:
Q.
Do you recognize this type of form?
A.
Yes. This is the Paycheck Protection Program Application
Form, the SBA 2483.
Q.
All right. I just want to show you this one. It has a
different date. Do you remember yesterday we had a 2483 that
was executed by Mr. Sheppard?
A.
Yes.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 9 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And that one had a date of May 1st, 2020?
A.
That is correct.
Q.
All right. So there was a second one with this date. What
is this date?
A.
Through the period of the Paycheck Protection Program loan,
there were some adjustments to forms needed. And so we re-sent
the DocuSign to Mr. Sheppard in September of 2020 -- it's the
same documentation -- and requested an updated signature. And
so, when he signed again on September 20th of 2020, it executed
the same forms with the updated date.
Q.
Okay. So this September 2020 signed document is for the
same loan application from April of 2020; is that correct?
A.
That is correct. It's for the first round of the Paycheck
Protection loan for which Mr. Sheppard received funds May 1st
of 2020.
Q.
Did Mr. Sheppard have to recertify that the information
provided and the documents provided were true and accurate in
all material respects?
A.
Yes.
Q.
All right.
MS. JIMENEZ: Now, if we can switch back to counsel's
table -- oh, I'm sorry. One additional thing with this
exhibit.
BY MS. JIMENEZ:
Q.
On Page 11292, what is this?
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 10 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
This is the DocuSign Certificate of Completion.
Q.
Is Mr. Sheppard's signature DocuSigned on this document?
A.
Yes, it is.
Q.
What is the date that the signature occurred?
A.
September 20th of 2020.
Q.
There's an IP address under the signature. What does that
indicate?
A.
That indicates the IP where the DocuSign was completed.
Q.
Where the individual --
A.
Would have been located at the time.
Q.
Well, where the individual would have signed the document;
is that right?
A.
Correct.
MS. JIMENEZ: If we could turn back to counsel's
table, Exhibit 17-10, please.
BY MS. JIMENEZ:
Q.
Ms. Hutcheson, what is this document, Exhibit 17-10?
A.
This is a printout of our SwiftForce. It's a tool that we
use at PayPal which captures lead information. So it
encompasses all of the information from the application and
loan history.
Q.
Okay.
MS. JIMENEZ: If you can go back to the document.
If you can zoom in down to the first two boxes that
you see.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 11 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Okay. What is this portion of the record?
A.
This indicates that the customer submitted a request
electronically through the PayPal portal requesting -- having a
question or requesting assistance on the loan. So it's similar
to like an online contact form or an email.
Q.
What is the question?
A.
The subject was: "Request Submitted Through Customer
Portal," and the applicant said: "I'm the owner of multiple
companies, so I need to change the application to reflect
self-employed with employees, and the LLC needs to be changed.
How do I do this?"
Q.
What is -- what would be the category of the applicant who
is self-employed with employees? Is there -- could someone be
self-employed with employees?
A.
Yes.
Q.
That would be the corporation with employees or the
business with employees?
A.
Correct.
Q.
Okay. And the individual who submitted this question, who
was that?
A.
It would be Eric Sheppard, since it has the contact name
there.
Q.
Okay.
MS. JIMENEZ: If we can go back out.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 12 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Does this record reflect whether an answer was provided?
A.
Yes. It actually was not. Because at the point this was
received, we had already processed the loan application and it
was not applicable to change. Because we do have documentation
showing that the business was an LLC, it was not feasible to
change the type of business.
Q.
And this loan was funded, correct?
A.
It was.
Q.
Okay.
MS. JIMENEZ: Can we go down this page -- no. I'm
sorry. Down to the next page.
Down further.
Okay. So if you could highlight -- yeah. The first
half of this document -- no. I'm sorry. Just the first half
of the document from the case number -- from the case number --
okay. That's fine.
BY MS. JIMENEZ:
Q.
All right. Now, what is this portion of the document?
A.
This is another request submitted through the customer
portal.
Q.
And what is requested?
A.
The applicant typed in the description: "I need to add
more documentation from my CPA to the submittal, but the site
will not let me. Thank you."
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 13 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Do you know what a CPA is?
A.
Certified personal accountant [sic].
Q.
All right. So this indicates that the individual wanted to
submit additional documentation from their accountant; is that
right?
A.
Yes, it is.
Q.
And typically -- well, was there additional documentation
from the accountant submitted with this application?
A.
Not at this time, because we had already processed the
documentation that was initially received.
Q.
Now, does this record indicate who made this request?
A.
Contact name Eric Sheppard.
Q.
All right. Now let's go back to the 2021 that we had
started to discuss yesterday. There was a second draw loan
application submitted for the same business, HM-UP Development
Alafaya Trails, correct?
A.
Correct.
Q.
And we were looking at Exhibit 19-3.
MS. JIMENEZ: Okay. Can we go back to 19-2 for a
moment?
COURTROOM DEPUTY: I'm sorry. Counsel, is this in
evidence?
MS. JIMENEZ: 19-2? Yes. All of the 19 exhibits are
in evidence.
COURTROOM DEPUTY: Thank you.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Thank you.
BY MS. JIMENEZ:
Q.
All right. We talked about this original lead information,
19-2. What does this reflect?
A.
This reflects the application information submitted by
Mr. Sheppard at the time he applied for the second round of the
Paycheck Protection Program loan.
MS. JIMENEZ: If we can go on, I believe there was
another page or another document attached.
If we can go on to the next page.
BY MS. JIMENEZ:
Q.
We discussed, I believe, that there was an industry code
provided by the applicant?
A.
Correct.
Q.
Okay. And what was that code?
A.
It was lessors of non-residential buildings.
MS. JIMENEZ: We can go to the next page.
BY MS. JIMENEZ:
Q.
So this is what I wanted to show you. What is this
document? What's the name of this document?
A.
This is "Application Data."
Q.
What is this?
A.
It pulls in the information from the application at the
time it was submitted.
Q.
Does this indicate who was the individual who applied for
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
this loan?
A.
Eric Sheppard.
Q.
All right. Does it indicate --
MS. JIMENEZ: If we can go up for a little bit and
show the -- no. I'm sorry. See the bottom of the page?
BY MS. JIMENEZ:
Q.
What was the date that the application was submitted?
A.
January 19th, 2021.
Q.
Now, there is a different industry code here, 236220. Why
is that on there?
A.
That would have been pulled in from the original
application.
Q.
Okay. But for this application, it was the lessor of
commercial buildings?
A.
Correct.
Q.
So the application submitted date, what is that supposed to
reflect?
A.
That's the date that the applicant submitted this
information online through the PayPal portal.
Q.
And that's the date on which PayPal servers would have
received this information; is that right?
A.
That's correct.
Q.
Okay. And on this document --
MS. JIMENEZ: If we can go up a little bit.
Thank you.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
-- provides the name of Eric Sheppard. Does it provide a
phone number?
A.
Yes, it does.
Q.
Is that the same phone number we saw with the first loan
application?
A.
Yes.
Q.
It provides an email as well, correct?
A.
Correct.
Q.
Is that the same email we saw with the first application?
A.
Yes.
Q.
Now, here this business, HM-UP Development Alafaya Trails,
has a d/b/a. Do you see that?
A.
I do. It's HM Management and Development.
Q.
And so it indicated that it's doing business as HM
Management and Development; is that right?
A.
Correct.
Q.
And what are the -- how many employees are listed here?
A.
Eighty.
Q.
All right.
MS. JIMENEZ: Now can we go to Exhibit 19-3.
If you can -- yeah. Expand the first half of this.
BY MS. JIMENEZ:
Q.
What is this record?
A.
This is details from SwiftForce showing the application
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
information.
Q.
Now, the left side indicates average monthly payroll. Is
that the information that was provided --
A.
Yes, it is.
Q.
-- with the application -- yes?
A.
Yes, ma'am.
Q.
And what was the average monthly payroll?
A.
$81,250.
Q.
And what was the requested loan amount?
A.
$203,125.
Q.
Now, what was the loan amount based on?
A.
It's based on the average monthly payroll times the 2.5.
Q.
For two and a half months of payroll?
A.
Correct.
MS. JIMENEZ: Can we zoom out.
If you go to the bottom half -- yeah, that second
half.
BY MS. JIMENEZ:
Q.
Does this column indicate a different set of numbers -- of
figures for the loan?
A.
Yes.
Q.
Who would have provided this information?
A.
Mr. Sheppard -- well, some -- based off of the
documentation based -- from Mr. Sheppard.
Q.
Okay.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: All right. If we can go to Exhibit
19-4.
BY MS. JIMENEZ:
Q.
Was the applicant -- you referenced documentation. Was the
applicant required to submit documentation to support the loan
application?
A.
Yes.
Q.
Looking at Exhibit 19-4, what is this?
A.
This is a copy of a Florida State driver's license. As
part of the required documentation, we did require a
state-issued photo ID or passport.
Q.
You required a photo ID or passport from whom?
A.
From the applicant.
MS. JIMENEZ: If we can go to Exhibit 19-5.
If you could expand the first half.
BY MS. JIMENEZ:
Q.
All right. What is this document, Exhibit 19-5?
A.
It's titled as a labor report for the period of
January 1st, 2020, through December 31st, 2020.
Q.
Is there a column here for wages paid?
A.
Yes, there is.
Q.
If you go down the names, do you see a Martin J. Beirne?
A.
Yes.
Q.
Do you see a Graff, C.?
A.
Yes, I do.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Do you see at the bottom here Carlos Granda?
A.
Yes.
Q.
The bottom of this pull-out?
MS. JIMENEZ: Okay. Now, if we can pull up Exhibit
19-6, please.
BY MS. JIMENEZ:
Q.
Okay. Looking at 19-6, what is this?
A.
This is the Paycheck Protection Program Second Draw
Borrower Application Form. So the SBA 2438 for second-time
loans.
Q.
Okay.
MS. JIMENEZ: If we could expand the first half of the
document.
BY MS. JIMENEZ:
Q.
All right. Now, does it indicate -- so it indicates the
business name to be HM-UP Development Alafaya Trails, correct?
A.
Yes, it does.
Q.
And the business code or NAICS code was what?
A.
531120.
Q.
Okay. And where is that industry code supposed to come
from?
A.
From the tax return, per the SBA guidelines.
Q.
And was that a new directive in 2021?
A.
Yes, it was.
Q.
All right. The primary contact for this application, who
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
was that?
A.
It's Eric Sheppard.
Q.
Now, there is a number of employees indicated on this form.
What is it?
A.
Seventy-four employees.
Q.
And the average monthly payroll was what?
A.
$79,275.
Q.
And the loan amount here was what? In between the payroll
and the number of employees.
A.
$198,187.
Q.
All right. So that was slightly less than the initial
application submission in January, correct?
A.
Yes.
Q.
The -- and the loan amount would have been based on what?
A.
It's based on the average monthly payroll for two and a
half months.
Q.
Okay. Now, for the second draw application, was there an
additional requirement aside from -- for a business applying as
a business with employees, in addition to wages, was there
anything that was required to receive a second draw from the
Paycheck Protection Program?
A.
Yes, there was. For applicants who had already received
one loan, the SBA specified to receive a second loan they must
show a reduction in revenue or gross receipts received by the
business of least 25 percent.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And that 25 percent business reduction would be for what
period of time?
A.
It would be year-over-year.
Q.
Could be year-over-year or?
A.
Or quarter-over-quarter.
Q.
When you say "year-over-year," what year over what year?
A.
2019 to 2020, showing how the coronavirus epidemic impacted
their business.
Q.
Which year would you need to reflect the 25 percent revenue
decrease?
A.
In 2020.
Q.
Then, if you do a quarter-to-quarter comparison, what years
are we talking about?
A.
It would be the same quarter, from 2019 to 2020. So in the
example here, it shows the second quarter of 2019 to the second
quarter of 2020 there would have to be at least a 25 percent
reduction in the year of 2020.
Q.
All right. Not a first quarter 2020 to fourth quarter
2019, correct?
A.
Correct.
MS. JIMENEZ: If we could go -- zoom back out and
focus on the bottom half of this from -- no. Sorry. From
"owner" -- here.
BY MS. JIMENEZ:
Q.
Who does it list as a managing member?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Managing member is Eric Sheppard.
Q.
And who does it list as having a 30 percent ownership in
addition to Eric Sheppard?
A.
Jennifer Sheppard.
Q.
Then -- what is that total?
A.
Eighty-two percent.
Q.
Now, if you -- do you have any requirements for owners to
be listed on the application?
A.
Yes. Any owners with greater than 20 percent stake in the
business must be listed.
Q.
So if you identify 82 percent, do you need to list anyone
else?
A.
No, you would not.
Q.
Here, the questions are answered and indicate initials that
are handwritten. Why is that?
A.
The applicant filled out this form themselves and uploaded
it to the PayPal portal. This was not a DocuSign that PayPal
sent to the applicant.
Q.
All right.
MS. JIMENEZ: If we can zoom back out to the document.
Go to the second page.
BY MS. JIMENEZ:
Q.
All right. So this document -- do you see it's got the
initials handwritten?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay.
MS. JIMENEZ: If we can go to the last page.
BY MS. JIMENEZ:
Q.
All right. So here --
MS. JIMENEZ: Can you zoom out -- sure.
BY MS. JIMENEZ:
Q.
Okay. So this is not a document that you provided the
applicant, correct?
A.
Correct.
Q.
Which we saw in the first application once you -- well, how
did that work with the first application?
A.
Once we have reviewed the loan and conditionally approved
it, then PayPal would send the DocuSign to the applicant to
DocuSign and send in.
Q.
All right. So this document was submitted to you by the
applicant; is that right?
A.
Correct. It was submitted before we reviewed the
application in full.
Q.
And what is the date indicated on this submission?
A.
January 24th, 2021.
Q.
Who is the person indicated as having been the one
submitting it?
A.
Eric D. Sheppard.
Q.
All right.
MS. JIMENEZ: If we can go back.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
In the February 2021 time frame, did the SBA provide any
directive to PayPal and anyone processing Paycheck Protection
Programs regarding the prioritizing of certain businesses in
reviewing the applications?
A.
Yes, they did. Because of the epidemic, the SBA wanted to
prioritize small businesses and gave the direction to all banks
and lenders to only process applications for businesses with 20
or fewer employees.
MS. JIMENEZ: Can we look at Exhibit 19-6, please.
No. That's the one we were just looking at. Sorry.
Can we look at Exhibit 19-12.
BY MS. JIMENEZ:
Q.
Okay. What is this?
A.
This is the Second Draw Application Form.
Q.
Okay.
MS. JIMENEZ: Sorry. Go back.
And can we go to the last page.
Okay. Here. Can we stop. Can we zoom out.
BY MS. JIMENEZ:
Q.
Okay. This application -- who does this document indicate
submitted this application?
A.
Eric D. Sheppard.
Q.
On what day?
A.
February 23rd, 2021.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay.
MS. JIMENEZ: Now let's go back to the first page.
Okay. Can we zoom out the first half.
BY MS. JIMENEZ:
Q.
All right. This is a document you provided to
Mr. Sheppard, or did this come to you from him?
A.
This came to us, and it's evident based off of different
types of font and such. It's not a DocuSign.
Q.
It's also -- is it handwritten, the signature?
A.
Yes.
Q.
Now, here, it -- with respect to number of employees, how
many employees are listed here?
A.
Nineteen.
Q.
All right. Can we -- do you recall if this is -- if it has
the same average monthly payroll figures and the same amount of
the loan as the one we just reviewed from January 24th, 2021?
A.
I believe so.
Q.
All right.
MS. JIMENEZ: Could we show the first page of Exhibit
19-6 and the first page of Exhibit 19-12, please.
I don't know if you can focus on the top half of each
of them.
BY MS. JIMENEZ:
Q.
All right. Do you see the --
MS. JIMENEZ: Okay. Squeeze.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Does it -- do both applications indicate the same average
monthly payroll?
A.
Yes, they do.
Q.
Do they -- can you -- yeah. Do they both show the same
loan amount?
A.
They do.
Q.
Do they show the same number of employees?
A.
No, they do not. The first one had 74 employees, and the
second one had 19 employees.
Q.
And the first one, which is Exhibit 19-6, was submitted
January -- or has a date of January 24th, 2021, correct?
A.
That's correct.
Q.
The second one has a date of February 23rd, 2021, correct?
A.
Yes.
Q.
All right.
MS. JIMENEZ: Could we take a look at Exhibit 19-19.
BY MS. JIMENEZ:
Q.
So starting at approximately February of 2021, did the SBA
prioritize businesses of a certain size?
A.
They did. They prioritized small businesses, wanting to
get money into the hands of those smallest businesses hurting.
So they prioritized any businesses with 20 or fewer employees.
Q.
All right.
MS. JIMENEZ: If we do go to Page 5 of this Exhibit
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
19-19, please.
The email with the date of March 2nd. It's the second
one -- no.
BY MS. JIMENEZ:
Q.
All right. Exhibit 19-19, what is it?
A.
This is an email copy of -- that we sent all applicants who
had a pending application with PayPal, which we were holding
because of the SBA requirement to prioritize those small
businesses with 20 employees or fewer.
Q.
All right. Can you read, if you go down the page, the
sentence that begins: "On February 24, 2021."
A.
"On February 24th, 2021, the SBA instituted a 14-day period
ending on March 10th, 2021, during which it will only accept
applications from businesses with fewer than 20 employees for
review. Your PPP loan application indicates that your business
or organization has 20 or more employees."
Q.
Okay. And why was that? Did you consider the submissions
that were provided to you on February 23rd by the applicant
indicating 19 employees?
A.
We had not yet at this time.
Q.
All right. Now, what documentation did you require for
payroll?
A.
We required a completed tax form and payroll reports.
MS. JIMENEZ: Can we go to -- well, in this same
document, Page 10, please. It's an email from February 10th,
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
which is the top.
BY MS. JIMENEZ:
Q.
All right. On the same report, this exhibit -- what is
this exhibit generally, Exhibit 19-19?
A.
This is an email that goes out to applicants letting them
know the status of their loan or what information we would need
to process their application.
Q.
All right. Okay. You -- "To apply for a PPP loan" -- do
you see that sentence: "To apply for a PPP loan"?
A.
Yes.
Q.
Did you need to determine whether they were in operation as
of February 15th, 2020?
A.
Yes, we did.
Q.
All right. Now, the second sentence, can you read that.
A.
"We are required to receive the supporting documentation
before we can submit a PPP application to the SBA for its
review."
Q.
I'm sorry. I meant --
A.
The second --
Q.
The next paragraph, actually: "Based on the SBA
guidelines."
A.
"Based on the SBA guidelines, and the information you
provided in your online application, you are required to
provide the following documentation: A payroll statement or
similar documentation from the pay period that covered
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
February 15th, 2020, to establish the business was in operation
and had employees on February 15th, 2020."
Q.
And the documentation for employees was a reference to who?
A.
For employees of the business.
Q.
And who are employees of the business?
MR. ETRA: Objection, Your Honor. Speculation.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
What do you require -- for a business applying as a
business with employees, what do you require from that business
about the employees?
A.
We require a payroll report, which would include anything
showing wages withheld for taxes, insurance, other benefits.
Q.
Okay.
MS. JIMENEZ: Can we look at Exhibit 19-8, please.
BY MS. JIMENEZ:
Q.
What is this record?
A.
This is the Quarterly Federal Tax Return, the 941, for
the -- 2020.
Q.
For what business?
A.
For HM-UP Development Alafaya Trails, LLC.
Q.
All right. Now, what quarter is reflected on this first
page?
A.
Quarter 4, for October through December.
Q.
Of tax year 2020; is that right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
What are the number of employees who received wages that
are indicated on this document?
A.
Fifty-eight.
Q.
And how much -- how much in wages does this document
indicate was paid to these employees in that quarter?
A.
$123,699.
Q.
And it also indicates federal income tax withheld from
their wages in "Other Compensation." Do you see that?
A.
Yes. In the amount of $11,737.
Q.
Okay. And then --
MS. JIMENEZ: I'm sorry. Go back out. And then go to
Line 5 -- 5e.
BY MS. JIMENEZ:
Q.
Does it indicate the total Social Security and Medicare
taxes that are owed for those wages?
A.
It does.
Q.
What is that amount?
A.
$30,662.94.
Q.
Okay.
MS. JIMENEZ: Could we go to the next page.
All right. No. Keep going.
Okay. Can we zoom in on the designee and the
signature.
Yeah. The bottom half.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
There we go.
BY MS. JIMENEZ:
Q.
Does this document indicate who signed off on that Form
941?
A.
Eric D. Sheppard.
Q.
And is the document signed?
A.
Yes, it is.
Q.
All right.
MS. JIMENEZ: Can we go back.
Go to the next document here.
BY MS. JIMENEZ:
Q.
All right. And this is third quarter of 2020, Form 941; is
that right?
A.
Correct.
Q.
For what business?
A.
HM-UP Development Alafaya Trails, LLC.
Q.
How many employees are listed who received wages?
A.
Fifty-eight.
Q.
In that quarter?
A.
Yes. Fifty-eight.
Q.
All right. And the amount of wages that are listed, do you
see that?
A.
Yes. $181,333.
Q.
And there's federal income tax that was withheld from those
wages; is that right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
How much?
A.
$17,450.
Q.
Okay.
MS. JIMENEZ: Can we go back.
BY MS. JIMENEZ:
Q.
And then Line 5e, does it list -- does it indicate that
there are Social Security and Medicare taxes owed on those
wages?
A.
Yes.
Q.
How much?
A.
$27,743.65.
Q.
Okay.
MS. JIMENEZ: Go back.
And then can you go down, please.
Next page.
And the next page.
And then zoom out to the bottom half.
BY MS. JIMENEZ:
Q.
Is this a document -- the 941 signed?
A.
Yes, it is.
Q.
Does it indicate who signed it?
A.
Eric Sheppard.
Q.
All right.
MS. JIMENEZ: Can we go back.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Go to the next document.
BY MS. JIMENEZ:
Q.
Then we have -- this is second quarter 941, for tax year
2020?
A.
Correct.
Q.
Same business?
A.
Yes, it is.
Q.
Now, this document is entirely handwritten; is that right?
A.
Appears to be. Yes.
Q.
Okay. Does it list the number of employees who received
wages in that quarter, second quarter of 2020?
A.
Yes. Seventy employees.
Q.
Okay. And we have the same -- we have wages filled in,
income tax filled in. And if we go down, we also have --
MS. JIMENEZ: I'm sorry. Go back out.
BY MS. JIMENEZ:
Q.
-- we also have Social Security wages and Medicare wages
that were taxed. Do you see that?
A.
Yes, I do.
Q.
Okay.
MS. JIMENEZ: Go to the next page.
Here, this is handwritten. If we can zoom into the
second half.
BY MS. JIMENEZ:
Q.
It lists the Defendant's -- or it lists a designee with a
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
name. Do you see that?
A.
Yes.
Q.
And then do you see that it's got a signature? And
who's -- with a printed name. Who is signing that document?
A.
Eric Sheppard.
Q.
All right.
MS. JIMENEZ: Go back.
Keep going.
BY MS. JIMENEZ:
Q.
Now, this is --
MS. JIMENEZ: Okay. Zoom in the first half.
BY MS. JIMENEZ:
Q.
This is first quarter for what business?
A.
HM Management and Development.
Q.
Is that the applicant here?
A.
Yes.
Q.
It's doing business as HM Management and Development?
A.
Yes. It does not have the Alafaya Trails, LLC.
Q.
Okay. And it also lists number of employees for this
quarter for HM Management. Do you see that?
A.
Yes. Thirty-two employees.
Q.
Okay. And it's got wages and taxes being withheld. Do you
see that on this form?
A.
Yes.
Q.
Okay.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Let's go down.
Okay. Here. Zoom in the -- yeah.
BY MS. JIMENEZ:
Q.
This document is signed as well, this 941, first quarter
2020?
A.
Correct.
Q.
Does it indicate who signed it?
A.
Eric Sheppard.
Q.
Does it indicate who the designee is?
A.
Eric Sheppard.
Q.
Okay.
MS. JIMENEZ: Let's go back.
Go down.
BY MS. JIMENEZ:
Q.
This is for what quarter in 2020?
A.
Quarter one.
Q.
So two documents for quarter one 2020; is that right?
A.
Correct.
Q.
This is -- what is the name listed for the business here?
A.
HM-UP Development Alafaya Trails.
Q.
So for first quarter 2020, how many employees are listed
who received wages?
A.
Sixty-eight.
Q.
And it also indicates wages paid, income tax withheld, and
Social Security and Medicare withholdings; is that right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Okay.
MS. JIMENEZ: Keep going.
Second page. Can we see who is indicated as the
signer?
BY MS. JIMENEZ:
Q.
Who's indicated as the signer?
A.
Eric Sheppard.
Q.
And the designee?
A.
Eric Sheppard.
Q.
All right.
MS. JIMENEZ: Can we go out.
This is -- is this the end?
Okay. I want to publish for the jury Exhibit 13-5.
Can we zoom in at the middle of this document. This
is in evidence.
Oh. You missed the taxpayer name.
BY MS. JIMENEZ:
Q.
Okay. Can you -- this is a record that is in evidence,
Ms. Hutcheson, Exhibit 13-5. Can you indicate the taxpayer
name here.
A.
HM-UP Development Alafaya Trails, LLC.
Q.
All right. Can you read what it says about Form 941
Employers Quarterly Federal Tax Return.
A.
"As of June 26th, 2022, the Internal Revenue Service shows
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
no return filed for the following tax years pertaining to the
individual described above."
Q.
And what are the -- without stating each quarter, what are
the tax years for which there were no Form 941s for this
business?
A.
2019, 2020, and 2021.
Q.
Does that include the tax year for the forms that were
provided to PayPal?
A.
It does.
Q.
All right.
MS. JIMENEZ: Can we go to Exhibit 13-2 to publish for
the jury, please. It's in evidence.
This is a -- 13-2 is an IRS tax return.
BY MS. JIMENEZ:
Q.
Can you indicate the business --
MS. JIMENEZ: Can you zoom out the first part.
BY MS. JIMENEZ:
Q.
What is the -- whose return is this, whose document?
A.
HM-UP Development Alafaya Trails, LLC.
Q.
What type of tax return is this?
A.
This would be for a partnership.
Q.
A 1065 Partnership Return?
A.
Correct.
Q.
Okay.
MS. JIMENEZ: Can we go to Page 6 of this document.
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39
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Okay. Can you focus on the middle box for HM Six.
And this was for 2019, actually.
BY MS. JIMENEZ:
Q.
For HM Six, does it indicate whether or not there were any
wages paid?
A.
It does not. Line 13 has wages and salaries. And there's
nothing filled in, which would indicate that there's no wages
paid.
Q.
Okay. All right.
MS. JIMENEZ: Can we go to Exhibit -- thank you. Can
we go to Exhibit 19-10.
BY MS. JIMENEZ:
Q.
What is this document?
A.
This was supplied by the applicant. It's just a letter
that they sent in with their documentation.
Q.
Actually, let me back up for one moment. The Exhibit 19-8
that I showed you with those tax forms, the 941s for each
quarter of 2020, was that electronically submitted to PayPal?
A.
Yes. It would have been submitted electronically through
our portal.
Q.
When were those documents submitted to PayPal?
A.
February 11th of 2021.
Q.
All right. Let's go -- okay. So we're here. 19-10. What
is the date on this document?
A.
February 15th, 2021.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Was this submitted to PayPal electronically?
A.
Yes, it was.
Q.
Okay. What does it indicate about -- in Line 1 that is
being submitted?
A.
They indicated: "The 1065 tax return was provided, but
2020 is not prepared as of today."
Q.
That's as of February 15th, 2021?
A.
Correct.
Q.
Okay. And then Line 5 it indicates what?
A.
That they provided 941s and 940s for 2020.
Q.
Okay. What did PayPal require if someone is submitting an
income tax return to them to support their loan application?
A.
We required the 2020 tax return, and the guidelines from
the SBA indicated that if it had not been filed yet that they
were to complete the tax return and sign it and submit it to
us.
Q.
Complete the tax return, sign it, and submit it. And did
they require anything about the -- what was being submitted?
A.
It should be reflective of the business income, wages paid,
et cetera. It should be accurate.
Q.
Okay.
MS. JIMENEZ: Can we go to Exhibit 19-18, please --
actually, I'm sorry. Before we do that, can we go to Exhibit
19-9.
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41
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Okay. Exhibit 19-9, what is this?
A.
This is the IRS Tax Return 1065 for Partnership for the
year 2019.
Q.
Was this tax return submitted to PayPal?
A.
Yes, it was.
Q.
Okay.
MS. JIMENEZ: Can we zoom out.
Go to Page 6.
BY MS. JIMENEZ:
Q.
Okay. Can you focus on the middle box here.
A.
Yes.
Q.
Okay. This document -- does it indicate on Line 13 whether
the business HM-UP Development Alafaya Trails, for tax year
2019, paid any wages and salaries?
A.
Yes. It has wages in the amount of $717,743.
Q.
All right.
MS. JIMENEZ: Can we leave this up -- or this page,
and pull up Exhibit 13-2, Page 6?
And actually, 13-2, let's go to Page 1 again just
briefly.
BY MS. JIMENEZ:
Q.
All right. Exhibit 13-2 is the IRS exhibit. Now -- for
tax year 2019 for HM-UP Development Alafaya Trails.
MS. JIMENEZ: Can we go to Page 6 of Exhibit 13-2.
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42
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Okay. For Exhibit 13-2, Line 13, what are the wages
listed?
A.
There is nothing listed, indicating zero.
Q.
Okay. And the one on -- the document on the left which is
Exhibit 19-9, that is the document that was submitted to
PayPal; is that correct?
A.
Correct.
Q.
Okay. And then does it indicate gross rents on the
document submitted to PayPal?
A.
It does, Line 2.
Q.
Is it -- and what is the amount?
A.
$1,414,576.
Q.
Is that the same as the one submitted to the IRS?
A.
It is.
Q.
Okay.
MS. JIMENEZ: All right. Now can we go to Exhibit
19-18, please.
BY MS. JIMENEZ:
Q.
Okay. What is this record, 19-18?
A.
They are brief notes and -- by PayPal employees on what
actions have been taken on the loan application.
Q.
Okay. Can you indicate the February 16 notation.
A.
Yes. On February 16th there was a note: "Emailed BO" --
which stands for business owner -- "IRS Form 1065, including
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Schedule K-1 and bank statements," initials SG of the employee
that worked at -- so they are essentially requesting these
documents from the business owner.
Q.
And to whom was this email sent?
A.
Sent to the applicant, Eric Sheppard.
MS. JIMENEZ: And if we can go back out.
BY MS. JIMENEZ:
Q.
Was it sent to the email address that's listed on the
application?
A.
Yes. We can only send to the email address on the
application.
Q.
And now you're requesting a 1065 tax return. Now, you were
already provided a 1065 tax return for 2019. What were you
requesting?
A.
We were requesting the tax return for the year 2020, per
the SBA guidelines.
Q.
All right.
MS. JIMENEZ: Can we pull up Exhibit 19-13, please.
BY MS. JIMENEZ:
Q.
What is Exhibit 19-13?
A.
This is an IRS Form 1065, US Return of Partnership Income,
for the tax year 2020.
Q.
This is for HM-UP Development Alafaya Trails?
A.
Yes, it is.
Q.
All right. By the way, the -- the business code is what?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
What is the business code?
A.
531120.
MS. JIMENEZ: Can we go to Schedule 8825.
Try Page 6.
Can we go down.
Sorry. I don't have the exact page.
Here we are. Okay.
Okay. Can you zoom in on the middle.
BY MS. JIMENEZ:
Q.
All right. Does this document, on Line 13, indicate how
much in wages that HM-UP Development Alafaya Trails paid to its
employees in tax year 2020?
A.
Yes. $815,358.
Q.
Okay.
MS. JIMENEZ: Go back.
Okay. Let's go back to the first page of this
document.
Can we focus in on the signature.
BY MS. JIMENEZ:
Q.
All right. So you indicated that you required that the tax
return be prepared and signed; is that right?
A.
That is correct.
Q.
Now, here, is there more than one signature?
A.
Yes. There's the signature of the partner or LLC member
and a preparer's signature.
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45
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
So this document -- this tax return indicates that the --
that it has been prepared by the actual tax preparer for this
business; is that right?
A.
Yes, it does.
Q.
What is the date when the tax return was prepared by the
preparer?
A.
February 9th, '21.
Q.
Does it indicate who was the preparer of this tax return?
A.
It indicates Neal A. Cupersmith.
MS. JIMENEZ: Could we go back to Schedule 8825. I
think it's now Page 8.
Okay. That middle box again.
BY MS. JIMENEZ:
Q.
All right. Now, see Line 2: "Gross Rents"?
A.
Yes.
Q.
What is that amount?
A.
$1,047,653.
Q.
And that is less than the total gross rents for 2019; isn't
that right?
A.
Yes.
Q.
Okay.
MS. JIMENEZ: Can we go to Exhibit 13-3 for a moment.
BY MS. JIMENEZ:
Q.
This is a tax -- an IRS Record for Taxpayer. What is the
taxpayer?
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46
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
HM-UP Development Alafaya Trails, LLC.
Q.
Okay. Then we were just looking at a tax return submitted
to PayPal for tax year 2020; is that correct?
A.
Correct.
Q.
All right. Can you indicate what it says about the 1065
return for this business?
A.
"As of June 4th, 2022, the Internal Revenue Service shows
no return filed for the following tax years pertaining to the
individual described above," period, "December 31st, 2020, and
December 31st, 2021."
Q.
Okay.
MS. JIMENEZ: Can we look at Exhibit 19-14.
BY MS. JIMENEZ:
Q.
Let me ask you another question about the tax return. You
indicated you required that it be signed. And you do not
require that in February 2021 -- that it necessarily be filed
at that point?
A.
That's correct. Generally you have until at least April to
file the tax return with the IRS. But the SBA did require that
the tax return be submitted to corroborate the application in
2021.
Q.
And what did -- what did you require that the tax return
contain with respect to the figures that are provided in the
tax return?
A.
They should be true and accurate per the business
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
reporting.
Q.
Okay. We have 19-14 -- nope. I'm sorry. One more
question about that 2020 tax return. When was that tax return
submitted to PayPal?
A.
The 1065?
Q.
The 1065. I'm sorry. Yes.
A.
February 26th, 2021.
Q.
And that was submitted electronically to PayPal; is that
right?
A.
Yes. It was uploaded through our portal.
Q.
Okay. Now, Exhibit 19-14 -- did -- what is this record?
A.
This is a 941 for the tax year of 2020, showing Employer's
Quarterly Federal Tax Return.
Q.
Were these submitted to PayPal more than once?
A.
They were, yes. They were initially submitted
February 11th, and then again submitted February 26th of 2021.
Q.
The same Form 941s; is that right?
A.
That's correct.
MS. JIMENEZ: For the submission of February 26th, if
we can go to the bottom of this document.
I'm sorry. The bottom of this whole composite.
Okay. Now scroll up.
BY MS. JIMENEZ:
Q.
These Form 941s that were --
MS. JIMENEZ: Okay. Stop.
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48
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Okay. Go up, so we get to the first page.
Okay. There we go.
BY MS. JIMENEZ:
Q.
The submission of the Form 941s on February 26th, 2021,
included -- did it include this document as well?
A.
Yes. These were all uploaded together.
Q.
All right. And what is the title of this document?
A.
This is a wages report for the period of January 1st, 2020,
through December 31st, 2020.
Q.
For what business?
A.
HM-UP Development Alafaya Trails, LLC.
Q.
And then does it have a column for gross wages paid?
A.
It does.
Q.
Does it have a column for withholdings?
A.
Yes.
Q.
Okay. Do you see the name Martin Beirne on this document?
A.
Yes.
Q.
Do you see the name Maria Del Pilar Ataca on this document?
A.
Yes.
Q.
Graff, C.?
A.
Yes.
Q.
Okay.
MS. JIMENEZ: All right. Let's go to Exhibit 19-15,
please.
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49
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
What was this submission with a date of March 2nd, 2021?
A.
This is an email submitted by the applicant to PayPal.
Q.
Okay. And so, in Item 1, it is now providing what -- the
first sentence.
A.
It's providing a detailed report for Q1 2019 versus Q1 2020
of gross receipts collected and the reduction of gross revenue
percentage and dollar amount between 2019 to 2020 for quarter
one.
Q.
All right. So now it's -- is it doing a quarter-to-quarter
comparison in 2019 to 2020?
A.
Yes, it is.
Q.
Okay. And it's also providing bank statements; is that
right?
A.
That's correct.
Q.
Okay.
MS. JIMENEZ: Go back out.
If we can go to Exhibit 19-16, please.
BY MS. JIMENEZ:
Q.
Did you receive this record as well?
A.
Yes, we did.
Q.
What is the title of this?
A.
"Florida Department of Revenue Employer's Quarterly
Report."
Q.
Does it indicate the business?
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50
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
What's the business?
A.
HM-UP Development Alafaya Trails Co., HM Management and
Development.
Q.
All right. And is it signed?
A.
Yes, it is.
Q.
It doesn't indicate a printed name, but it is signed
nonetheless with a phone number. Is that the phone number that
was provided in the application for Eric Sheppard?
A.
Yes, it is.
Q.
All right.
MS. JIMENEZ: Go back.
If you could just scroll down this document, please.
Okay. Stop here.
BY MS. JIMENEZ:
Q.
It lists employees with gross wages. Do you see that?
A.
Yes.
Q.
Okay. Okay. Including a Joseph Beirne. Do you see that?
A.
Yes.
Q.
Okay.
MS. JIMENEZ: If we can go down.
This page.
BY MS. JIMENEZ:
Q.
And then about two-thirds down, the list of names, do you
see a Jeffrey Graff?
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51
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes, I do.
Q.
Okay. And so this document is supposed to indicate their
gross wages paid and taxable wages. Do you see that?
A.
Yes. That's correct.
Q.
All right.
MS. JIMENEZ: Okay. Can we go to Exhibit 19-19 again,
"Activity History."
BY MS. JIMENEZ:
Q.
Okay. There's an email from March 5th --
MS. JIMENEZ: Hold on. Page 4. Page 4.
BY MS. JIMENEZ:
Q.
Now, let me ask you about this business. With the records
that were provided, the income tax return for tax year 2020
that you requested, the Form 941s that were supplied twice, was
that substantiation for the payroll of this business?
A.
It was.
Q.
Did it -- did those records indicate to you that the
business had that volume or was paying that amount of money to
its wage employees?
A.
Yes. They reflected wages paid.
Q.
Now, based on your experience at PayPal, and your
experience working on the Paycheck Protection Program for
PayPal, if the records submitted, instead of being 941s, were a
business's, say, 1099 for the contractors that it paid, would
that be sufficient to establish the payroll?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
A business cannot submit for the Paycheck Protection
Program loan based on wages paid to contractors, 1099ed
employees. Those 1099ed employees are eligible to file for
their own Paycheck Protection loan.
Q.
Well, are there those contractors -- are those payments to
those contractors wages, as far as you know?
A.
No, they are not.
Q.
And if the documents submitted -- those wage reports -- if
they had -- based on your experience, if they had instead
indicated that these are the payments that this business makes
to its contracted workers, its independent contractors, what
would happen with that application?
A.
We would not consider those as wages paid, and so the
application would have been declined.
Q.
Could you determine the loan amount for a business if it
submits to you a report indicating the payments that it made to
its contractors? Can you determine -- can you add those up and
determine the loan amount that they would be eligible for?
A.
No, we cannot.
Q.
What would -- okay.
Now, on March 6th, 2021, your Exhibit 19-19, Page 4,
what -- what did you communicate to Eric Sheppard at HM-UP
Development Alafaya Trails?
A.
This is an email sent regarding the Paycheck Protection
Program loan request. And it indicates that: "We regret to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
inform you that after careful consideration we were unable to
approve your request at this time for the following reason: We
do not do business with this industry type."
Q.
What does that mean?
A.
The SBA had requirements that only certain industries,
certain business types were eligible for the loan. And based
off of the code, the NAICS code, industry code submitted with
this application and on the tax form, this business was not
eligible for a loan.
Q.
And so this document -- or I'm sorry -- this application
was not DocuSigned; is that right?
A.
It was not.
Q.
Why was it not DocuSigned?
A.
Because the DocuSign is only sent after we have reviewed
the documents in full and conditionally approved the loan.
Q.
All right.
MS. JIMENEZ: Can we pull up exhibits 19-6 and 19-12
again, please.
Can you scroll up.
Okay. Here. Stop. The signature page, so go up.
No. The other way.
Here. Okay. And the same -- so it's Page 3 on the
document.
BY MS. JIMENEZ:
Q.
So these are the exhibits, 19-6 and 19-12, that we
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
previously looked at. And what did you indicate about these
documents?
A.
That they were hand-filled out by the applicant and
submitted to PayPal by the applicant through the portal. They
were not DocuSigned.
Q.
Are these the same 2483 Form that you would -- if you have
an approved loan, tentatively approved -- that you would
provide the applicant to DocuSign?
A.
Yes. It's the standard form provided by the SBA.
Q.
Do they contain the same certifications?
A.
They do.
MS. JIMENEZ: Can we zoom in on the last two
paragraphs before the signature.
BY MS. JIMENEZ:
Q.
The applicant indicated that they were certifying the
information provided in the documents submitted were true and
accurate in all material respects; is that right?
A.
Correct.
Q.
Did you -- in connection with this application that you
ultimately declined, did you rely -- were you relying on the
truthfulness and accuracy of the information provided and the
records supplied to you?
A.
Yes. We require -- we rely on the documentation provided
by the applicant to be true.
Q.
Did you conduct any independent investigation of this
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
business and whether or not it paid any wage employees to make
your determination about the loan?
A.
We did not. We rely on the certification of the applicant.
Q.
And in this particular case, it so happened that the
business industry indicated for the business did not qualify
for a Paycheck Protection Program loan; is that right?
A.
That's correct.
Q.
So did you have any information that any documents
submitted, such as the documents supporting wages, were false?
A.
We did not.
Q.
As for the 2020 loan application submitted by this business
that was funded, did you have any information to indicate to
PayPal that the figures submitted as wages paid to employees
were false?
A.
No, we did not.
Q.
Did you have any indication with respect to this 2021 loan
application that the tax returns submitted, the income tax
returns, were falsified and forged?
A.
No, we did not.
MS. JIMENEZ: One moment, Your Honor.
THE COURT: All right.
(Pause in proceedings.)
MS. JIMENEZ: Your Honor, I don't have any other
questions of the witness.
THE COURT: All right. Ladies and Gentlemen, let's go
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
ahead and take a 10-minute recess, please.
COURT SECURITY OFFICER: All rise for the jury.
(Jury not present, 10:19 a.m.)
THE COURT: We're on a 10-minute recess.
(Recess from 10:19 a.m. to 10:31 a.m.)
THE COURT: All right. Welcome back.
Both sides ready to continue?
MS. JIMENEZ: Yes, Your Honor.
MR. ETRA: Yes, Your Honor.
THE COURT: Can you see if our jurors are ready?
Thank you.
COURT SECURITY OFFICER: Remain standing for the jury.
(Before the Jury, 10:31 a.m.)
THE COURT: All right. Welcome back, Ladies and
Gentlemen.
Please be seated.
And we'll begin with the cross-examination.
MR. ETRA: May I proceed?
THE COURT: Yes. Of course.
CROSS-EXAMINATION
BY MR. ETRA:
Q.
Good morning, Ms. Hutcheson.
A.
Good morning.
Q.
We've never met, correct?
A.
No, we have not.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And you've never met my client, Mr. Sheppard, have you?
A.
I have not.
Q.
You've never spoken to him?
A.
I have not.
Q.
You've never seen how he runs his business?
A.
I have not.
Q.
You have no idea how his business is run?
A.
I do not.
Q.
You don't know who prepares forms?
A.
No.
Q.
You don't know who goes on the portal?
A.
No.
Q.
You don't know -- take a step back.
You have no personal knowledge about the PPP loans or
loan applications we've been talking about today; is that
correct?
A.
Not this particular loan, no.
Q.
The answer is correct?
A.
Correct.
Q.
You weren't involved in the loan applications and loan
you've been discussing on your direct, correct?
A.
I was not.
Q.
Okay. There were people at PayPal who were involved,
correct?
A.
Yes, they were.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
They're not here, though, are they?
A.
No.
Q.
Are they even at PayPal still?
A.
I don't know.
Q.
Did you investigate -- when you were contacted -- at some
point, PayPal was contacted by the Government, correct?
A.
Yes, we were.
Q.
And did you investigate, see who actually worked on this
loan?
A.
I see the names -- the number of different names of people
who worked on the loan.
Q.
I'm going to ask you to try to answer my question yes or
no, if you can. Okay?
A.
Okay.
Q.
The question is: Did you investigate who worked on the
loan?
A.
I personally did not.
Q.
Okay. Do you know of anyone else who did?
A.
I do not.
Q.
Do you know the decision-making process of the people who
worked on the loans?
A.
I know the guidelines which they followed.
Q.
Do you know that they followed the guidelines?
A.
(No verbal response.)
Q.
In other words, you know the guidelines they're supposed to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
follow, correct?
A.
Yes.
Q.
But you don't know the actual decision-making process of
the people involved in the loans, correct?
A.
No. Just what we see.
Q.
What you see. Well, let's talk what we see. You're
basically here to talk about general -- the policies and
procedures at PayPal during the relevant times, correct?
A.
Correct.
Q.
And you also reviewed some documents, correct?
A.
Yes.
Q.
And that is what you're basing your testimony on?
A.
Yes, it is.
Q.
And in fact, we don't have -- you didn't produce to the
Government a complete record of the loan applications in this
case, correct?
A.
We provided all documentation requested.
Q.
Did you provide the Government with all loan documentation
involving the loan applications in this case? I'd like to get
a yes or no answer if I can.
A.
Yes.
Q.
Are you sure about that?
A.
I can't answer that.
Q.
You don't really know if PayPal provided all of the
documentation about the loan applications in this case,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
correct?
A.
My understanding is we did.
Q.
Based on what?
A.
Based on the subpoena and the documentation that I've
reviewed.
Q.
So you reviewed the documentation and it looked complete?
A.
It did.
Q.
Okay. And did you find any documentation where people are
making contemporaneous decision-making, where there's notations
of the people involved, and why they are doing -- and what the
thought process is?
A.
Yes.
Q.
What are those?
A.
Some of the notes that we've seen are decisions made on the
loan applications.
Q.
If you -- in other words, you see the decision-making:
"Oh. This is why we need to do this," or "This is why we need
to do that"?
A.
Yes.
Q.
Well, when we get there, hopefully I'll remember to ask and
you'll remember to tell me. Okay?
A.
Okay.
Q.
And you testified at the very beginning of your testimony
that you were subpoenaed to appear here, correct?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Since you weren't involved in the loan applications, do you
know why you, of all people at PayPal, were subpoenaed to
appear here?
A.
Yes. I'm familiar with the Paycheck Protection Program
loan from its inception in 2020 through 2021 and am one of the
most educated and experienced people at PayPal.
Q.
Do you work with the legal department when there are
inquiries from the US Attorney's Office or other enforcement
agencies?
A.
Yes, I do.
Q.
Is that a big part of your job?
A.
Yes.
Q.
And so basically working with the prosecutors, like the
prosecutors here, is a big part of what you do?
A.
I don't want to say a big part. But yes, I did it quite
often in that time period.
Q.
Part of your responsibilities?
A.
Yes.
Q.
There are some documents in this case that are fraudulent.
Do you agree with that?
A.
I can't make a determination of fraudulency.
Q.
I thought you did when you were asked on direct -- that the
tax returns were fraudulent. Did you say that on direct?
A.
I said that they did not match.
Q.
Okay. Well, we certainly acknowledge there are fraudulent
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
documents in this case, like the tax returns and the 941s and
the 940s. My question for you is: Do you have any personal
knowledge about who created those documents?
A.
I do not.
Q.
Do you have any personal knowledge about whether
Mr. Sheppard created those documents?
A.
I do not.
Q.
Some of them have Mr. Sheppard's apparent signature on
them, correct?
A.
Correct.
Q.
Do you know whether he signed them?
A.
I can't verify his signature.
Q.
Do you know whether he signed them?
A.
It has a signature of Eric Sheppard.
Q.
Do you know whether he signed them?
MS. JIMENEZ: Asked and answered.
THE COURT: Overruled.
BY MR. ETRA:
Q.
Do you know whether he signed them?
A.
I do not.
Q.
Okay. Yet, on direct, several times -- I lost count -- in
your response to the questions you said that's -- Eric Sheppard
signed these documents. Didn't you do that?
A.
I said the name that was reflected on the documents.
Q.
Okay. And do you know whether it's Mr. Sheppard's practice
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
to sign those kinds of forms?
A.
I do not.
Q.
And do you know who at Mr. Sheppard's office would prepare
these kinds of forms, say, the -- I'm talking -- let me take a
step back.
I'm talking about the payroll reports, 941, 940, those
types of filings. Okay?
A.
No, I do not.
Q.
You do not. And do you not know whether he relies on the
payroll group or office managers to prepare those?
A.
I do not.
Q.
And do you know in particular who he was relying on in
COVID?
A.
No.
Q.
Did you ever hear of a fellow named Jeff Vasilas?
A.
No.
Q.
Do you know whether Jeff Vasilas prepared some of those
documents?
A.
I do not.
Q.
Did you conduct an investigation to determine any of the
answers to these questions I'm asking?
A.
No.
Q.
Is that because you're not in law enforcement?
A.
Correct.
Q.
So it's not your job to find those things out?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Okay. And do you know whether Jeanette Gonzalez had a role
in preparing some of this information?
MS. JIMENEZ: Objection.
THE COURT: Basis?
MS. JIMENEZ: No foundation.
THE COURT: If the witness knows. Overruled.
BY MR. ETRA:
Q.
Do you want me to ask again?
A.
Please.
Q.
Have you heard the -- do you know if someone named Jeanette
Gonzalez had a role in preparing some of this information?
A.
I do not know.
Q.
Do you know to -- the extent to which Mr. Sheppard relied
on Ms. Gonzalez for information about payroll and other types
of back-office functions?
MS. JIMENEZ: Objection, Your Honor. The witness has
already said she doesn't know anything about this gentleman's
business -- the Defendant's business.
THE COURT: And the witness is free to respond in that
manner. Overruled.
THE WITNESS: No, I do not.
BY MR. ETRA:
Q.
Okay. Several times you've talked about Mr. Sheppard --
when the prosecutor asked you about documents being submitted,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
and I think you said it was Mr. Sheppard. So I'm going to ask
you: Do you have any personal knowledge that Mr. Sheppard
submitted any of the documents in this case?
A.
When the application was submitted, and it asked for the
person's name and -- it was indicated as Eric Sheppard.
Q.
Okay. Let's start with that. When you say: "The
application was submitted" -- "the application" could mean a
lot of different things with all the papers here -- what are
you referring to specifically?
A.
The initial application on the PayPal portal.
Q.
Okay. On the portal?
A.
Yes.
Q.
Do you know whether Eric Sheppard actually opened up the
portal and put the information in or someone else did it on his
behalf? Do you know?
A.
I wouldn't have a way of knowing that.
Q.
Right. And with respect to the rest of the information and
documents, you don't know what Mr. Sheppard's role was and what
he knew about them, correct?
A.
Correct.
Q.
Now, I want to kind of take it from the beginning, and
we'll go through this. Have you heard the term "loan service
provider"?
A.
Yes.
Q.
Or LSP?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
Is it fair to say that PayPal was a loan service provider
in the PPP program? Right?
A.
Yes. That's correct.
Q.
And it worked exclusively with the bank WebBank, right?
A.
That's correct.
Q.
So WebBank was the bank that the SBA allowed to issue PPP
funds, correct?
A.
Yes.
Q.
And the bank was allowed to work with loan service
providers, like PayPal, to do the work needed to get the
process approved?
A.
That's correct.
Q.
Okay. Great.
And in reality, PayPal did pretty much all the work
here, right?
A.
Yes. We reviewed the applications in full.
Q.
You did the whole thing. So basically, the bank -- WebBank
just issued the loans and collected the fee?
A.
Correct.
Q.
And as a result of collecting the fee, how did PayPal get
paid?
A.
We were paid by WebBank.
Q.
And what percentage of the fee that WebBank got did PayPal
get?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I don't know.
Q.
So you don't know how much money PayPal made from the PPP
program?
A.
I do not.
Q.
Okay. Have you heard of the term "referral agent" in the
context of the PPP program?
A.
I have.
Q.
And what is a referral agent in the context of the PPP
program?
A.
My understanding is that they refer people to banks or loan
providers.
Q.
Who was the -- was there a referral agent in this case?
A.
Not that I'm aware of.
Q.
Okay. So how is it -- what was the first -- let me take a
step back.
You used the term "applicant" several times in your
testimony, correct?
A.
Correct.
Q.
Could we agree the applicant is HM-UP, the borrower -- the
company that applied for the loan?
A.
The applicant is the individual representing the business.
Q.
The applicant is the individual representing the business?
So who applied -- okay. Okay. Who was the borrower in the
HM-UP PPP loan?
A.
The business is the borrower, but an individual has to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
apply on behalf of the business.
Q.
I understand. The borrower is HM-UP, correct?
A.
Correct.
Q.
And so the borrower is the entity that's applying for the
loan, correct?
A.
Yes.
Q.
So the borrower is the applicant on the loan; is that
correct?
A.
Yes.
Q.
Okay. So we could agree that the applicant on these loans
was HM-UP, correct?
A.
Yes. There was a personal applicant and a business
applicant.
Q.
Okay. So you're not agreeing with me that HM-UP was the
applicant?
A.
HM-UP is the business, yes.
Q.
Okay. All right. Mr. Sheppard was not the applicant,
correct?
A.
Yes. The applicant is an individual. A business can't
fill out the documentation. An individual has to apply.
Q.
And you don't know Mr. Sheppard's involvement in applying
for the loan, correct?
A.
The person who submitted the documentation indicated they
were Eric Sheppard.
Q.
Okay. But you don't know his involvement?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I do not.
Q.
Okay. So can we agree to use the term "applicant" for the
company or are we going to have to, every time you use "the
applicant," figure out if you're talking about the company or
Eric Sheppard?
MS. JIMENEZ: Objection. She's answered the question.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Generally speaking, how did HM-UP first come into contact
with PayPal?
A.
They went to PayPal's website and submitted the initial
application.
Q.
How did HM-UP -- do you know whether PayPal actually did
marketing to get HM-UP to go to the website?
A.
I do not know.
Q.
Do you know that PayPal is fairly aggressive -- well, I
should take that back. Do you know that PayPal sends a lot of
emails out to try to gin up business, right?
A.
Sure. We're a business. We solicit business.
Q.
I've received one every two weeks since I've been on this
case. That sounds right?
MS. JIMENEZ: Objection.
THE COURT: And the basis? Is there a legal basis?
MS. JIMENEZ: Yes. Irrelevant -- his own personal
experience with PayPal.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Sustained.
BY MR. ETRA:
Q.
But you're familiar with the fact that PayPal -- and
they're allowed to -- will send out emails to solicit business,
correct?
A.
Yes.
Q.
And did they do that in the PPP program?
A.
Yes.
Q.
And what did those emails say?
A.
I don't recall exactly. It's that we are offering the
Paycheck Protection loan.
Q.
You don't know what the email said about the nature of the
program, correct?
A.
Not in detail. It was three years ago. I don't recall.
Q.
So -- okay. So when I asked you about what the email said,
you're now saying it's three years ago, you don't recall,
correct?
A.
Yeah. I can't recall exactly what they said.
Q.
Okay. And you didn't look into that before you came today?
A.
No.
Q.
And do you know whether PayPal does pop-up ads? Pop-ups
when you're on -- let's say you're making a payment on PayPal.
Do you know whether they do pop-ups?
A.
We do. I don't recall doing that for the Paycheck
Protection loan.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Do you know whether they did that or not? Do you know for
a fact?
A.
No, we did not.
Q.
You sure?
A.
Yes.
Q.
Okay. So you don't know whether Mr. Sheppard -- excuse me.
You don't know whether Mr. Sheppard or someone from HM-UP went
on the portal on their own or was first solicited by an email?
You don't know?
A.
I don't.
Q.
Okay. And PayPal basically handles everything. Once a
person goes on the portal, PayPal handles everything else,
right? Let me strike that. Start again.
Once the person hits the portal, PayPal is basically
doing all of the requests for documents, requests for
information, and that whole process for WebBank, right?
A.
Yes. That's correct.
Q.
Okay. And after WebBank issues the loan, does PayPal
remain -- do they get the loan back?
A.
PayPal remains the service provider.
Q.
So what are the different ways that PayPal makes money on
the PPP loan?
A.
Based off of the interest accrued on the loan.
Q.
So they do all the work to get the loan ready, right?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And they get a fee for that, right?
A.
I can't speak to the fee agreement between PayPal and
WebBank.
Q.
But you know there's one?
A.
Yes.
Q.
Then when WebBank issues the loan, PayPal still stays
involved to make more money on the back end, correct?
A.
I can't speak to how we make money. I don't know the
different points or how that's calculated.
Q.
But you do know that PayPal does earn money on the interest
payments, correct?
A.
We have an agreement with WebBank based on fees.
Q.
Okay. And do you know how many loans -- when WebBank
issued a PPP loan, it means it went through you -- PayPal,
correct?
MS. JIMENEZ: What was the question?
THE WITNESS: PayPal was one of the service providers
for WebBank. They had other --
BY MR. ETRA:
Q.
I apologize. Were you finished with your answer?
A.
Yeah. Go ahead.
Q.
Was PayPal the only service provider for WebBank?
A.
No, we were not.
Q.
I see. How many loans did PayPal work on during the PPP
program?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Objection. Relevance.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Okay. How many loans per day did PayPal work on in the
program?
MS. JIMENEZ: Objection.
THE COURT: Basis?
MS. JIMENEZ: Relevance.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Okay. How much time did PayPal spend on each loan?
MS. JIMENEZ: Objection. Relevance.
THE COURT: Sustained.
BY MR. ETRA:
Q.
I think you said that you're supposed to take all the
representations as true from the applicant, correct?
A.
Correct.
Q.
And I'm using the term "applicant" as the borrower. Okay?
Do you understand that?
A.
Yes.
Q.
Okay. And is it true that you're supposed to scrutinize
the information provided by the applicant?
A.
Define "scrutinize."
Q.
Well, it's the only word I have from a witness earlier than
yours. Would you describe the obligation of the bank or the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
LSP to scrutinize the information from the borrower?
A.
No.
Q.
Okay. And PayPal did not scrutinize the information from
the borrowers, correct?
A.
No.
Q.
You just accepted them all as true, correct?
A.
Correct.
Q.
But it's different certainly for the payroll calculation,
correct?
A.
We would verify the payroll calculation.
Q.
You're required to verify the payroll calculation?
A.
Yes.
Q.
You're required to take the information provided by the
borrower and make sure it adds up and makes sense, that it fits
with the payroll disclosure by the borrower, correct?
A.
Correct.
Q.
Okay. Good.
Certainly, if there's information that you have, or a
representation or disclosure from the borrower, you're not
supposed to ignore it, correct?
A.
Correct.
Q.
And if the information is inconsistent, you don't just
ignore the inconsistency, correct?
A.
Correct. If we see an inconsistency.
Q.
Okay. Great.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: All right. Let's go to the portal. I have
it as L-50, Chris.
(Pause in proceedings.)
MS. JIMENEZ: What document is this?
THE COURT: What exhibit number is this?
MR. ETRA: Your Honor, it's our L-50. It matches --
first of all, we have a different numbering system.
THE COURT: So it's not evidence. So just the
witness, please.
MS. MARTINEZ: It may be a Government exhibit --
MR. ETRA: It's okay with me, if it's okay with the
Court.
THE COURT: Ms. Jimenez, do you want to look at L-50
and see if that matches with an exhibit already in evidence?
And to save time, Mr. Etra, do you know, sir?
MR. ETRA: I believe it is.
THE COURT: Which exhibit number?
MR. ETRA: That's the problem. We don't have it. I
don't know.
MS. JIMENEZ: No objection, Your Honor.
THE COURT: All right. Then L-50 admitted into
evidence.
MR. ETRA: Thank you.
(Defendant's Exhibit L-50 received into evidence.)
THE COURT: You may show the jury, please.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Thank you.
BY MR. ETRA:
Q.
Ms. Hutcheson, do you recognize L-50?
A.
Yes.
Q.
What is it?
A.
It is a screenshot of the application that's done online.
Q.
Now -- so this is the portal that was set up by PayPal, and
this is the first page you see when you click in the website,
right?
A.
Correct.
Q.
Okay. And it was entirely PayPal's decision about what
information to put here, correct?
A.
We had information required by the SBA that would be
required on their forms. So we have to collect that
information.
Q.
Fair. But you could have provided other information as
well to make sure that the -- make sure that you're getting
what you need from the applicant, correct?
A.
Yes.
Q.
Okay. I'm going to show you --
MR. ETRA: If I can go back to the ELMO for a moment.
BY MR. ETRA:
Q.
-- Exhibit O-1 in evidence. I'm focusing on the letter H.
Are you able to see that?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
This is from the Federal Regulations. And here it says:
"Question" -- this is from the regulations by the SBA:
"Question: Do independent contractors count as employees for
purposes of PPP loan calculations?"
"Answer: No. Independent contractors have the
ability to apply for a PPP loan on their own, so they do not
count for purposes of a borrower's PPP loan calculation."
You see that?
A.
Yes.
Q.
And you know that's consistent with your knowledge of how
the program works, correct?
A.
Yes.
Q.
You did not put that information anywhere on the portal,
correct?
A.
No. We referred to the regulations.
Q.
So those words, or words like that, that specifically say:
"Don't include an independent contractor as an employee or as
payroll," that is not in the portal, correct?
A.
It is not.
Q.
Okay.
MR. ETRA: And let's go back to the -- if we can, to
the non-ELMO system.
No. I want to use the -- all right.
BY MR. ETRA:
Q.
So the first line you see when you go into the portal is
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the term "Eligibility Information," correct?
A.
Correct.
Q.
And it's got: "Put your name," some basic information
down, right?
A.
Yes.
Q.
And it asks a few very simple questions, right?
COURTROOM DEPUTY: I'm sorry. Counsel, is this for
everybody -- to publish?
MR. ETRA: Yes. I apologize, Your Honor. Yes.
THE COURT: It should be on the jurors' screens, L-50.
Thank you.
BY MR. ETRA:
Q.
Let me start again, Ms. Hutcheson. You -- basically, it's
some basic information. You put the business name, and the
individual, and the email address, right?
A.
Correct.
Q.
And then it asks simple questions like whether the -- let's
look at the first question. "Is the applicant or an owner of
the applicant suspended, debarred, or otherwise precluded from
working with an agency," right?
A.
Correct.
Q.
Now, there, how is the word -- isn't the word "applicant"
being used to refer to the business?
A.
It could be the business or the owner.
Q.
Right. Right. It says: "Applicant or the owner of the
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
applicant." Do you see that?
A.
Right.
Q.
Okay. So that means the applicant isn't a person because
no one owns another person. The applicant is the company,
right?
A.
Yes.
Q.
Okay. Great. And if we could just run through the other
questions briefly.
MR. ETRA: If we can just go down and maybe see the
whole page.
BY MR. ETRA:
Q.
Without getting into all the wording, the next question
asks about whether the applicant or owner has prior loan
history with the SBA, right?
A.
Correct.
Q.
And then without --
MR. ETRA: Just keep it like this.
BY MR. ETRA:
Q.
And then it talks about criminal history after that, right?
A.
Yes.
Q.
And then, after that, it asks if the owner or the applicant
was approved for another loan, right?
A.
Right.
Q.
And then you press "continue" and it goes to the next page.
MR. ETRA: Let's go to the next page.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
And at the very top, do you see like a -- I don't know how
you describe that bar. Is that a term in the industry?
A.
It's like a progress bar.
Q.
Progress bar. It basically said: "Okay. You've already
entered the eligibility information." Do you see that?
A.
Yes.
Q.
So PayPal set this up where someone who jumps on the screen
and answers those questions is basically being told: "You're
eligible." Do you see that?
A.
Those are the initial prequalifications per the SBA.
Q.
Oh. And does the website -- does the portal say: "These
are the initial prequalifications"?
A.
It's initial eligibility information.
Q.
You want to go back and look? Let's go back to the first
page, whether it says "initial eligibility." Let's go back.
Tell me where it says "initial eligibility."
A.
It says: "Enter eligibility information."
Q.
Right. Does it say this is only initial eligibility? Yes
or no, if you can.
A.
No.
Q.
Okay. PayPal ever concerned that this was misleading
borrowers the way it set up the portal? Any concern at PayPal
over that?
A.
No.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay.
MR. ETRA: Next page.
BY MR. ETRA:
Q.
Says: "Business Entity Type," and this is -- there's a --
what's the term -- draw-down?
A.
Drop-down.
Q.
Drop-down. And as you acknowledged, there were no
instructions about whether to use a tax return or not, right?
A.
On this version in 2020 there was not.
Q.
Right. And the information put on was the code for
construction; is that right?
A.
Correct.
Q.
Okay. And you have no information to suggest that that was
an inaccurate description, correct?
A.
I do not.
Q.
Okay. Let's go to the trade name or d/b/a.
Do you recall when you were first asked this question
by the prosecutor about what the d/b/a is, and you said it
could be another name for the company or another company that's
connected to it?
A.
Yes.
Q.
Okay. So even your answer in that question you acknowledge
that someone who is limited to what's in these boxes might put
the name of another actual company for the d/b/a, right?
A.
They could.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And in fact, the applicant put down HM Management and
Development, correct?
A.
Yes.
Q.
Was that an indication perhaps that HM-UP had an affiliate?
MS. JIMENEZ: I'm sorry. What was the question?
BY MR. ETRA:
Q.
Was that an indication that HM-UP had an affiliate, HM
Management?
A.
It's simply an indication that they are doing business as
that name.
Q.
Right. Which could be a connected business, right?
A.
Could be.
Q.
All right. And then it says: "Number of Employees." Do
you see that?
A.
Yes.
Q.
You testified on direct that that meant W-2 or wage
earners, right?
A.
Yes.
Q.
Doesn't say that on the portal, does it?
A.
It asks for number of employees.
Q.
Okay. Those are the only words available to the applicant,
correct?
A.
Correct.
Q.
You didn't say -- PayPal didn't put down: "Only put W-2
employees," or something like that, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No. It's not specified.
Q.
Okay. And when you testified that it means W-2, that's
based on your own knowledge of how the program works, right?
A.
It's based on the SBA guidelines.
Q.
Right. Your knowledge of that, right?
A.
Based on the published guidelines by the SBA, yes.
Q.
Okay. Did you spend time studying the published guidelines
of the SBA?
A.
I did.
Q.
That's part of your job, right?
A.
Yes.
Q.
You said you were one of the most knowledgable people -- I
think you said you're one of the most knowledgeable people at
PayPal on SBA, on these guidelines, right?
MS. JIMENEZ: Objection.
MR. ETRA: I'll ask it differently.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Are you one of the most knowledgable people at PayPal of
how the program runs?
A.
Yes.
Q.
Do you expect everyone else to have as much knowledge as
you do?
MS. JIMENEZ: Objection. It's argumentative.
THE COURT: Sustained.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
"Average Monthly Payroll." Do you see that?
A.
Yes.
Q.
Again, I think your testimony was this is only for W-2.
But it doesn't actually say that, right?
A.
No.
Q.
So there's nothing in this portal telling the applicant
this is only about W-2 right here, correct?
A.
Correct.
MR. ETRA: Let's go to the next page.
BY MR. ETRA:
Q.
See where it says: "What percent of the business do you
own?" Do you see that toward the bottom?
A.
Yes.
Q.
So if HM-UP is owned by a company -- do you know that
sometimes some companies are owned by other companies?
A.
Yes.
Q.
Okay. There's no place to make that clear here because
you're asking the person to put down how much that person owns
in the applicant company, correct?
A.
Correct. This is based off of personal information.
Q.
Okay.
MR. ETRA: Let's go to the 2411.
BY MR. ETRA:
Q.
This is loan details. This is the different usage you can
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
make of the funds, correct?
A.
Correct.
Q.
Do you know whether the applicant checked these off or not?
A.
Yes, they did.
Q.
Okay. So that would show up in the application data form?
A.
Yes.
Q.
We'll hold that thought, and we'll get back and we'll see
when we get there.
MR. ETRA: Let's go to the last page, the
certifications. Maybe that's not the last page then. 2413.
BY MR. ETRA:
Q.
You spent some time -- the prosecutor spent some time
asking you questions about these certifications, right?
A.
Not on this page.
Q.
Okay. Well, when you get to this page, right -- at some
point, if you answer the questions, you get to this page,
correct?
A.
(No verbal response.)
Q.
And there's a list of certifications?
A.
Yes.
Q.
Okay. And the prosecutor asked: "When you click on the
bottom, what are you acknowledging?" Do you recall that?
A.
Yes.
Q.
And you said when you click on the bottom you're
acknowledging that you read or are certifying the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
certifications, correct?
A.
Correct.
Q.
It's actually not what it says on the box; am I correct?
A.
This was the agreeing to receive legal disclosures
electronically and giving us permission to pull their personal
and business information.
Q.
When you testified that the clicking on the bottom is a
certification that you're agreeing to the certifications here,
that's false?
MS. JIMENEZ: Objection. Misstates the testimony.
THE COURT: Overruled.
THE WITNESS: Above it has: "I certify that." And by
clicking "submit," you're making that certification.
BY MR. ETRA:
Q.
I'd like you to try to answer any question yes or no and
then explain if you need to. Am I correct that when the person
clicks on these forms they're not being asked to acknowledge
the certifications above it or indicate that they've read it or
agree with it? Am I correct?
A.
You are correct. I'd like to explain that it has the
certifications above.
Q.
Right. Right. And let's look at the first certification.
Do you see that?
A.
Yes.
Q.
"I certify that the statements included in this form,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
including the statements required by law and executive orders,
and I understand them." Do you see that?
A.
Yes.
Q.
So what this says is -- and this comes directly out of the
2483, right?
A.
I believe so.
Q.
Okay. But here, the form that you're referring to is the
information in the portal, correct?
A.
Correct.
Q.
Okay. Not necessarily -- the person looking at this
doesn't get -- is not looking at the 2483 application, correct?
A.
Not at this time.
Q.
Right. And then it says: "I read the statements included
in this form, including the statements required by law and
executive orders, and I understand them."
Do you see that?
A.
Yes.
Q.
Don't you think this suggests -- does PayPal recognize --
let me do that differently.
Doesn't this indicate to the applicant that if they
agree with everything they've done so far they can certify
this?
A.
Yes.
Q.
Okay. And you have no information that -- even with the
benefit of today, that the person submitting this
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
information -- strike that.
Now let's go to the original lead information. And
you see the name Eric Sheppard and the phone number that ends
5529, correct?
A.
Correct.
Q.
And you see an email address of ericsheppard10@gmail,
correct?
A.
Yes.
Q.
And there's an IP address at the bottom, correct?
A.
Yes.
Q.
This indicates that -- I think you testified -- that the
portal was being filled out at this IP address, correct?
A.
Yes.
Q.
And you understand an IP address gives a location, correct?
A.
Correct.
Q.
You don't know who was sitting at that location filling out
the information, correct?
A.
No, I wouldn't.
Q.
You don't know?
A.
No.
Q.
Okay. And do you know whether that location was a home or
an office?
A.
I do not.
Q.
Do you know whether it was a home office?
A.
I do not.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Some of these forms confuse me a little bit, and let me
show you why I say that. Maybe you can clarify this for me.
Do you see where on the right-hand side it says:
"Bankruptcy was combined as personal and business" and they
answer no?
A.
Yes.
Q.
That wasn't in the portal, was it?
A.
No, because they didn't indicate that they had a
bankruptcy.
Q.
Okay. Okay. And the number of employees, 80. Do you see
that?
A.
Yes.
Q.
And again, that's there based on the information that's in
the portal that we looked at about the word "employee,"
correct?
A.
Correct.
Q.
Which doesn't specify W-2, correct?
A.
Correct.
Q.
Now, when the person fills this out, you know -- you know
that the payroll data that you're going to rely upon -- this is
now April of 2020, correct?
A.
Yes.
Q.
April 15, I think you testified?
A.
Yes.
Q.
So you know that in April 2020, at the beginning of the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
program, the payroll data was probably going to be from 2019,
right?
A.
It was employees at the present time.
Q.
Right. But the payroll -- okay. Let me ask that question.
Remember we saw the word "Portal" set at "Employees," correct?
A.
Yes.
Q.
Did it say: "At the present time"?
A.
It did not.
Q.
Did it say: "Employees over the period of time when you'll
be using the loan"?
A.
It did not.
Q.
Did it say: "Employees that you had before COVID"?
A.
No.
Q.
It was not clear as to the time period, right?
A.
No.
Q.
You agree with me?
A.
Correct. But if I can explain, again, we relied on the
applicant to refer to the SBA guidelines.
Q.
Okay. So do you say in the portal, when you're asking this
information each time: "Please rely on the SBA guidelines and
check this out"? Do you say that?
A.
We do not each time, but it is part of those
certifications.
Q.
Okay. And the reason you don't say it is it would slow
people down and you may not get as many applications, correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No. That's not correct.
Q.
So why not say that? Why not say: "For employees, this is
W-2," or "Here's a link to the application," or the regulation
I showed you? Why not do that?
A.
It would be extremely long and confusing to refer to the
guidelines for each individual item.
Q.
Right. This is a lot simpler, right?
A.
Yes.
Q.
All right. We can go back to the portal, if we need to,
but let me ask you: The portal doesn't ask what year's payroll
you're going to rely upon, correct?
A.
It does not.
Q.
So when the person here wrote: "80," that person wasn't
yet informed, you know, they might be asked about payroll from
the previous year, correct?
A.
No.
Q.
You're agreeing with me?
A.
Correct.
Q.
Okay. All right.
MR. ETRA: Let's go to the application data form.
BY MR. ETRA:
Q.
Is this information also populated from the portal?
A.
Yes, it is.
Q.
Okay. So you see the HM Management is the d/b/a, right?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And you see the date of April 15th, 2020?
A.
Yes.
Q.
Where does it show the purpose -- the use of the funds that
was asked in the portal?
A.
It's not on this page.
Q.
Is it on the original lead information?
MS. JIMENEZ: Your Honor, with respect to this
document, C-5 and L-51, which was the prior document, neither
one -- now, this one has not even been identified. The
previous one and this one, they're not in evidence. We had a
long discussion about them. I don't object to their
admissibility. But for the record, these things --
THE COURT: Are you seeking to introduce it into
evidence?
MR. ETRA: I am, Your Honor.
THE COURT: Without objection, admitted into evidence.
(Defendant's Exhibits C-5 and L-51 received into
evidence.)
BY MR. ETRA:
Q.
The information here on C-5 -- sorry. I was asking you
about -- when we looked at the portal, it asked: "How are you
going to use the funds," correct?
A.
Yes.
Q.
And we didn't see that in the original lead information,
did we?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No.
Q.
And we don't see that in the application data, correct?
A.
Correct.
Q.
So where does that show up?
A.
It's another screen within our Salesforce system.
Q.
Did you provide that to us?
A.
I don't recall.
Q.
Okay. What other information that's put in the portal is
not in the application data screen page or the lead -- original
lead information page?
A.
I'm not aware of anything.
Q.
Okay. How do you know that the applicant put in the
information for the uses of the funds?
A.
It's a required fill.
Q.
You wouldn't be able to get past it?
A.
Right.
Q.
Okay.
MR. ETRA: Let's go to the -- the document on building
the loan -- yeah, the loan calculation. Putting up
Government's Exhibit 17-3.
BY MR. ETRA:
Q.
So after you go to the portal, you end up on this page,
correct?
A.
Yes.
Q.
Okay. So again, I want to put ourselves in the mind of the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
person at the portal. They answer the questions and they're
put here, right?
A.
Correct.
Q.
Okay. And in this case, the person checked -- well, it
says: "To get started with your calculations, select a time
frame for the data you'll be providing which is best applicable
to your business," right?
A.
Correct.
Q.
And the person checked the first one?
A.
Yes.
Q.
Which is -- which is the period of 2019, right?
A.
Yes.
Q.
Okay. So it's only at this point, after they've entered
the information, like number of employees, that they see that
the payroll period is going to be 2019, right?
A.
Correct.
Q.
And then let's look at the information under Payroll Costs.
Item A, "Total Gross Salaries, Wages Commissions," do you see
that?
A.
Yes.
Q.
Just focusing on those words, does it say there: "Don't
include independent contractors"?
A.
It does not directly, no.
Q.
Okay. And does it actually have not just the term wages --
sorry. Do you have a fixed idea of the word "wages," that it
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
only means W-2?
A.
(No verbal response.)
Q.
Let me rephrase that.
The terms here of salaries, wages, and commissions
could apply equally to an independent contractor, correct?
A.
It could, but I would refer to the notes.
Q.
You would refer to the notes. When you say: "Refer to the
notes," what notes are they?
A.
On the right side.
Q.
So you would refer to the notes. And if you didn't refer
to the notes you wouldn't see it right here, correct?
A.
No.
Q.
Okay. Now let's refer to the notes. "Provide on a gross
basis without regard to federal taxes imposed or withheld." Do
you see that?
A.
Yes.
Q.
Do you agree that federal taxes are imposed or withheld on
W-2 workers? Right?
A.
Yes.
Q.
Or 1099ed workers, right?
A.
1099ed workers pay their own federal taxes.
Q.
Okay. Does it say that you consider only W-2 workers in
this sentence?
A.
No.
Q.
Okay. It says: "Gross basis without regard to," say,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
withholding, right?
A.
Yes.
Q.
That's not -- that doesn't eliminate independent
contractors; am I correct?
A.
That sentence does not.
Q.
Okay.
A.
The next sentence explains.
Q.
The next sentence does that?
A.
Yes. It refers to independent contractors.
Q.
It says: "For sole proprietors, self-employed, and
independent contractors, this can include earnings from
self-employment." Do you see that?
A.
Yes.
Q.
And that's referring to the type of entity the borrower is,
correct?
A.
Yes.
Q.
Okay. And I think you said -- or we'll see -- that this
borrower is not considered a sole proprietor, or self-employed,
or an independent contractor, correct?
A.
Correct.
Q.
It is an LLC, right?
A.
Yes.
Q.
So that sentence doesn't apply to the LLC that's a
borrower, correct?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. So the first sentence doesn't say you don't include
independent contractors, and the second sentence doesn't tell
the LLC owner not to include independent contractors; am I
correct?
A.
Yes. But I'd like to explain.
Q.
Why don't you?
A.
Because it calls out independent contractors, and that
would indicate that independent contractors would file on their
own. Additionally, there is a linkup above to refer to the
SBA's site for detailed information on appropriate calculation
of payroll costs.
Q.
Let's start with the first sentence. The second -- first
thing you said. Sorry. The second sentence, as you suggest,
indicates that an independent contractor can apply on its own,
correct?
A.
Yes.
Q.
But it doesn't tell the LLC that it can't include
independent contractors it pays, correct?
A.
No.
Q.
I'm incorrect?
A.
It doesn't directly say that. You're correct.
Q.
I get confused sometimes when you answer my questions. Not
a problem.
Okay. So if we look at the actual words that the
applicant is reading -- and we've got the whole section here
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
highlighted -- not one part of it tells the LLC owner not to
include independent contractors? Yes or no?
A.
Yes.
Q.
Thank you.
All right. Going down -- and then going down to the
calculation, you've described how this becomes the average
monthly payroll, correct?
A.
Yes.
Q.
Okay.
MR. ETRA: Let's go to the next page -- is it the next
page that does the bank records?
BY MR. ETRA:
Q.
Okay. Which page -- how would you describe this part of
the portal?
A.
It's from that calculator. It's the second tab, which
would show what documentation could be supplied.
(Pause in proceedings.)
MR. ETRA: This is the -- our version. It's not in
evidence. We will soon get the one in evidence. So let's keep
this on the --
MR. CAVALLO: Jonathan, this is in evidence.
MR. ETRA: Oh. This is --
THE COURT: All right. It's in evidence as 17-3?
MS. JIMENEZ: Just for the record, 17-3 has two
separate tabs. This is Part 2 of 17-3. So yes, no objection.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: All right. Then let's continue.
BY MR. ETRA:
Q.
So this is the next part of the portal flow, correct?
A.
Correct.
Q.
Okay. And it's basically telling you -- well, let's look
at the top. "Instructions. Please indicate the type of
documents you are providing to support each category of payroll
costs," correct?
A.
Yes.
Q.
And that's because you don't just get to say what the
payroll is. You have to substantiate it, correct?
A.
Yes.
Q.
And let's focus on the different options here. The
different options are at the top; if you haven't filed your
2019 tax returns or if you have, correct?
A.
Yes.
Q.
Okay. And in this case -- unfortunately, we're not seeing
it -- do you recall that the bank statements part was checked?
A.
Yes.
Q.
Okay. And it's just not on this version, right?
A.
Correct.
Q.
Okay. So now that we've acknowledged that, clearly the
applicant checks off "bank statements," right?
A.
Yes. Further down.
Q.
Right. And by doing that, he's indicating he hasn't filed
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
his 2019 tax returns.
Okay. Now we have a different document up.
MR. ETRA: Okay. Which exhibit is this?
MR. CAVALLO: It's 17-3. There's just two versions.
BY MR. ETRA:
Q.
All right. 17-3. Okay. Do you recognize that?
A.
Yes.
Q.
Okay. All right. Very good. So if I could just -- no. I
want to read the -- okay. So: "Other Information." I want to
look at the choices here. "Bank statements, receipts, other
verifiable docs." Do you see that?
A.
Yes.
Q.
Okay. So if you're an applicant, if you haven't filed your
returns, you have a choice of doing, on the left, Payroll
Processing Data or, on the right, Other Information, right?
A.
Correct.
Q.
And none of those choices say to the LLC owner -- none
of these -- excuse me. None of those choices would apply
exclusively to W-2 workers, correct?
A.
Correct.
Q.
Right. If you write checks to your independent contractor,
you could select "bank statements," correct?
A.
You could, but that would be inaccurate based on the
referral to the SBA site.
Q.
But there's nothing here in these choices that tell the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
applicants: "Oh, my God. This is only for W-2 workers,"
right?
A.
Correct.
Q.
That's because bank statements -- you could use a bank
account to pay independent contractors or W-2 employees,
correct?
A.
Correct.
Q.
And the choice -- and the item clicked were "Bank
Statements and Other Verifiable Docs," correct?
A.
Yes.
Q.
And in fact, the applicant provided bank statements to
substantiate payroll, correct?
A.
Yes.
Q.
Okay. And you're not saying there's anything wrong with
those bank statements, are you?
A.
No.
Q.
Okay. So the applicant was openly disclosing actual bank
statements to show who he paid and how he paid them, correct?
A.
Correct.
Q.
And you don't see -- okay. And that information would
probably help you figure out if there was a W-2 or a 1099,
right?
A.
A bank statement doesn't clarify if it's a W-2 or 1099.
Q.
Oh, okay. It just shows checks.
A.
(No verbal response.)
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Miami, Florida 33128
(305) 523-5698
Q.
But you wouldn't see checks necessarily to the IRS?
A.
You could.
Q.
But not necessarily?
A.
Not necessarily.
Q.
Okay.
MR. ETRA: Let's look at those bank statements.
Let's start with -- I have 17-5.
BY MR. ETRA:
Q.
Okay. Exhibit 17-5 is on the screen. Do you recognize
that?
A.
Yes.
Q.
And I think you testified these are some of the bank
records that were provided by the applicant, correct?
A.
Correct.
Q.
Okay. I want to separate the portal information that we
went over from the rest of the information because we've now
finished what happens when the person's on the portal at the
beginning, correct?
A.
Yes.
Q.
And you have an IP address for all that information,
correct?
A.
Yes.
Q.
Including the document we just went over, right?
A.
Correct.
Q.
Do you have any information as to who sent in these bank
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
records?
A.
The same person who filled out that information would have
had to log into the portal using the email address and
password.
Q.
Okay. So to get to the portal you have to use the email
address and password, right?
A.
Correct.
Q.
Okay. Do you know who had access to the email address and
password?
A.
No.
Q.
Okay. Do you know who submitted these bank records?
A.
I do not.
Q.
Okay. Do you even know what IP address -- from what IP
address the bank records were submitted?
A.
I do not.
Q.
Okay. And it's just not information that PayPal kept?
A.
Correct.
Q.
All right. So the first bank account is CJUF Flagler, LLC.
Do you see that?
A.
Yes.
Q.
For SunTrust.
Now, you'll agree with me that CJUF Flagler, LLC is
not the same thing as HM-UP, correct?
A.
Correct.
Q.
Okay. So here, the -- whoever sent this is disclosing
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Miami, Florida 33128
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affiliates, correct?
A.
Presumably.
Q.
Presumably. Well, you talk about how PayPal interprets
materials. Help me here. Does PayPal understand that when
it's getting payroll information, and it gets a bank account
from a different company, that that's an affiliate?
A.
I don't know whether this document was considered for that.
Q.
Why is it that in some cases you know how the documents
were considered and other cases you don't?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained.
This might be a time -- Mr. Etra, I do have a matter
at 11:30.
So Ladies and Gentlemen, as I did advise, we're going
to take an extended lunch break, and I'll see you back here at
one o'clock.
Have a pleasant lunch. We will see you back here at
one p.m.
COURT SECURITY OFFICER: All rise for the jury.
(Jury not present, 11:25 a.m.)
THE COURT: Okay. I'll see you back here at one p.m.
(Recess from 11:27 a.m. to 1:00 p.m.)
THE COURT: Okay. Welcome back.
I hope everyone had a nice lunch.
All right. Let me acknowledge the presence of the
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Miami, Florida 33128
(305) 523-5698
Defendant.
Are we ready to proceed?
MR. ETRA: Yes, Your Honor.
MS. JIMENEZ: Yes, Your Honor.
MS. MARTINEZ: Yes, Your Honor.
THE COURT: Do we have all of our jurors?
COURT SECURITY OFFICER: Let me check.
THE COURT: Okay. Appreciate it.
(Before the Jury, 1:01 p.m.)
THE COURT: All right. Welcome back, Ladies and
Gentlemen.
Please be seated.
Do you know why we stand for you, the jury? Because I
know some of you are hesitating to sit down before all the
jurors come in. We stand for you, the jury, because we give
the same deference and respect to you, the judges of facts, as
we do the judges when they come into the courtroom. So
certainly you are free to remain standing. But once you come
in, obviously we remain standing until all of you are here.
I trust that everyone had a pleasant lunch and ready
to get back to work.
And we'll continue with the cross-examination.
MR. ETRA: Thank you, Your Honor.
If we can put up Exhibit 17-7 in evidence.
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106
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
So before the lunch break, Ms. Hutcheson, we had looked at
the CJUF bank account. Do you recall that?
A.
Yes.
Q.
Okay. And that was one of the bank accounts that was
submitted by the applicant to substantiate payroll, right?
A.
It was submitted by the applicant.
Q.
Well, the applicant -- that's fair. But the applicant had
indicated that the way he would substantiate payroll was with
bank account records and other verifiable documents, correct?
A.
Correct. It did not specify which bank account records.
Q.
Sorry?
A.
Correct. It did not specify which bank account records.
Q.
Right. Right. But -- so -- but the step after that was --
do you agree with me that what followed next was that the
applicant submitted the bank accounts?
A.
Yes.
Q.
And we saw the first one was CJUF, right?
A.
Correct.
Q.
And now I'm showing you 17-7. This is an HM Management and
Development bank account, correct?
A.
Yes, it is.
Q.
Okay. And this is also another indication that HM-UP has
affiliates, not just CJUF but also HM Management and
Development, right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I can't take that from the statement alone.
Q.
You can't take that from the statement alone. Well, the
statement that's being provided to -- comes after -- well --
did PayPal -- let me ask you this: Did PayPal substantiate
payroll?
A.
Yes.
Q.
It was required to?
A.
Yes.
Q.
And it did it based on these bank accounts, correct?
A.
Bank account and payroll documentation.
Q.
Okay. Let's start with the bank accounts. Did it review
these bank accounts?
A.
I can't say to what extent the statements were reviewed.
Q.
Okay. So how do you know payroll substantiated payroll --
excuse me. How do you know PayPal substantiated payroll?
A.
The figures used were from the payroll documentation.
Q.
I don't understand your answer. Could you please explain
it.
A.
So to substantiate the payroll, we utilized the payroll
statement.
Q.
What's the payroll statement?
A.
The statements of wages paid that we reviewed earlier.
Q.
Oh, okay. How do you know -- okay. So let me take a
step -- how do you know that PayPal used that payroll report --
the withholdings column, that one?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
Okay. How do you know that PayPal used that report to
substantiate payroll?
A.
Based off of the amount of payroll paid, the figures
matching.
Q.
What are the facts you're relying upon to prove that that's
the document that PayPal relied upon?
A.
Only that the numbers would match.
Q.
Only that the numbers match. So you're assuming that
PayPal relied on that document, correct?
A.
Correct.
Q.
Okay. And you have no personal knowledge, correct?
A.
Correct.
Q.
There's nothing in the payroll -- the PayPal system you
looked at that tells you: "Oh, we relied on that payroll
report to substantiate payroll," correct?
A.
Correct.
Q.
Not only that, you can't rely on that -- PayPal could not
rely on that payroll report to substantiate payroll; isn't that
correct?
A.
No. That's not correct.
Q.
The reason I say it is it's not a verifiable document.
It's just a piece of paper, correct?
A.
It's verifiable in the fact that it was provided by the
applicant to substantiate payroll.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Oh. So your definition of verifiable document is a piece
of paper from the applicant that says: "This is the payroll"?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained.
BY MR. ETRA:
Q.
What does "verifiable documents" mean?
A.
It could be any provided record by the business to show
payroll costs.
Q.
And how does the word "verifiable" affect the word
"document"? I don't understand how a piece of paper from the
applicant is something that's verifiable.
MS. JIMENEZ: Objection.
MR. ETRA: Your Honor --
THE COURT: Sustained. You stated: "I don't know,"
Mr. Etra.
MR. ETRA: I'm sorry?
THE COURT: You stated: "I don't know," as if that's
not relevant, and the objection is sustained.
Let's continue.
BY MR. ETRA:
Q.
Are you saying that PayPal reviewed these bank records?
Yes or no?
A.
We had the bank records, yes.
Q.
Did you review -- did PayPal review the bank records? Yes
or no?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Asked and answered.
MR. ETRA: I don't have any -- I'm not getting an
answer.
THE COURT: Does the witness understand the question?
THE WITNESS: Yes.
THE COURT: The question calls for a yes-or-no
response. If you need to explain your answer, you may
certainly do so.
THE WITNESS: Yes. PayPal had the bank statements
available for review.
BY MR. ETRA:
Q.
Again, the question was: Did PayPal review the bank
statements? Yes or no?
A.
I cannot personally answer that.
Q.
Just as you cannot personally answer whether PayPal
reviewed the payroll report, correct?
A.
Correct.
Q.
Okay. You don't know if -- you don't know if it was even
read by someone at PayPal, correct?
A.
I wasn't the person reviewing it. I can't say.
Q.
Okay. All right. By the way, we talked about the concept
of a d/b/a before. Remember that?
A.
Yes.
Q.
With a d/b/a, you can have a company which has a formal
name and then the d/b/a is like a nickname, right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Right.
Q.
So like someone who's -- Samantha Smith, Inc. could be a
company, but Samantha's Books might be the d/b/a?
A.
Correct.
Q.
And the d/b/a is not a real name of the company. It's the
nickname, trade name?
A.
Could be, yes.
Q.
Which means that a d/b/a can't get a bank account in its
name because it's not a real company, right?
A.
I don't know.
Q.
So here you see -- do you know what KYC is?
A.
Yes.
Q.
You testified about that on direct, didn't you?
A.
Yes.
Q.
You know for KYC you have to have a real name of a real
company to get a bank account, right?
A.
You have to have a company name.
Q.
Right. Right. This tells you -- this bank statement tells
PayPal clearly that HM Management and Development is not just a
d/b/a, it's a separate company, correct?
A.
The bank account is listed in the name of HM Management and
Development, LLC.
Q.
Did PayPal -- what was the policy at PayPal as to
whether -- strike that.
MR. ETRA: Okay. Let's go to the -- I'm sorry -- the
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
next document -- I'm sorry.
BY MR. ETRA:
Q.
The document we have on the screen is bank account 7571.
I'm using the last four digits. Do you see that?
A.
Yes.
Q.
And that's ultimately the account that the PPP funds go to,
correct?
A.
Yes.
Q.
Okay.
MR. ETRA: And let's go to the next document, which is
Exhibit 17-6.
BY MR. ETRA:
Q.
And this is the third bank account -- statements from a
third bank account that was provided by the applicant, correct?
A.
Correct.
Q.
And this is also HM Management and Development, but this
time -- account -- excuse me -- but this time it's at Bank of
America, correct?
A.
Yes.
Q.
Okay. Just separately from the PPP program, does -- PayPal
is involved in lending outside of PPP, correct?
A.
Yes.
Q.
Okay. Small business loans, correct?
A.
Yes.
Q.
That's kind of a sweet spot?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
(No verbal response.)
Q.
Okay. Does it ever rely on bank account records to verify
information from the applicant?
A.
Yes.
Q.
Let's go to the payroll report, which is --
MR. ETRA: Turn it around.
Okay. This is -- Your Honor, this is Exhibit L-52.
It is not yet put into evidence as L-52 -- okay. Now we're
putting in -- sorry, Your Honor.
THE COURT: All right.
MR. ETRA: We're putting in the one in evidence, which
is 17-8.
BY MR. ETRA:
Q.
Do you recognize that?
A.
Yes, sir.
Q.
By the way, going back to the bank statements, do you know
what date they were submitted to PayPal?
A.
Not off the top of my head.
Q.
Do the records you have indicate that?
A.
Yes. They should.
Q.
Do you know -- okay. Did you produce those records that
would indicate that?
A.
I don't recall.
Q.
Okay. And what about this payroll report? Do you know the
date that this was submitted to PayPal?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Not off the top of my head. It would have been after the
application and prior to the loan funding.
Q.
Okay. You can't tell if it's between those two dates,
right?
A.
(No verbal response.)
Q.
Sorry. I strike the question. Your answer was clear
enough. Thank you.
And do you know who actually -- was this uploaded into
the system?
A.
Yes, it was.
Q.
Do you know who did that?
A.
It was by somebody who logged in with the email address and
password.
Q.
Okay. So you don't know who?
A.
I don't know them.
Q.
And you don't know from where it was submitted?
A.
No.
Q.
Okay. All right. So the first question I have for you on
this report -- the first comment is: On the upper left-hand
corner, do you see that there are names of two companies, HM
Management and CJUF?
A.
Yes.
Q.
Is that sort of another indication that these companies are
all affiliates?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. Another disclosure by the applicant that the
applicant has affiliates, correct?
A.
I can't speak to a disclosure.
Q.
Okay. And this is for 2019, and it's got a list of names.
Do you see that?
A.
Yes.
Q.
How many names are on that list?
A.
Eleven.
Q.
Now, how many employees was listed by the applicant in the
portal?
A.
Eighty.
Q.
Okay. So this is inconsistent with the information from
the applicant in the portal, correct?
A.
Yes.
Q.
And how did -- what efforts did PayPal take to reconcile
this discrepancy?
A.
We did not.
Q.
So you had inconsistent information from the applicant, and
PayPal ignored it -- that fact, correct?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Why didn't you attempt to -- why didn't PayPal attempt to
reconcile the inconsistency?
A.
We weren't required to reconcile inconsistencies. We were
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
relying on the borrowers' certifications that the information
was accurate.
Q.
So I thought you said this earlier, that you're supposed to
rely on what the borrower says, correct?
A.
Yes.
Q.
But what if the information is inconsistent -- and I
thought you said you had to resolve that. I thought you said
that before the lunch break.
A.
If it's notable.
Q.
If it's notable. Okay.
Okay. So maybe no one noticed the inconsistency?
A.
Possibly.
Q.
Again, maybe no one ever read this report, right? You
don't know?
MS. JIMENEZ: Objection. Calls for speculation.
THE COURT: If the witness knows. Overruled.
THE WITNESS: I do not know.
BY MR. ETRA:
Q.
Okay. Okay. Now, I want to understand PayPal's approach
to a document like this. You've saying normally when you would
see withholding PayPal would understand that to mean W-2,
correct?
A.
Yes.
Q.
And when they would see non-withholding, then it would
presumably be an independent contractor, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Generally, yes.
Q.
Okay. So if you read this report, there are two names
listed where there's no withholding compared to the others,
correct?
A.
Correct.
Q.
One of them is Eric Sheppard and one of them is Jeff Graff.
Do you see that?
A.
Yes.
Q.
Okay. Wouldn't -- based on PayPal's policies and
procedures, it shouldn't be including the dollars associated
with Jeff Graff in the calculation because, from the looks of
it, he would be an independent contractor, right?
A.
No. They have draws listed.
Q.
So anyone who gets a draw can include that amount in the
calculation?
A.
(No verbal response.)
Q.
Only one person gets that, right?
A.
I don't understand the question.
Q.
Okay. All right. Under the rules, the employees get
covered in payroll calculation and the boss gets covered up to
a hundred thousand dollars in addition, correct?
A.
Correct.
Q.
That's one person, not numerous bosses, correct?
A.
There could be multiple owners.
Q.
And you would account that for multiple owners?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes. Each employee could be considered for up to a hundred
thousand dollars in wages paid.
Q.
Oh. So you're saying that you could include in the
calculation of payroll any number of owners up to a hundred
thousand dollars, right?
A.
Yes.
Q.
So you could have a PPP loan where there are no W-2s, but
it's a substantial loan because there's maybe like 20 owners.
Is that your testimony?
A.
I can't speak to that. I'd have to review the SBA
guidelines.
Q.
Isn't it a fact that you're only allowed to have one owner
who gets up to a hundred thousand dollars? Isn't that the
rule?
A.
I would have to read the SBA guidelines.
Q.
Okay. The final application, the 2483 that was signed --
DocuSigned in May -- you know what I'm talking about?
A.
Yes.
Q.
That has the number 80 for employees, not 10 or 11,
correct?
A.
Correct.
Q.
And where they ask about affiliates, it doesn't say "yes."
It says "no," even though we've seen affiliate information,
correct?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And that was because PayPal filled out the 2483
application, correct?
A.
The information was prefilled out, based upon the
information submitted at the time of application.
Q.
Some of the information, not all of the information, right?
A.
Everything except for the borrower's initials and
certifications.
Q.
So you're saying -- when you say "applications," do you
mean when they submit the information in the portal?
A.
Yes.
Q.
Okay. So it's what you put in the portal. But the rest of
the documents that get submitted don't count in how PayPal
fills in the 2483 application? Is that your testimony?
A.
Can you restate the question, please?
Q.
Sure. Is it your testimony that when PayPal fills in the
2483 final application they only rely on the first step where
the applicant goes to the portal and they ignore the rest of
the disclosures and information in between?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained. Rephrase, please.
BY MR. ETRA:
Q.
Does PayPal consider the information submitted to PayPal in
filling out -- other than what's in the portal, in filling out
the 2483 application? Yes or no?
A.
We could.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
It's your choice?
A.
If there's information different than what was submitted,
and we -- there's changes to the application.
Q.
When you say: "Changes to the application," you mean they
have to go back to the portal and change it?
A.
If the applicant told us that there was a different number
of employees, or we found there were different payroll costs,
then that could be updated in the loan application data.
Q.
But when -- so, for example, here the applicant in so many
words keeps telling PayPal that it has affiliates, but it
doesn't get put into the 2483. How do you explain that?
A.
We would not have changed that based off of the information
presented.
MR. ETRA: Let's go to Exhibit 17-10.
BY MR. ETRA:
Q.
Do you recall going over this on direct examination?
A.
Yes.
Q.
Okay. And this is something that the applicant -- someone
from the applicant company submitted, a comment or a question
through the portal, correct?
A.
Correct.
Q.
And this is on April 22nd, correct?
A.
Yes.
Q.
And the description is: "I'm the owner of multiple
companies." I want to stop there. So, in fact, the applicant
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
is specifically telling PayPal on April 22nd that it -- he,
whoever is typing is, is the owner of multiple companies. Do
you see that?
A.
Yes.
Q.
And yet, in the final 2483 application that you guys filled
out -- PayPal filled out -- you had "no" for affiliates,
correct?
A.
That's what was submitted by the applicant.
Q.
Okay. But this information was -- is submitted -- just so
it's clear, what we're looking at is information submitted by
the applicant through the portal, correct?
A.
Yes.
Q.
Okay. And then he writes: "So I need to change the
application to reflect self-employed with employees and the LLC
needs to be changed." Do you see that?
A.
Yes.
Q.
I think you testified that it didn't make sense to make
that change, correct?
A.
Correct.
Q.
And how did you know that?
A.
The application was already under review, and there was not
sufficient information here to change the loan. Ultimately,
that would be up for the applicant to notify us if the
information was incorrect before signing the 2483.
Q.
Okay. So if I understand you correctly, when this person
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
put the information in on April 22nd, at 4:12 p.m., PayPal had
already sent out the 40 -- 2483 application for DocuSigning?
A.
No, we had not.
Q.
Okay. So what is the reason that you -- sorry. Did you
determine -- did you -- did PayPal know -- let me take a step
back.
Did you answer this question? Did PayPal answer this
response -- this question? Excuse me.
A.
We did not.
Q.
So the applicant asked a question and PayPal didn't
respond, right?
A.
Correct.
Q.
Because PayPal determined, for whatever reason, there was
no need to?
A.
There was no need or the application had already been
processed.
Q.
So if the application's already processed, and the --
meanwhile, the applicant is sending you potentially new and
different information, you're not going to look at it because
the application's already been processed? Is that your
testimony?
A.
If it's not substantial to change.
Q.
Oh. So PayPal has a sense of which changes are substantial
enough to go back and fix the application, correct?
A.
This would not have changed the overall loan.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. So when the -- "would not change the overall loan."
So did PayPal make that determination at that time or are you
speculating?
A.
I'm speculating.
Q.
You were not the person who was dealing with this question
at the time, correct?
A.
I was not.
Q.
So you have no idea why the person -- whatever person was
dealing with this chose to ignore it?
A.
No. Throughout the course of the PPP program, we received
many contacts that we were unable to respond to.
Q.
See at the bottom line, it says: "The LLC needs to be
changed." Do you see that?
A.
Yes.
Q.
Now, the applicant was an LLC, correct?
A.
Yes.
Q.
So here the applicant is saying got to change the LLC to
a -- basically, the borrower to a different borrower. Do you
see that?
A.
Yes.
Q.
And yet, PayPal, for whatever reason, decided to ignore
that, correct?
A.
We did not respond to this.
MR. ETRA: Let's go to the next message.
Further down.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
And here, on April 23rd, the applicant's writing: "I
needed to add more documentation from my CPA to the submittal,
but the site would not let me. Thank you." Do you see that?
A.
Yes.
Q.
And in fact, this is another time where the applicant is
communicating in the portal about the information that it wants
to get to PayPal, correct?
A.
Correct.
Q.
And PayPal did not respond, correct?
A.
We did not.
Q.
PayPal proceeded with the 2483 application the way it did,
without the -- without the benefit of whatever information --
new information the applicant wanted to give; is that correct?
A.
Correct.
Q.
Okay.
MR. ETRA: All right. Let's go to -- we have a new
document, C-14.
Your Honor, C-14 is part of the overall PayPal
production. So we're going to offer C-14.
THE COURT: Is it part of the exhibits already
admitted into evidence?
MR. ETRA: Yes.
THE COURT: So which exhibit is it?
MR. ETRA: So C-14 -- and it's a part of one exhibit
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
which is a large group of PayPal documents.
MR. CAVALLO: Seventeen is all PayPal exhibits in
evidence. This is a document within that.
THE COURT: Show Ms. Jimenez, so that we can make
sure, in fact, it is.
(Pause in proceedings.)
MS. JIMENEZ: No objection, Your Honor.
THE COURT: All right, then.
MR. ETRA: We offer C-14 in evidence.
THE COURT: Well, you don't need to admit it into
evidence since it's already part of the Government's exhibit.
MR. ETRA: Thank you, Your Honor.
THE COURT: All right.
BY MR. ETRA:
Q.
Do you recognize the document on the screen?
A.
Yes.
Q.
Could you tell us what it is.
A.
It's screenshots from our Salesforce system.
Q.
The same system we were looking at in the two prior
documents or pages?
A.
Correct.
Q.
So it indicates -- on April 27th, 2020, there's a subject
that says: "Open opportunity already exists with email:
Ericsheppard10@gmail.com." Do you see that?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
What does that indicate?
A.
That the applicant tried to submit multiple PPP
applications under the same email address.
Q.
Right. He tried to submit a new application, correct?
A.
Yes.
Q.
And did PayPal review the application that was submitted on
that date?
A.
No. We only reviewed the first application submitted.
Q.
So you didn't read whatever it was that the applicant
submitted, correct?
A.
No.
Q.
Do you know whether it was an attempted corrected
application?
A.
I do not.
Q.
Okay. Did PayPal observe -- well, take a step back.
Do you know for a fact that this was not -- whatever
application was submitted was not reviewed by the people at
PayPal?
A.
Yes. We only reviewed the first application.
Q.
Okay. And do you tell -- okay. Isn't it a fact -- and did
you -- but you did receive a new version of an application on
this date, correct?
A.
Yes.
Q.
And did you produce that to the Government?
A.
We produced this information.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Did you produce the application that was submitted at the
Eric Sheppard email address on April 27th, 2020? Yes or no?
A.
He would not have been able to complete a full application
since the email address was already in the system.
Q.
Did you produce -- let me ask it differently. Isn't it a
fact that whatever information was produced that resulted in
this message, whatever information was submitted to PayPal that
resulted in this message, PayPal did not produce to the
Government? Isn't that correct?
A.
I can't speak to that.
Q.
Okay. Isn't it a fact that, in fact,
ericsheppard10@gmail.com submitted a corrected application in
this process to change the LLC from HM-UP to HM Management and
Development? Isn't that true?
MS. JIMENEZ: Objection. Asked and answered.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Do you know whether at this time the person who was
submitting information was trying to correct information that
had previously been provided to PayPal?
MS. JIMENEZ: Objection. Calls for speculation.
MR. ETRA: Your Honor, it's cross-examination.
THE COURT: If the witness knows. Overruled.
THE WITNESS: I do not know. It appears to be a new
application.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
So if a borrower takes out a 2483 form, fills it in at this
time period in this portal and submits it, you view that as a
new application, right?
A.
They cannot submit a 2483 through the portal. That's sent
via DocuSign after the application is conditionally approved.
Q.
Okay. Remember from your direct testimony that later on
someone at the applicant would like fill in their own 2438 and
submit it? Right?
A.
They could, but we did not consider that nor was one
received in 2020.
Q.
Is it your testimony that no -- one of those handwritten,
done by the applicant 2483 form -- is it your testimony that
none was submitted in 2020 by the applicant?
A.
Yes.
Q.
How do you know that?
A.
Based on the documentation received.
Q.
Okay. So -- okay. You still don't know what was submitted
that resulted in this message, correct?
MS. JIMENEZ: Objection. Asked and answered.
Argumentative.
MR. ETRA: Your Honor, on the one hand --
THE COURT: Overruled. I'll allow it.
You may answer the question.
THE WITNESS: An application was started but not
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Miami, Florida 33128
(305) 523-5698
completed because PayPal allows only one application per
business per email address.
BY MR. ETRA:
Q.
What is your personal knowledge as to what was submitted on
this date? Do you have any?
A.
I do not.
Q.
But whatever was submitted was not considered by PayPal for
purposes of the loan we're talking about; is that correct?
MS. JIMENEZ: Objection. Asked and answered.
THE COURT: Sustained.
(Pause in proceedings.)
MR. ETRA: Let's go to Exhibit 19-19 in evidence at
Bates Number 11515.
BY MR. ETRA:
Q.
Do you recognize this email?
A.
Yes, I do.
Q.
What is it?
A.
It's the approval message saying that their Paycheck
Protection Program loan had been approved.
Q.
Okay. So this is sort of at the end of the process or very
close to the end of the process?
A.
Yes. This is after the DocuSign.
Q.
No. This is submitting the form for the applicant to
DocuSign, correct?
A.
No. This is after the DocuSign.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
So your testimony is that the 2484 [sic] Form was already
DocuSigned on May 1st, 2020?
A.
2483. Yes, sir.
Q.
2483. Okay.
MR. ETRA: Let's go to the 2483, which is Exhibit C-6.
MS. JIMENEZ: C-6 is not in evidence.
MR. ETRA: It's in evidence from earlier in trial.
MS. JIMENEZ: Okay.
MR. ETRA: Let's go to page SHEPP 00248, and focus in
on the DocuSign.
BY MR. ETRA:
Q.
When was this application DocuSigned?
A.
May 1st, 2020.
Q.
Let me do it differently. When was it first sent to the
Gmail email?
A.
April 23rd, 2020.
Q.
I see. Okay. And it was viewed on May 1st and signed on
May 1st?
A.
Correct.
Q.
Okay. And the part below indicates what, the signing below
that is -- is who signing?
A.
That's the completion after PayPal and WebBank sign their
portion.
Q.
Okay. So this application was sent to the Gmail email
about eight days before it actually got viewed by whoever was
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Miami, Florida 33128
(305) 523-5698
looking at it, correct?
A.
Correct.
Q.
Okay.
MR. ETRA: Let's go to the first page of the document.
BY MR. ETRA:
Q.
Now, if you go to the -- the application is in the name of
HM-UP, correct?
A.
Yes.
Q.
And I thought -- and the portal had HM Management and
Development as a d/b/a, but you did not put that here, correct?
A.
Correct.
Q.
Why is that?
A.
I can't speculate.
Q.
Okay. Are you sure that this application reflects the
information provided by the applicant?
A.
Yes.
Q.
Based on what?
A.
That's how the information is obtained and prefilled into
this form.
Q.
So you're basically answering it based on the way it's
supposed to be done. You can't say that's the way it was done
in this case, correct?
A.
That is the way the system works.
Q.
So no matter what, the system works that way?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
It's perfect? Yes?
A.
I've not seen any errors.
Q.
Okay. And there are people involved making decisions as
well, correct?
A.
Yes.
Q.
Or is it -- I mean, is it all done by -- like, all done by
some kind of artificial intelligence program?
A.
It's a computer system taking information from one place
and filling it into another.
Q.
Okay. So it's possible there weren't many people involved
along the way, it was just done by computer?
A.
There were people involved, but it's done by computer as
well.
Q.
All right. And again, if you -- the first -- the top part
of the loan application you see "Number of Employees, 80." And
that stayed in there even though subsequent information was
given making it 11 or so, correct?
MS. JIMENEZ: Objection. That misstates the
testimony.
THE COURT: Sustained.
MR. ETRA: Your Honor, it's cross-examination.
THE COURT: Rephrase. Sustained.
BY MR. ETRA:
Q.
The number 80 appears here for number of employees,
correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
Even though some of the information given suggested that
the number was lower, closer to maybe 11, correct?
A.
The information provided by the applicant indicated 80
employees.
Q.
And the payroll report didn't also indicate 80 employees?
A.
It did not.
Q.
Okay. Let's keep going. The part we're looking at right
here, is there a place for the applicant to DocuSign?
A.
Down below, yes.
Q.
The part we're looking at right here, is there a place for
the applicant to DocuSign?
A.
No. There is not a signature here.
Q.
Let's go a little further below, in the middle where it
asks about affiliates, Question 3. And the answer there is:
"No," correct?
A.
Correct.
Q.
Even though the borrower had provided information
indicating it had affiliates, correct?
A.
The borrower, on their application, indicated they did not
have affiliates.
Q.
Right. And PayPal put in "no" even though the borrower
provided information indicating it had affiliates? Yes or no,
if you can.
MS. JIMENEZ: Asked and answered. Object.
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Miami, Florida 33128
(305) 523-5698
THE COURT: Overruled.
You may answer the question.
THE WITNESS: Can you restate the question, please.
BY MR. ETRA:
Q.
Sure. The final application that PayPal put together and
sent to the applicant had "no" for affiliates, even though the
applicant had provided information indicating that the
applicant had affiliates, correct?
A.
Correct. It was based upon the initial application
submitted.
Q.
At any point in time, did PayPal tell the applicant that
it's only going to focus on the initial information submitted
in the portal?
A.
No.
Q.
All right.
MR. ETRA: Let's go to the bottom third.
BY MR. ETRA:
Q.
And this is the first place to DocuSign here, right?
A.
Yes.
MR. ETRA: Let's go to the --
BY MR. ETRA:
Q.
When inconsistent information is provided to PayPal, does
PayPal have -- does PayPal, as part of its procedures, get in
touch with the applicant to try to sort it out?
A.
It depends on the situation. Generally, with the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
processing of the PPP loans, we relied on the borrowers'
initial information submitted. Due to the sheer volume, we
couldn't contact every borrower.
Q.
How much time did PayPal spend on this application?
A.
I don't know.
Q.
How many applications a day did PayPal process?
MS. JIMENEZ: Objection.
THE COURT: Sustained.
MR. ETRA: Go to the next page.
Your Honor, could I have a sidebar, please?
THE COURT: All right. Come on forward.
(At sidebar on the record.)
MR. ETRA: So a few issues, Your Honor, on the record.
I'm making a proffer. I feel the -- well, first argument, then
a proffer.
Based on the direct, it sounded like this was a loan
package done by a traditional loan committee or a credit
committee, and it was thought out -- you know, well-thought-out
in that way. And I'd like to establish -- in a proffer, I'd
like to establish that it wasn't done that way. And part of
the way of doing that is -- showing that is how little time was
spent on each application. That's point one.
Point two, Your Honor, is, respectfully, this is a
very, very, very, very difficult witness, who's an advocate.
And that's okay. And I should be given the latitude to fully
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
cross-examine to demonstrate that and not have to accept her
non-answers. And I feel like I'm not being permitted to do
that.
THE COURT: Response?
MS. JIMENEZ: Your Honor, this witness is answering
the questions to the best of her ability, with counsel
insisting on getting different answers that he would like. And
the witness is simply answering the questions, but the same
questions are being posed over and over again in different
ways.
This witness is not an advocate. This witness was
subpoenaed here. This witness is PayPal, which has absolutely
nothing to do with the Government. She's simply responding on
behalf of PayPal based on the records that she's familiar with
in this case. The Defense attorney simply doesn't like the
answers that are being provided.
THE COURT: Okay. I'm not permitting you to go
outside of -- this witness has already testified that she's had
no direct involvement with regard to this application. And
with regard to other applications, and PayPal's other work with
other individuals, I'm not permitting it. I'm not.
MS. WEINTRAUB: Judge, may I be heard just one second?
THE COURT: Mr. Etra made the argument. I'm not
permitting it.
MR. ETRA: Your Honor, the difficulty I have is
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Miami, Florida 33128
(305) 523-5698
that -- is that she has given an answer. But then, when it's
convenient, she then steps outside that role and gives a
certain answer, and I'm stuck because I can't go back --
THE COURT: You're not stuck. You've made significant
points. But now it's getting to the point where other
applications are not relevant.
With regard to the time that may have been spent on
this application, you asked her. She didn't know. So any
other applications, and time spent on other applications, and
the number of applications during that period is just not
relevant.
MR. ETRA: One more thing, Your Honor, if I may.
I recognize she said she didn't know this application.
And I understand Your Honor's point about this application;
however, I can get there if I show that they typically spent
only so much time on an application. Then that's good evidence
that that's how much time they spent on this --
THE COURT: But that's all speculation. Because the
fact that certain time may have been spent, or a certain amount
of applications, it's just -- it's going way far afield, and
I'm not permitting it.
Let's continue.
(End of discussion at sidebar.)
BY MR. ETRA:
Q.
Do you know whether --
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Miami, Florida 33128
(305) 523-5698
MR. ETRA: I'm sorry. May I proceed, Your Honor?
THE COURT: Of course.
MR. ETRA: I'd like to move forward to the promissory
note. And I'm going to get to a specific page -- sorry -- the
loan agreement. And it's on Page 000252.
MS. JIMENEZ: Which exhibit is this?
MR. ETRA: C-6.
BY MR. ETRA:
Q.
Are you with me, ma'am?
A.
Yes.
Q.
Okay. Thanks.
Are you familiar generally with the loan agreement
that was provided to PPP borrowers that were approved?
A.
Yes.
Q.
Is that an SBA form?
A.
No. It's a PayPal and WebBank form.
Q.
And you're allowed to use your own forms, as long as it's
not inconsistent with the SBA rules, correct?
A.
In addition to the SBA 2483, we can use additional forms,
yes.
Q.
Okay. Great. And it says: "Bank Account Information" --
and by the way, the bank account information under here is
filled out by who?
A.
By the applicant.
Q.
Well, let me take a step back. This package all comes
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
together with the 2483 application, and in this case on
April 23rd, correct?
A.
Yes.
Q.
So PayPal actually physically -- let's put it that way --
physically filled in this information, right?
A.
No. The applicant does.
Q.
So you're saying that when this package was sent to be
DocuSigned, there was a place for the applicant to type in the
account information?
A.
Yes. They specify the deposit and withdrawal account.
Q.
Okay. I'm not sure if we're having a misunderstanding or
not, and maybe we're not. Your testimony is the reason these
accounts are there is because at some point in the process the
applicant indicated that's the account they wanted to get the
money into, correct?
A.
Yes.
Q.
But in terms of actually putting the information into the
piece of paper physically, that was done by PayPal, right?
A.
My understanding is it's done by the applicant.
Q.
So when they get the DocuSign, there's a place to fill in
on that date?
A.
Yes.
Q.
Okay. What is that understanding based on?
A.
The flows that I have seen when we created the experience.
Q.
And this is account 7571 SunTrust that we saw before,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
correct?
A.
Yes, it is.
Q.
And the applicant had already provided a statement from
that account, correct?
A.
Correct.
Q.
And the statement indicated that this account is held by
not the borrower, but by HM Management and Development,
correct?
A.
Correct.
Q.
So the borrower didn't hide the fact that it -- that the
money would be going into an account not in the name of the
borrower, correct?
A.
That's correct.
Q.
Did you agree with me?
A.
Yes.
Q.
Okay. And that's okay, right?
A.
It's an LLC.
Q.
But -- okay. I'm sure that's a good answer. I don't
understand your answer. Could you explain.
A.
Yes. Based off of it being an LLC, that's acceptable.
It's the same business name.
Q.
Well, take a step back. The business name of the applicant
is HM-UP, correct?
A.
Yes.
Q.
And the money was going to go into an account in the name
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
of HM Management and Development, correct?
A.
Yes.
Q.
And that's acceptable to PayPal, right?
A.
Yes.
Q.
And it's acceptable under the SBA rules, as understood by
PayPal, right?
A.
Yes.
Q.
Okay. And the bank account information that we looked at
for this account indicated that -- and we could look at it if
you want. But if you recall, it was a February statement.
Does that sound about right?
A.
That sounds correct.
Q.
Okay. So -- certainly the borrower didn't indicate that it
was putting the money in a segregated bank account, correct?
A.
Correct.
Q.
And PayPal didn't require that the money go in a segregated
bank account, correct?
A.
That was not a requirement.
Q.
It could go into a regular operating account, right?
A.
Correct.
Q.
The account that -- accounts that are used by businesses
for all kinds of withdrawals and deposits, right?
A.
Yes.
Q.
Okay. And that means the money gets commingled, right?
A.
Yes. Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
That's not a problem?
A.
No. The only requirements are how the money is used.
Q.
Right. So I want to just finish on the first loan and just
ask a few questions.
Am I correct that at no point in the documentation
provided to the borrower -- at no point did PayPal make it
clear that payroll cannot include payments to independent
contractors; am I correct?
A.
No. I don't agree with that statement because PayPal
referenced the SBA guidelines that must be followed.
Q.
Okay. Let me ask it a little differently. PayPal in no
point communicated in words of one syllable -- you ever hear
that expression?
A.
No, I have not.
Q.
Okay. In plain simple terms. Okay?
A.
Okay.
Q.
There's no part of this where PayPal, in plain simple
terms, communicates to the borrower to say: "Listen, you're an
LLC. You could pay for W-2 but not for 1099"; am I correct?
MS. JIMENEZ: Objection. Asked and answered.
THE COURT: Overruled.
THE WITNESS: You are correct. But I'd like to
clarify that we referred to the SBA guidelines.
BY MR. ETRA:
Q.
Okay. And the SBA guidelines, those are like the interim
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
rules I showed you?
A.
Yes.
Q.
Okay. Do you know how many interim rules there are?
A.
Not off the top of my head.
Q.
Do you know how complicated they are?
A.
Yes.
Q.
I also want to understand, from all the documents we've
looked at for the first loan -- and if I have left out any
you'll please tell me -- which of the documents does PayPal
have an IP address for?
A.
We obtain the IP address only at the time of the
application being submitted, and then with the DocuSign.
Q.
Right. And the application being submitted, that's the
portal at the beginning?
A.
Yes.
Q.
Okay. I want to talk about forgiveness.
We're making progress. Okay?
A.
Okay.
Q.
I'm going to put up Exhibit 18-1 in evidence. Do you see
it, ma'am?
A.
Yes, sir.
Q.
Am I correct that your testimony was that the applicant
submitted this prematurely, something like that?
A.
Yes. They submitted this through the portal.
Q.
And was there something -- it sounded from your testimony
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
as I understood it that you were being a little critical of the
applicant in doing so. Am I incorrect?
A.
We had not prompted the applicant to do so.
Q.
You had not prompted the applicant to seek forgiveness?
A.
Correct.
Q.
How do you know that?
A.
Because if we had prompted it, we would have asked for
documentation and then sent them this form from DocuSign versus
them uploading it themselves.
MR. ETRA: Let's go to Exhibit 19-19 in evidence at
Bates 11514, please.
BY MR. ETRA:
Q.
See this email?
A.
Yes.
Q.
Let me take a step back. This is part of
something called -- this is a large document with a series of
communications, right?
A.
Correct.
Q.
What is it supposed to capture?
A.
Emails sent to our borrowers and any other notes or case
history.
Q.
It's supposed to be complete, right?
A.
That's open to interpretation.
Q.
Okay. Maybe you could explain what you mean.
A.
Your definition of complete and mine may be different.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
What's yours?
A.
It's inclusive of all emails sent.
Q.
That's mine too. Is it inclusive of all emails sent?
A.
Yes.
Q.
And received?
A.
Yes.
Q.
Okay. All right. Fair enough. We have the same
definition.
And this is an email that's sent to the
ericsheppard10@gmail on May 11th, 2020, right?
A.
Correct.
Q.
That is shortly after the loan is -- the loan is approved
and signed, right?
A.
Yeah.
Q.
And right away PayPal writes: "We're writing to remind you
that" -- oops. We lost it. The first paragraph: "We're
writing to remind you that if you satisfy all related SBA
requirements your Paycheck Protection Program loan may be fully
forgiven," correct?
A.
Correct.
Q.
That's a reminder you sent -- PayPal sent to the applicant
a week after the funding or so, correct?
A.
Ten days after --
Q.
Ten days after. Okay?
MR. ETRA: And let's go to the next email, 11513.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Going the other way.
BY MR. ETRA:
Q.
And then the next month and a half later you sent another
message that basically says the same thing, correct?
A.
Yes.
Q.
Okay.
MR. ETRA: And let's go to the next one, which is
11512.
BY MR. ETRA:
Q.
Another message about a month later that says basically the
same thing, right?
A.
Yes, sir.
Q.
But this time you're asking your borrowers to lobby
Congress to make it easier to loosen up the PPP program, right?
A.
Yes.
Q.
Okay.
MR. ETRA: All right. And then the next one, last two
digits 11, 11511.
BY MR. ETRA:
Q.
In September -- oh. This is a different message.
MR. ETRA: Let's put that down.
BY MR. ETRA:
Q.
So am I correct that, after the loan was funded, PayPal
would send emails -- or did send emails to
ericsheppard10@gmail.com stressing -- stressing to think about
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
forgiveness? Right?
A.
Yes, sir. Those are a series of emails we sent to all SBA
PPP borrowers who had been approved for a loan, based on the
volume of inquiries we received requesting information about
forgiveness.
Q.
So are you suggesting there's something wrong for the
applicant to then -- to do the application -- the first one it
did, that was done by themselves?
MS. JIMENEZ: Objection. Misstates the testimony.
THE COURT: Sustained. Rephrase, please.
BY MR. ETRA:
Q.
So is there anything wrong with Mr. Sheppard, or whoever it
was at the companies, submitting a forgiveness application in
January?
A.
I won't say it was wrong, but we would not have accepted
that.
Q.
Okay.
MR. ETRA: Let's go to D-1 -- D-2.
Your Honor, this is part of the PayPal material that's
already in evidence.
THE COURT: All right.
MS. JIMENEZ: No objection.
THE COURT: Then there's no need to admit it
separately, if it's already part -- you can use this document
certainly.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
All right. And this was the form that was submitted by the
applicant, right?
A.
Yes. This is the DocuSign version.
MR. ETRA: So I have the wrong document up. We're
going to D-1, which -- same circumstance, Your Honor. It's
part of what's in evidence already.
BY MR. ETRA:
Q.
You see the document on the screen, D-1?
A.
Yes, sir.
Q.
Okay. And that's the original version that the applicant
submitted, you know, on his own, right?
A.
Correct.
Q.
And there's a place to talk about payroll schedule. Do you
see that?
A.
Yes.
Q.
It says: "Weekly" -- it's checked in weekly, biweekly, and
monthly, and depends on the job, correct?
A.
Correct.
Q.
Is there anything in these materials that tells the
borrower that forgiveness only applies to W-2 workers?
A.
No.
Q.
Okay. And in fact, the borrower wrote: "Weekly, biweekly,
monthly, and for some workers the pay depends on the job,"
right?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
That tends to be consistent -- or inconsistent with W-2
employees and work assistant -- well, that tends to be
inconsistent with W-2 employees, correct?
A.
Not necessarily.
Q.
Okay.
A.
There's employees that could be commissioned and paid
depending on the job.
Q.
What -- typically, employees tend to have more regular
hours than independent contractors generally? Is that -- do
you agree with that?
A.
I can't speculate on that.
MR. ETRA: I need to go back to the September
application.
(Pause in proceedings.)
MR. ETRA: Go to Exhibit 19-19 in evidence. And going
back -- unfortunately, I left something out of the first
application, which was the second time it got DocuSigned in
September.
(Pause in proceedings.)
BY MR. ETRA:
Q.
Okay. Do you see --
MR. ETRA: Maybe go a little higher, so she can see at
the very top of the email.
Thank you.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Do you see the email on the screen from the log on
September 3, 2020?
A.
Yes, sir.
Q.
And is that an email that, based on the system, got sent
from PayPal to -- it says: "Eric Sheppard" because it's the
Sheppard Gmail account, correct?
A.
Correct.
Q.
Okay. And this is essentially the email where PayPal says:
"We've already done this loan, but there's been some changes.
So you can" -- essentially, there's a new version of the
application to sign, right?
A.
Yes.
Q.
Okay. And let's go to that new version -- the September
version of the application which is coming up.
(Pause in proceedings.)
BY MR. ETRA:
Q.
Okay. Do you recognize this document, C-4?
MR. CAVALLO: It's in evidence.
MR. ETRA: Okay. Which is -- sorry. It's part of the
bigger production. This is part of the larger PayPal
production that's in evidence.
THE COURT: Is that correct, Ms. Jimenez?
MS. JIMENEZ: Yes. And just for the record, it's
Bates Stamp Range 11288 to 11293.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: The original version that's in evidence,
you mean?
MS. JIMENEZ: Right. Yes.
MR. ETRA: Got it.
THE COURT: All right.
BY MR. ETRA:
Q.
Do you see C-4 in front of you?
A.
Yes.
Q.
Okay. So this is the new version of the application that
was submitted from PayPal to the Sheppard Gmail address in
September, correct?
A.
Yes.
Q.
This was populated -- the information here was populated by
PayPal, correct?
A.
Yes. Based off of the application data.
Q.
Right. So PayPal took all the information from the
May application -- from the May 2483 application, and just
dumped it into the September application, correct?
MS. JIMENEZ: Objection. Argumentative.
MR. ETRA: I'll restate it.
THE COURT: Restate it.
BY MR. ETRA:
Q.
PayPal took all the information that was in the May 2020
2483 application, and just put it in a new application dated
September, and sent it out in September; is that correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
All of the information remained the same, except for what
was in that email addendum.
Q.
So when this document is sent for DocuSigning, and it says:
"80 employees," that's not the applicant saying: "Oh, by the
way, in September, I still have 80 employees." That's PayPal
putting 80 in there and sending it to the applicant, right?
A.
That was filled in from the previous application.
Q.
Right. All the information -- so it was PayPal's
determination to repeat all the information from the
May application and put it into the September application,
correct?
A.
Yes. Because this is an addendum to the original
application.
Q.
And what steps did PayPal make to -- strike that.
MR. ETRA: Put up D-3.
D-3 is also part of the larger PayPal production.
MS. JIMENEZ: What is the exhibit that's in evidence?
MR. ETRA: What's the large number?
MS. JIMENEZ: Is it 17-7?
MR. CAVALLO: No.
THE COURT: Is it 17-5 or 17-7?
MR. CAVALLO: I believe it's 18-2, but I'm checking.
It's the bank statements submitted with the -- you know, as
part of forgiveness.
MS. JIMENEZ: 18-2.
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Miami, Florida 33128
(305) 523-5698
THE COURT: All right. Let's continue, then.
(Pause in proceedings.)
MR. ETRA: May I proceed, Your Honor?
THE COURT: Yes. Of course.
MR. ETRA: Okay. Thank you.
BY MR. ETRA:
Q.
Do you recognize D-3 to be the bank records that were
submitted with the forgiveness application?
A.
Yes.
Q.
And again, here again, the applicant is HM-UP, correct --
or the borrower is HM-UP, right?
A.
Yes.
Q.
But the bank account information is HM Management, right?
A.
Correct.
Q.
Okay. And to what extent did PayPal review the bank
records to verify the payroll -- that the payroll was used --
excuse me -- that the money was spent on payroll according to
the forgiveness program?
A.
We did not. Ultimately, the SBA ruled that for loans under
$150,000 no documentation was required. That's when the 3508S
was introduced.
Q.
And did you indicate that to the borrower?
A.
Yes.
Q.
That would be in the call log?
A.
No, that's based off of the actual DocuSigned version of
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the forgiveness application.
Q.
Okay. So this is submitted before there's a DocuSigned
application, correct?
A.
I don't recall the exact dates, but --
Q.
Let me take a step back.
Do you have any IP address information for the
forgiveness application we looked at, the first one that was
put in by the borrower?
A.
I do not.
Q.
Do you have the date that it was submitted?
A.
I don't recall off the top of my head.
Q.
You obviously --
A.
It was dated. We can go back and look at that.
Q.
And you obviously don't know who actually was involved in
submitting it in the portal, correct?
A.
Whoever had access to the email address and password.
Q.
Okay. And same with the bank account information. You
don't have an IP address for the submission of the bank account
records, right?
A.
I do not.
MR. ETRA: Let's go to D-4.
MS. JIMENEZ: What is the Government exhibit, please?
MR. CAVALLO: 18-3.
MS. JIMENEZ: Thank you.
MR. ETRA: In evidence as 18-3.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
And this is the wage report that was submitted with the --
as part of the forgiveness application, right?
A.
As part of the first one, yes.
Q.
Well, there was only one -- okay. Part of the first one.
Fair enough. And -- meaning the one that the borrower sent in
on their own?
A.
Correct.
Q.
Do you know -- does PayPal know the IP address or any
details about the submission of this document?
A.
No.
Q.
Okay. And this document, am I correct, doesn't actually
say that there's withholding, right?
A.
No.
Q.
In fact, none of the information provided on forgiveness
stated that payroll -- the payroll at issue was only W-2,
correct?
A.
The SBA guidelines did.
Q.
If I can get an answer to my question, please. None of the
information submitted by the applicant for forgiveness stated
that payroll was only -- or was -- or was only W-2, correct?
A.
Correct.
Q.
And in the back-and-forth between the borrower and PayPal,
PayPal never stated in simple terms: "Make sure that when
you're seeking for forgiveness -- when you're seeking
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Miami, Florida 33128
(305) 523-5698
forgiveness, you're only including W-2 wages," correct?
A.
Correct.
Q.
We're on the -- past forgiveness on the second -- now we're
on the attempted application. Okay?
MR. ETRA: So let's go to Exhibit 12-12 at 011500 in
evidence.
MR. CAVALLO: Sorry. What was the exhibit number?
MR. ETRA: 12-12. It's the log.
I apologize. Exhibit 19-19.
THE COURT: All right.
BY MR. ETRA:
Q.
Okay. So I think you went over this on direct. The
application was ultimately rejected because it had the wrong
industry type, correct?
A.
It was rejected because the SBA did not allow loans to this
type of industry.
Q.
And the industry is real estate lending or real estate
development? That one? Which industry was it?
A.
I forget the exact terminology.
Q.
But it starts with a five, that one?
A.
Yeah.
Q.
Okay. That's fine. We can say it starts with a five.
That's fine with me.
Okay. And this is sent to the borrower on March 6th,
2021, correct?
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Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
And the way PayPal got the information that it was the
wrong industry was from running a credit report; is that
correct?
A.
No.
Q.
Okay.
A.
It was based off of the information provided by the
applicant.
Q.
Let me just read the -- what the email says right below:
"We don't do business with this industry type. Our credit
decision was based in whole or in part on information obtained
in a report from the consumer reporting agency listed below,"
and then it lists TransUnion. Do you recognize TransUnion to
be a credit report agency?
A.
Yes.
Q.
Okay. Isn't it a fact that, for whatever reason, it wasn't
until it ran a credit report that PayPal determined that the
applicant was in the wrong industry type because it's the one
with the five in front of it?
A.
It's at this point in our process that we checked the
industry.
Q.
Okay. And even though earlier the applicant, according
to -- let me ask this question: Isn't it true, based on your
testimony, the applicant had earlier disclosed that it had the
industry type with the five in front of it?
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MS. JIMENEZ: I'm sorry. What was the last -- what
did you say?
MR. ETRA: I'll say it again. I'll say it again.
BY MR. ETRA:
Q.
Didn't you testify in your direct that earlier, before
March, say, in February -- or excuse me -- January or February,
the applicant had already disclosed that industry type, the one
that begins with a five?
A.
Correct. However, PayPal does not check the industry until
later in the process.
Q.
Okay. So the borrower discloses an industry type that's
ineligible, but the system doesn't reject it until PayPal runs
the credit report. Is that it?
A.
Correct.
Q.
Okay.
MR. ETRA: I want to put up Government's Exhibit 19 --
or actually, that's too early. That's too early.
MS. JIMENEZ: Too early?
MR. ETRA: Okay. Please put up Exhibit 19-1.
BY MR. ETRA:
Q.
This is the portal as it existed for the second round,
correct?
A.
Yes, sir.
Q.
Okay.
MR. ETRA: And let's go to the next page.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Unlike the first round -- when we saw the portal in the
first round, we didn't have this type of information in the
version that you produced, correct?
A.
Correct. We made --
Q.
Can you explain.
A.
Yes. We made a more detailed version for the second round
because of some of the nuances and different flows based on if
the applicant had a previous loan or this was their second
loan. There were just a lot more nuances, so more detailed
screenshots.
Q.
So you were making improvements in the portal -- in the
application through the portal, correct?
A.
Improvements, as well as adjustments based off of the SBA
guidelines, yes.
Q.
And none of those improvements or adjustments involved
stating in simple terms: "Don't include payroll for an
independent contractor," correct?
A.
Correct. That was never an issue.
Q.
Okay.
MR. ETRA: Let's go to Page 032393.
BY MR. ETRA:
Q.
And here, the question that's asked is on the left-hand
side, correct?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Is that the only part that the applicant sees or does it
also see the discussion in the middle?
A.
There's --
Q.
The comments in the middle.
A.
There's a hyperlink that would show that information.
Q.
Okay. So I think you testified in the second round you
specifically didn't just ask the borrower to pick an industry.
You said: "Use the industry code, the NAICS code, on your tax
returns," correct?
A.
Correct.
Q.
And it cites the rule on the right-hand side, right?
A.
Yes.
Q.
And the -- and this comes right from the SBA guidelines,
right?
A.
Yes.
Q.
And it says: "For purposes of reporting NAICS code,
applicants must match the business activity code provided on
their IRS income tax filings, if applicable," correct?
A.
Correct.
Q.
So you're only supposed to provide the code from the tax
returns if it's applicable, right?
A.
Yes.
Q.
Okay. And in fact, it doesn't -- it has a hyperlink to a
website which lists the NAICS codes, right?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
For those who feel that the code on their tax returns may
not be applicable, they could look up all the codes on the
Census government website, right?
A.
I think the way you're using "applicable" may be different
here. So recall that not everybody had to submit a tax return
if it was their first draw loan.
Q.
Does it say that explanation right here?
A.
No.
MR. ETRA: Let's go to Bates Number 32400.
BY MR. ETRA:
Q.
We're talking about the subject of demonstrating revenue
loss, correct?
A.
Yes.
Q.
That was a new feature for the second round, right?
A.
Yes.
Q.
And your portal made it clear there are two different ways
of showing loss and revenue, right?
A.
It was showing a 25 percent reduction either
quarter-over-quarter or year-over-year.
Q.
Right. The borrower had a choice, right?
A.
Yes.
Q.
Okay. So it specifically says: "Did the applicant have a
reduction in gross receipts of at least 25 percent in any 2020
quarter, as compared to a selected quarter in 2019, or when
comparing calendar year 2020 against calendar year 2019"; is
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that correct?
A.
Yes.
Q.
So under the SBA rules, and the way PayPal applied them, it
was the borrower's choice to demonstrate loss of revenue either
by comparing quarter-over-quarter from different years or the
entirety of the year-over-year, correct?
A.
Correct.
Q.
And in this case, the applicant chose quarter-over-quarter;
is that correct?
A.
Yes.
Q.
Okay. It did not choose year-over-year, correct?
A.
Correct.
Q.
Let's continue with the -- and the reason that's
significant is because of the issue of tax returns, correct?
A.
Tax returns would have to be provided regardless, just
whether they're quarterly or yearly.
Q.
Let me -- my question was imprecise. I'm talking about the
1065 tax returns. Okay?
A.
Okay.
Q.
You only needed to provide the 1065 tax returns if you're
choosing to demonstrate the loss in revenue from one year to
the next versus from a quarter in one year to a quarter in
another year; is that correct?
A.
For the 1065, yes.
Q.
So all that testimony on your direct examination about the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
need for the 1065 tax returns was false?
MS. JIMENEZ: Objection.
THE COURT: Basis?
MS. JIMENEZ: It's argumentative.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Isn't it a fact that because the borrower chose to show
loss in revenue from quarter to quarter, it was not obligated
to provide 1065 tax returns?
A.
I would need to refresh on the SBA documentation. But my
recollection is that the SBA did say that if you have not yet
filed your 2020 tax return, fill it out and submit it.
Q.
Only if you need to submit it, correct?
A.
I don't have every word of the SBA guidelines memorized.
Q.
Okay. Let me just get this straight. Are you saying for a
fact that the 2020 tax returns were required by PayPal on this
application?
A.
Yes. We saw earlier where we requested the 2020 tax
return.
Q.
And that's based on that line in that document we just
looked at, correct?
A.
Yes.
Q.
We're going to get there.
It's certainly not necessary to show change in
revenue, right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
(No verbal response.)
Q.
Let me restate it. Because the borrower elected to show
loss of revenue from one quarter -- a quarter in one year to a
quarter in the next, there was no requirement to do -- provide
1065s to show loss of revenue; is that correct?
A.
The SBA guidelines specified that the 1065 must be filled
out and submitted.
Q.
Let me just say it very differently -- well, let me
continue. We'll get there.
Okay. Which guideline is that exactly?
A.
I don't have the guideline memorized, but it's in the SBA
guidelines on how to calculate a loan.
Q.
And the only place in the documents you submitted that says
you have to file the 1065 returns is that one line in that
document we saw, correct?
A.
(No verbal response.)
Q.
That little line in that -- do you recall that line?
A.
That's where the caseworker made a note that we requested
it. We would have sent an email to the borrower requesting.
Q.
And where is that email?
A.
It would have been part of the email -- the whole string of
emails you have.
Q.
Why don't we look for it.
MR. ETRA: 12-12 -- 19-19.
Actually, what's the date? Why don't we first pull up
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that line, the...
BY MR. ETRA:
Q.
While we're waiting, when you say that the SBA guidelines
required the submission of a 1065, is that in all -- is that
just in the second round -- let me take a step back.
You know, in 2021 you could apply for a second-round
loan if you already had one, or you could apply even if you
hadn't gotten one before, correct?
A.
Correct. It was only for the second draw loans.
Q.
It was only for the second draw loans that you required the
1065?
A.
Correct.
Q.
Okay. Do you recall in the SBA guidelines why that would
be?
A.
I can't speculate to the SBA guidelines.
Q.
No. I meant it differently. In all the SBA literature
that you looked at, did you ever read an explanation for this
regulation you say that says in the second round you need a
1065, but only in the second round?
A.
Yes. It was under the heading of how to calculate the
eligible loan amount.
Q.
Why would you need a 1065 to calculate the eligible loan
amount?
A.
Sir, that's what's in the SBA guidelines.
Q.
You're talking about verifying payroll?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No, sir.
Q.
Okay. All right. Why don't we go to the third page first.
This is --
MR. ETRA: Sorry. This is C-10 and that is part of...
This is part of Government's 17 of the PayPal
production. The Government offers -- sorry. The Defense
offers.
(Pause in proceedings.)
MS. JIMENEZ: What's our exhibit number?
MR. CAVALLO: I don't have it written down. This is
from the PayPal production.
MS. JIMENEZ: But it's not one of the exhibits I
showed?
MR. ETRA: You only showed the operative page. You
didn't show the cover pages.
THE COURT: Is there any objection?
MS. JIMENEZ: No objection, Your Honor.
THE COURT: All right, then.
(Defendant's Exhibit C-10 received into evidence.)
BY MR. ETRA:
Q.
Do you recognize -- this is now Page 3 of the exhibit. Do
you recognize this page?
A.
Yes, sir.
Q.
And is this what you were referring to before when you saw
an indication that PayPal asked for the 1065?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
Okay. And let's look at the fourth line. It indicates
that -- entered by Satpall Gill. Do you know who Satpall Gill
is?
A.
I do not know that individual.
Q.
What?
A.
No, I don't know that individual.
Q.
But do you know him to be, at least at the time, a PayPal
worker?
A.
Yes.
Q.
Okay. All right. And it indicates that -- an entry of --
creation date of February 16th, 2020, right?
A.
2021.
Q.
2021. I'm sorry. Been a long day.
And this essentially is saying that Mr. Gill, on
February 16th, 2021, emailed the borrower, correct?
A.
Emailed business owner.
Q.
Business owner? Okay.
A.
Yes.
Q.
It says: "Emailed business owner IRS Form 1065, including
Schedule K-1 and bank statements," signed SG; is that correct?
A.
Correct.
Q.
And your interpretation of this -- well, you testified that
this meant that they asked for the 2020 1065. Is that your
testimony?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
How do you get that from these few words?
A.
Because we would only ask for that tax year.
Q.
Okay. Based on your knowledge of how PayPal works?
A.
Correct.
Q.
And it says it's been emailed, correct?
A.
Correct.
Q.
Isn't it a fact that on that date Mr. Gill sent an email to
the Sheppard email address and asked for the 1065s of the
parent LLCs at HM-UP, not of HM-UP? Isn't that a fact?
MS. JIMENEZ: I'm sorry. Of the what of HM-UP?
MR. ETRA: Parent. HM Four and HM Eight.
THE WITNESS: The email would not have specified the
company name. The email went to Eric Sheppard.
BY MR. ETRA:
Q.
So you don't know which 1065s were requested, correct?
A.
No, sir.
Q.
Sorry?
A.
No.
Q.
So when you testified that this line meant that the
business owner -- Mr. Gill emailed the business owner asking
for the 1065 -- sorry. Let me start again, please.
When you testified that this line meant that PayPal
requested the 2020 1065 for HM-UP, you were speculating,
correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
It's for the borrower.
Q.
Just please answer my question yes or no.
A.
Yes, but I'd like to explain. We're not going to ask for a
tax return from some other random company.
Q.
I'm not talking about a random company. I'm talking about
the owners of the borrower. So aren't you speculating about
which 1065 is being requested?
A.
No. I don't think that's speculation.
Q.
And your testimony, then, would be -- is it also -- well,
is it your view as a PayPal representative that PayPal would
never ask for the partners -- I mean the owners of the LLC --
would never ask for the owners' tax returns?
A.
We're asking for the tax returns of the borrower.
Q.
Is it your testimony that PayPal never asked for the tax
returns for the owners of the borrowers? Is that your
testimony?
A.
No, sir.
Q.
Okay. So sometimes PayPal would request 1065s from the
owners of the borrower, correct?
A.
I can't say yes or no to that.
Q.
So again, you're speculating when you say that in these few
words here that this shows that PayPal requested the 1065 for
HM-UP, correct?
A.
The email would have been addressed to Eric Sheppard as the
business owner and with the borrower name.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Could I please get an answer to my question. Are you
speculating or not? It's up to you to answer.
MS. JIMENEZ: Objection. Asked and answered.
THE COURT: If the witness will answer the question,
please. If you need to explain your answer, you can certainly
do so.
THE WITNESS: I don't think that's a speculation.
BY MR. ETRA:
Q.
Okay. So it's clear to you from reading this that the
email from Mr. Gill was seeking the 1065 return for HM-UP and
for 2020, correct?
A.
Very brief notes, yes, sir.
THE COURT: Please let us know when it might be a good
time to give the jury a well-needed break.
MR. ETRA: It's going to take a while to develop this
point, so maybe we could take one now.
THE COURT: All right. Ladies and Gentlemen, let's
take a 10-minute recess.
COURT SECURITY OFFICER: All rise for the jury.
(Jury not present, 2:30 p.m.)
THE COURT: Mr. Etra, how much more do you have, sir?
MR. ETRA: A fair amount, Your Honor.
THE COURT: What does that mean?
MR. ETRA: Over an hour, maybe two.
THE COURT: You have over an hour for your
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
cross-examination?
MR. ETRA: There's a lot to cover here.
THE COURT: All right. We're on a 10-minute recess.
MS. WEINTRAUB: Judge, can the witness be instructed,
please. Because upon leaving the court last time, it was
personally observed that there's all of the texting going on,
and meetings with the Government, and I'm just concerned --
THE COURT: I've already advised Ms. Hutcheson that
she's on the witness stand, she's not to discuss her testimony,
the testimony of any individual, or any aspect of the case.
MS. JIMENEZ: And Your Honor, just for the record,
there was absolutely no discussion with this witness at any
point, and I have told that to counsel --
THE COURT: I don't think you need to be on the
defensive.
MS. JIMENEZ: Well, I think --
THE COURT: The witness is well aware. She can
certainly use her phone and text to anyone that she wants, as
long as it's not about the case.
MS. JIMENEZ: That's correct.
THE COURT: All right. I'll see you back here in 10
minutes.
(Recess from 2:32 p.m. to 2:43 p.m.)
THE COURT: All right. Both sides ready to continue?
MS. MARTINEZ: Yes, Your Honor.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Could we just see if they are all in.
Thank you.
(Pause in proceedings.)
MS. JIMENEZ: Your Honor, I was just provided --
THE COURT: Ms. Jimenez...
(Before the Jury, 2:44 p.m.)
MS. JIMENEZ: Your Honor, may we approach?
THE COURT: Welcome back, Ladies and Gentlemen.
Please be seated, everyone.
Ms. Jimenez?
MS. JIMENEZ: Yes, Your Honor. Can we approach for a
moment?
THE COURT: All right. Come on forward.
(At sidebar on the record.)
MS. JIMENEZ: Yes, Your Honor. I was just handed -- I
was just handed a document which has a tax return attached,
which appears to be related. We have asked repeatedly, through
12 discovery productions, for reciprocal discovery in this
case.
THE COURT: What is this?
MR. ETRA: This is impeachment material. It's the
email -- we saw the line before on the document where Mr. Gill
said he emailed the borrower for the tax return. And I'm going
to show her next -- I said: "Did you produce it?" She said:
"It should be in that log." I'm going to show her it's not in
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the log and she didn't produce it. And I'm going to show her
the email, which actually shows that it's asking for the
parents of -- tax return for the parents -- the partners of the
company. And --
THE COURT: Well, what is this document?
MR. ETRA: It's the same thing. It's an email between
PayPal and Mr. Sheppard. It's PayPal's records.
THE COURT: So then you should have received that as
part of the records.
MS. JIMENEZ: I did not receive this as part of the
records. I have never seen this before.
THE COURT: Well, then where did that come from?
MR. ETRA: PayPal didn't produce it, but --
MS. JIMENEZ: This must have come from the Defendant.
THE COURT: Well, if PayPal didn't produce it, then
there's no basis to impeach her.
MS. WEINTRAUB: PayPal said -- she testified that --
she testified that --
THE COURT: You have to use the microphone, please.
MS. WEINTRAUB: -- that she provided all of the
documents from PayPal. She's testified on behalf of this
person that was communicating with the Defendant; therefore,
it's impeachment to show, A, they didn't produce all the
documents, and B --
THE COURT: No. Because you're not laying the proper
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
predicate that this document was part of the packet. How do
you link that document to the packet?
MR. ETRA: Because there's two parties. It's an email
to Mr. Sheppard. So he gets an email from PayPal.
MS. JIMENEZ: This is an individual who apparently is
at PayPal because we've seen his name. PayPal was -- we've
subpoenaed records from PayPal to produce all of the records.
They produced their records. I've turned over our records.
This witness was never the individual who handled this
particular application -- any of the applications for this
business. That has been well established here. This witness
reviewed the records that PayPal produced in response to our
subpoena. How does this impeach this witness, who has never
seen this record, as I have never seen this record?
MR. ETRA: Because the witness, who claims not to know
anything, testified that that one line, where it said
Mr. Gill -- said on February 16th Mr. Gill emailed BO,
Borrower.
THE COURT: All right. And that's the email from
Mr. Gill?
MR. ETRA: Yes.
THE COURT: Let me see. Let me see the email.
MS. JIMENEZ: Well, let me say that this is --
how is --
THE COURT: This is from Eric Sheppard to Mr. Gill.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Well, this is the email we're referring
to --
MS. WEINTRAUB: It's in response. It goes up.
MR. ETRA: There's an earlier chain. I didn't want to
to create a fake document and --
THE COURT: All right. So if there is a reference in
the document to Gill, and if, in fact, she can identify that
Satpall Got -- Gill -- is part of PayPal, and this is the
additional record that is referenced, then you can use it for
impeachment purposes.
MS. JIMENEZ: Let me just --
THE COURT: Because there's an additional document
that she's referencing specifically in the records that were
provided by PayPal. So that's fair.
MS. JIMENEZ: She did not reference -- so --
THE COURT: She referred to -- not this document. She
referred -- yeah. Where's the one --
MS. JIMENEZ: So the email that the witness referred
to is the email message that is in the PayPal records that were
produced. It was an email that's -- on February 16th, 2021,
where the business owner is asked to produce their tax return.
They have previously -- before that date, they have
produced the HM-UP Development Alafaya Trails 2019 tax return.
There is this message on 2016 requesting the 1065 tax return.
What is in the record -- what is in the record that PayPal
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
produced is a 2020 tax return for that same business, which is
the tax return that we went over on direct examination.
The witness -- I mean, those are what the records
were. And so, the witness, reviewing the records, sees that
PayPal makes a request for an additional tax return, and there
is an additional tax return supplied on February 26th, which is
the one that was shown to the jury here, the 2020 return.
How does this -- first of all, the Government has
requested 12 times, and more in emails, all of their records
relating to this case. This record does not impeach this
witness because this record was not among the PayPal records
that were produced.
THE COURT: But this witness has already testified
that she's provided the complete set of PayPal records. If
that's another record that's part of the PayPal records, and
she identifies it, and it's during that time period, and it's
referenced specifically in the documents that were sent and
were produced by the Government, then it's fair game to just
ask her if this is the document that is referenced in the other
document.
MS. JIMENEZ: Well, that's one issue. But the other
issue that I'm raising is that the Government has requested
more than 12 times for reciprocal discovery before there
was a -- I don't concede that this is impeachment of this
witness. But before there was any issue relating to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
impeachment, the Government requested the records that the
Defense had.
How is this supposed -- if this is truly an email from
PayPal, or an exchange with the Defendant, where he's
submitting an actual tax return or multiple tax returns -- I
don't know -- how is that something that --
THE COURT: Well, why wasn't that provided?
MR. ETRA: The reciprocal discovery, as we have
discussed at pretrial -- I think at the first pretrial
conference was documents we intend to use in our case in chief.
We were not planning to get into any of this in our case in
chief. We were shocked by this witness's testimony, where she
looked at that email, which is just a line -- which, they
didn't even produce this email, by the way. We didn't think
this email would come up.
THE COURT: All right. Let's -- it's fair game. If
that witness can identify who that individual is, it's fair
game.
MS. MARTINEZ: There's hearsay within --
(End of discussion at sidebar.)
THE COURT: Thank you, Ladies and Gentlemen, for your
patience.
And let's continue.
MR. ETRA: May I proceed, Your Honor?
THE COURT: You may.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: So we have the portion of C-4 on the
screen. And let's go to the very first page of this document.
Sorry. Your Honor, we want to make sure C-4 is in
evidence. It's part of a larger production. When the
Government used this page, it only used sort of this page of
the larger document.
BY MR. ETRA:
Q.
Let's look at the first page in C-10. Do you recognize
what's -- see the first page?
A.
Yes.
Q.
Do you know who Special Agent Sarah Halleran is?
A.
Yes.
Q.
Have you spoken to her in preparation for -- have you
spoken to her about this case?
A.
Yes.
Q.
Did she request this information from you?
A.
It appears so.
Q.
And are you part of PayPal Global Investigations Group?
A.
I am not.
Q.
Sorry?
A.
No.
Q.
Okay. Are you familiar with the circumstances upon which
the FBI asked for the document we just looked at?
A.
Yes.
Q.
What were the circumstances?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
They were investigating a case and submitted a subpoena.
Q.
And were they specifically asking you to try to show
whether 1065s were actually demand -- requested or required?
Correct?
A.
I don't know what documentation they specifically
requested.
Q.
Were you involved in getting this information to the FBI?
A.
I was not.
Q.
Okay.
MR. ETRA: All right. And let's go back to the third
page and the reference to that one email.
BY MR. ETRA:
Q.
I think you said that that email from Mr. Gill on
February 16th to the borrower would be in the log of emails
that we've looked at, right?
A.
It should be.
Q.
It should be. Okay. Well, why don't we look.
MR. ETRA: Let's go to 19-19. And unfortunately it's
not in date order. I don't know why, and I'm not going to ask.
But I'm going to go through this and you stop me when you tell
me if you find a February 16th email in this production. Okay?
A.
Okay.
Q.
So first page, not there, right?
A.
Correct.
MR. ETRA: Let's go to the next page.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Just tell me when we can continue.
A.
Continue.
Q.
Sorry?
A.
Continue.
Continue.
Continue.
Continue.
Continue.
Continue.
It should be on this page, but this appears to be the
automated system emails, not the emails sent by teammates.
Q.
Okay. So you have not -- so do you agree that you have not
produced that email --
MR. ETRA: Let's go back to C-10 --
BY MR. ETRA:
Q.
From Mr. Satpall Gill to the borrower -- meaning to
ericsheppard10@gmail.com -- on February 16th, correct?
A.
It did not appear in those documents you just showed me.
Q.
Okay. And in connection with your testimony, you didn't
actually read that email before you came into court and
testified about what that email was asking for, correct?
A.
I did not.
Q.
You don't know?
A.
I said I did not.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Did not.
Okay. Did you attempt to look for the email?
A.
No, sir.
Q.
Okay. So you can't say exactly what that email asked for,
correct?
A.
Correct.
Q.
Okay. Well --
MR. ETRA: Only for the witness, Exhibit C-10, please.
BY MR. ETRA:
Q.
I want to focus on the bottom email. Well, look at the
whole thing but focus on the bottom. And why don't you take a
moment and look at it, please.
A.
Okay.
Q.
Have you looked at it?
A.
Yes.
Q.
Do you recognize that to be the email from Mr. Gill at
PayPal to ericsheppard10@gmail.com, on February 16th, 2021,
about 1065s?
A.
Yes. It appears so.
MR. ETRA: Your Honor, we offer C-10 -- C-1. Excuse
me.
MS. JIMENEZ: Your Honor, the Government objects. The
document contains hearsay of the Defendant. The document
references attachments that are actually not attached to this
email.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Yes, they are.
THE COURT: I believe that the documents are attached
to the email, as we observed. But you're only seeking to
introduce the email itself; is that correct?
MR. ETRA: That's not correct, Your Honor, because
it's the response as well that continues the communication
between PayPal and Mr. Sheppard in response to the request.
MS. JIMENEZ: Your Honor, the heading of the email --
of the top email references attachments of multiple documents
of two different entities, and what's attached refers to a
single entity. So the documents that presumably were submitted
with these emails are not included, except one of them,
assuming this is the document that was submitted. And the
email contains hearsay.
MR. ETRA: Your Honor, it's a business record.
THE COURT: I'm going to allow it. It's part of the
business records of PayPal.
With regard to the exhibits that are attached, if, in
fact, they are consistent with what is reflected attached to
the 1065 returns, as well as the other items, then certainly
you can introduce that as a composite. But the objection is
noted. It's overruled. It will be admitted and is part of the
PayPal records.
(Defendant's Exhibit C-1 received into evidence.)
MR. ETRA: May I publish the exhibit?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: You may.
MR. ETRA: Okay. Now let's enlarge the bottom portion
of the -- enlarge the bottom portion of the email.
BY MR. ETRA:
Q.
Here -- this is the email that we've been talking about,
correct?
A.
Yes.
Q.
Okay. And Mr. Gill is writing to Mr. Sheppard on
February 16th, 2021, about the 1065, correct?
A.
Correct.
Q.
And he's not asking for the 1065 of HM-UP, correct?
A.
It does not specify.
Q.
Okay. Well, why don't we read the email. "Can you please
upload the following documents of both partners of the
company." Do you see that?
A.
Yes.
Q.
Do you understand that what's being requested are documents
for the owners of the company?
A.
Yes.
Q.
Okay. And it then goes on to say: "IRS Form 1065,
Schedule K-1," and other things, correct?
A.
Correct.
Q.
So do you recognize now that, in fact, that line you looked
at and talked about on direct was not PayPal asking for the tax
returns, 1065, of HM-UP but was asking for the 1065 tax returns
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
of HM-UP's parent companies HM Four and HM Eight? Is that
correct?
MS. JIMENEZ: Objection. You're misstating the email.
MR. ETRA: Leading. I mean --
THE COURT: Overruled. The witness is free to answer
that way. You may answer the question.
THE WITNESS: Can you repeat the question, please.
BY MR. ETRA:
Q.
Sure. In fact -- in fact, contrary to your testimony, here
Mr. Gill was seeking the 1065 tax returns not of HM-UP but of
HM-UP's parents, HM Four and HM Eight; isn't that correct?
A.
It just says: "Both partners."
Q.
Okay. So let me ask you something. When you were
testifying about what was in this email, you were speculating,
weren't you?
A.
I had not seen this email.
Q.
And hence, you were speculating, correct?
A.
Correct.
MR. ETRA: And let's continue the chain up.
BY MR. ETRA:
Q.
In response, Mr. Sheppard writes: "Hi, Satpall. Sorry.
Just saw your email. Will copy and upload the documents
requested in your email shortly. Thank you again for your
expeditious follow-up on documents. Sincerely, Eric."
Do you see that?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
That wasn't in the PayPal log that you produced either, was
it?
A.
No. Those aren't part of that log.
Q.
So when I asked you at the beginning of the cross, or early
in the cross, whether PayPal produced all the documents related
to these loans, and you said yes, in fact, you were mistaken.
They did not produce all the documents related to these loans,
correct?
A.
I don't consider the emails as documents relating to the
loan.
Q.
Okay.
A.
It's to get to --
Q.
Okay. So your testimony is --
(Court reporter interruption.)
BY MR. ETRA:
Q.
So your testimony is emails don't count as documents. Is
that your testimony?
A.
They are not part of the loan application considered,
correct.
Q.
Are there any other emails that PayPal has between PayPal
and Mr. Sheppard that PayPal did not produce?
A.
I don't know. As I stated, I did not personally produce
the documentation.
Q.
Oh. Since you personally did not produce the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
documentation, you really can't speak to the completeness of
the documentation produced, correct?
A.
Correct.
MR. ETRA: Let's go further a line up -- further email
up.
BY MR. ETRA:
Q.
It's an email from Mr. Sheppard to Mr. Gill: "Hi, Satpall.
I was able to send the bank statements into the portal, but the
1065 for respective LLC interest did not have the ability to go
into the portal. Attached are the 1065 returns for 2019," and
it says other information there. Do you see that?
A.
Yes.
Q.
And what does it indicate on the attachments?
A.
It indicates the attachments shown. You want me to read
the --
Q.
Well, it shows "HM Four, LLC, '19 TR." Do you see that?
A.
Yes.
Q.
And "HM Eight, LLC, '19 TR," correct?
A.
Correct.
Q.
And in fact, Mr. Sheppard sent HM Four, LLC's 2019 tax
return, "TR," and HM Eight, LLC's 2019 tax returns, correct?
A.
I don't know based off of that.
Q.
Okay. Well, let's look at the next page.
MR. ETRA: Sorry. The first page of the attachment.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Are you able to read this document?
A.
Yes.
Q.
Does it appear to be the 2019 1065 tax return for HM Eight?
A.
Yes.
MR. ETRA: And then let's go to the next one.
BY MR. ETRA:
Q.
Let me -- by the way, let me take a step back and go to
what we had before. Did you testify that PayPal only accepts
signed tax returns? Was that your direct testimony? I may
have misheard you.
A.
I believe the direction from the SBA was to fill out the
tax return and submit it.
Q.
So let me just get this out of the way. Was PayPal's
policy when they needed tax returns to accept only signed tax
returns?
A.
I don't recall.
Q.
Okay. Then I misheard your testimony. I apologize.
Okay. You're not aware of any such policy, correct?
A.
Correct.
Q.
Okay. That was HM Eight.
MR. ETRA: And did you find HM Four?
BY MR. ETRA:
Q.
And now do -- you see the HM Four tax return 2019 attached
as well, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
Okay. So do I have it correctly that Mr. Gill -- that line
on the document that we saw from Mr. Gill that says: "Email
the borrower about the tax return" was actually emailing about
the tax returns of the parent companies? Correct?
A.
I can't speculate.
Q.
All right. Well, in fact, that's what the email I showed
you said, the partners of the company, correct?
A.
Correct.
Q.
Okay. And then, in fact, Mr. Sheppard provided that which
was requested, the tax returns, 2019, of the partners of HM-UP,
correct?
A.
For 2019, yes.
Q.
And that's a good point. Here in this time period -- early
2021 this is all going on, right?
A.
Correct.
Q.
When Mr. Sheppard has to provide tax returns, he's
providing 2019 tax returns, not 2020. Do you see that?
A.
Yes.
Q.
Okay. And typically, 2020 returns aren't usually done by,
you know, February of 2020, correct -- by February of the next
year?
A.
Correct. But the SBA issued the guidance to -- if you had
not yet filed your tax return, to fill it out and submit it.
Q.
Am I correct there's not a single indication in this file
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
where it shows that PayPal asked for the 2020 tax returns of
HM-UP?
A.
Correct.
Q.
And there's not a single notation in the file where PayPal
asked for the 1065 tax returns of HM-UP for 2019?
A.
Correct. The file did not indicate the year.
Q.
And they were -- okay.
MR. ETRA: You can take that down.
I'm going to put up Government's Exhibit 19-2.
BY MR. ETRA:
Q.
I think you testified this was the application data
submitted by Mr. Sheppard, or whoever it was at his Gmail, on
January 19th, 2021, for the second round, correct?
A.
Correct.
Q.
And this is based on your understanding of how the
documents worked, right? You're interpreting documents based
on your understanding of the systems and policies and
procedures, correct?
A.
Yes.
Q.
All right. And I want to show you -- also put up next to
it the version of the application --
MS. JIMENEZ: Excuse me. What exhibit number is this,
please?
MR. ETRA: The current one is 19-2, and I also want to
put up 17-4 next to it, both in evidence.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Okay. So on the right-hand side, 17-4, it has a -- is the
application data from the portal for the first round, correct?
A.
Correct.
Q.
And the left side is the -- per your testimony, the
application data from the portal for the second round, right?
A.
Correct.
Q.
Do you find it strange that they're completely identical?
A.
Because the applications were tied and the applicant logged
into the portal, the information is carried forward.
Q.
Okay. So thank you for explaining that. So for the second
round, it's not as if Mr. Sheppard, or whoever had access,
typed in the information for 2021 the way it appears on the
application data here. You're not saying he did that or anyone
at his portal did that, correct?
A.
Correct. The lead information form has the additional
information.
Q.
Okay. So the information in this application data was
simply something got -- a button got pressed and the -- PayPal
imported the information from the first round into the second
round, right?
A.
Correct.
Q.
So your testimony isn't that the second round application
data was newly filled in by the applicant, correct?
A.
Correct. If there were changes, it would show on the lead
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
information.
Q.
I had a hard time hearing you. I apologize.
A.
Yes. That's correct. If there were changes, it would show
on the lead information.
MR. ETRA: Let's go to the lead information, then,
which is the first page of 19-2, and we can take down the other
document.
BY MR. ETRA:
Q.
So here, for example, this is the lead information for the
second round?
A.
Yes.
Q.
So when it says: "Number of Employees, 80," didn't that
just get carried forward from the first round by PayPal?
A.
No. This is specific to the application version SBA 2.
Q.
Is your testimony -- I just want to make sure I understand
it. Is your testimony that -- strike that.
Isn't it true that under its system -- under PayPal's
system, when an applicant sought a second round, it carried
forth the data from the first round? Correct?
A.
It depends on the screen. The application data is tied
together. The lead is a separate loan lead.
Q.
And your testimony is -- so how did that "80" get there?
A.
That was what was input at the time of the application.
Q.
In the second round?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And what is that based on? How do you know that?
A.
That's my understanding of how the system works.
Q.
Are you sure that's how the system works, that one page is
copied from the previous year and the other page isn't?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained.
MS. JIMENEZ: Asked and answered.
THE COURT: Sustained.
BY MR. ETRA:
Q.
Do you know for a fact that the information here was newly
put in, or are you not sure?
MS. JIMENEZ: Asked and answered.
THE COURT: Sustained.
MR. ETRA: All right. Let's go to the second page of
this document.
BY MR. ETRA:
Q.
This is that number we were talking about, right, the one
with the five?
A.
Correct.
Q.
Okay. So your understanding -- your testimony is that this
was inputted by the applicant in January of 2021, correct?
A.
Yes.
Q.
Okay. And PayPal had this information -- and this is an
ineligible code, right?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. And PayPal had this information from January to
February but didn't reject the loan application for an
ineligible code until it ran the credit report a month and a
half later?
A.
Correct.
Q.
Okay.
(Pause in proceedings.)
BY MR. ETRA:
Q.
Let's go to the --
(Pause in proceedings.)
MR. ETRA: Putting on the screen I-10 -- it's part of
Exhibit 17 from the Government --
THE COURT: I'm sorry. Seventeen?
MR. ETRA: It's part of the Government's Exhibit 17 in
evidence.
MS. JIMENEZ: Okay. But which exhibit?
MR. ETRA: Defense I-10.
MR. CAVALLO: It's 19-13 for the Government.
MS. JIMENEZ: Thank you.
THE COURT: 19-13. All right.
MR. ETRA: May I proceed?
THE COURT: Yes. Of course.
BY MR. ETRA:
Q.
Do you see this -- recognize this to be the purported 2020
returns for HM-UP you testified about on direct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes, sir.
Q.
Okay. And I want to focus on the -- well, first, the
question is: Does PayPal -- I think you testified this was
submitted on February 26th, 2021; is that correct?
A.
Correct.
Q.
Okay. And -- but PayPal doesn't have information from
the -- of the IP address, correct?
A.
Correct.
Q.
Or any other way of telling who did it?
A.
Only that it was submitted through the portal via email
log-in and password.
Q.
By the way, if you -- do you know this question -- and if
you don't know the answer, fine, but you seem to know a lot.
Can someone go into a portal -- forget it. It's too much of a
mouthful.
All right. Let's focus on the signatures at the
bottom. Am I correct that PayPal will accept -- whenever
PayPal needs for the PPP program a tax return, a 1065 tax
return, it doesn't need the name or any information of an
accountant on it, correct?
A.
Correct. It's not required to have an accountant or a
preparer.
Q.
And to the extent that PayPal ever relies on tax returns
submitted, whether or not there's a name there, or a signature
there, or a PTIN number, is irrelevant, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
All right. And PayPal understands that when taxpayers
submit returns for any number of reasons there may be no
information from the -- from a tax preparer, correct?
A.
Sure.
Q.
Okay. All right. What are the dates of the purported
signatures here? You see February 9 and February 12?
A.
Yes. The signature of the partner is February 12th, 2021,
and the signature from the preparer is February 9th, 2021.
Q.
On purported 2020 tax returns of HM-UP, right?
A.
Correct.
MR. ETRA: Now let's go to Government Exhibit 19-10.
BY MR. ETRA:
Q.
You recall talking about this exhibit on your direct?
A.
Yes.
Q.
And this was submitted to PayPal, correct?
A.
Correct.
Q.
From that portal?
A.
Yes.
Q.
And you don't have a date for the submission, correct?
A.
I don't recall.
Q.
Okay. But it has a date on the document, correct?
A.
Yes, sir.
Q.
All right. Before I do that, let me just go to the
second-to-last paragraph which says: "The company's two main
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
bank accounts are with Wells Fargo and SunTrust Bank, which
both have been provided for verification of the company and
also the volume of wages." You see that?
A.
Yes.
Q.
Did PayPal understand that whoever submitted this was
basically saying: "If you want to verify payroll just look at
the bank accounts"?
A.
Yes. That can be --
Q.
All right. Okay. Now let's go to -- again, the date is
February 15th, 2021, right?
A.
Yes.
Q.
And I want to look at the -- Line -- actually, Line 6:
"Provided bank statements with copies of checks for employees
and schedule," right? You see that?
A.
Yes.
Q.
That's consistent with the other paragraph I read that
someone at the borrower was saying: "Here are the bank
records. That's how to verify payroll," right?
A.
Correct.
Q.
Okay.
MR. ETRA: Now let's go to the -- Line 2. And to be
fair, let's do Line 6 too. Let's do Line 5 as well, to be
fair.
BY MR. ETRA:
Q.
It also said: "Provided 941s and 940 for 2020," correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
That is -- those are the documents you use to verify
payroll, right?
A.
Correct.
Q.
Okay. And now let's go to the -- Line 2. Here, the
borrower is saying: "Tax returns commenced for the year. 2012
through 2019 were filed." You see that?
A.
Yes.
Q.
So on February 15th the applicant is saying: "We've filed
our returns through 2019," right?
A.
Correct.
Q.
And on Line 1, the applicant is saying: "The 1065 tax
return for 2019," colon. Then it said: "2020 is not prepared
as of today." Do you see that?
A.
Yes.
Q.
So what the applicant is telling PayPal is as of
February 15th, 2021, the applicant's returns for 2020 have not
been prepared, right?
A.
Correct.
Q.
Now let's go back to the 2020 returns. Those are dated
before the memo, correct?
A.
They are.
Q.
So the applicant is saying: "I have no returns for 2020 as
of February 15th," correct?
A.
Correct.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
But somehow someone submitted these bogus tax returns that
are signed earlier, correct?
A.
Correct.
Q.
Did that cause PayPal to wonder if there's more than one
person submitting information?
A.
I can't speculate to that.
Q.
Do you know?
A.
(No verbal response.)
Q.
That would be speculation. You don't know. Okay.
Is there any -- okay. Did PayPal -- you see anything
in the records where PayPal made note of this and said:
"There's something wrong here. We have supposed tax returns
that are dated by February 12 or February 9 but the applicant's
already told us they are not prepared yet"?
A.
No. There was nothing in the notes indicating that, but
that's not totally out of the ordinary either.
Q.
What's not totally out of the ordinary?
A.
To have date discrepancies. There was a lot of confusion
around what a prepared return was versus submitted.
Q.
So it's not out of the ordinary to hear from an applicant
that a certain document hasn't been prepared yet, and then to
get that document prepared with an earlier signed date,
especially a tax return? That's typical? That's not out of
the ordinary?
A.
In those times, yeah. Where the SBA asked for tax returns
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that hadn't yet been filed, yeah, unfortunately, it was.
Q.
But these are signed -- these are purportedly -- these are
purportedly signed documents, not purportedly draft documents,
right?
A.
Sure. But we heard from customers who thought that they
had to actually file with the IRS and didn't understand the
difference between preparing and filing.
Q.
I'm sorry. I'm not sure I understood your last answer.
Could you please repeat that.
A.
There was often confusion between understanding what a
prepared return was versus filing with the IRS.
Q.
Okay. Do you have any information that when the borrower
wrote to you on February 15 that 2019 tax returns have not been
prepared that the borrower was confused about those things?
MS. JIMENEZ: Objection. Calls for speculation.
THE COURT: Sustained.
BY MR. ETRA:
Q.
You also were shown 2019 purported returns from HM-UP,
correct?
A.
Correct.
Q.
And is it fair to say that there's no indication that those
returns were requested either?
A.
Correct.
Q.
And you don't know who was involved in providing those
purported returns?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Does -- is there any information that would indicate -- is
there any evidence from PayPal that anyone at PayPal reviewed
the 2020 -- the purported 2020 return from HM-UP?
A.
No, sir.
Q.
Is there any indication that anyone at PayPal relied on
that purported return?
A.
No, sir.
Q.
You were shown various quarterly employment tax filings --
employment tax filings -- or I shouldn't say that -- employment
filings for 941, 940, RT-6, correct?
A.
Correct.
Q.
And notwithstanding -- the reality is you don't know
whether Mr. Sheppard signed where it says: "Mr. Sheppard,"
right?
A.
I don't verify signatures.
Q.
Right. Or his knowledge of what was going on on the
documents, correct?
A.
Correct.
MR. ETRA: Let's go back to that email chain. Putting
back up P-1, I'm going to go to the bottom of the email chain.
BY MR. ETRA:
Q.
All right. This is an additional --
MR. ETRA: No. The very bottom of the whole chain.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
The bottom email --
MR. ETRA: We have to go a little higher to see the
date.
BY MR. ETRA:
Q.
-- is a February 9th email from Mr. Gill to Eric Sheppard
at the Gmail address, correct?
A.
Yes.
Q.
Okay. And it asks for various documents. If you look
below, it includes the 941, correct? Let's take a look at it.
Do you see that?
A.
Yes.
Q.
And again, you don't know whether Mr. Sheppard -- what his
knowledge was of Form 941s, correct?
A.
I do not.
MR. ETRA: Let's go further up the chain and just run
through this chain.
BY MR. ETRA:
Q.
And then you see Mr. Sheppard's response, or whoever is
manning his email, to Mr. Gill on February 11. You see that?
A.
Yes.
Q.
Says: "I received the 941s for 2020 from our accounting
department and submitted them to the portal." Do you see that?
A.
Yes.
Q.
Okay.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Let's go further up.
BY MR. ETRA:
Q.
And then on February 11th Gill writes back: "Hi, Eric. I
received your 941 Form. Can you please upload the rest of the
documents too. I've made space in your portal." Do you see
that?
A.
Yeah.
Q.
All that back-and-forth information, that's not reflected
in that other information -- in the documents you provided to
the Government, right?
A.
Correct. Because these were individuals -- between two
individuals -- emails between two individuals, not the
automated emails we reviewed.
Q.
I see. That's only the automated emails. Okay. Do you
know if they're -- we've covered that already.
MR. ETRA: Let's go further up.
BY MR. ETRA:
Q.
Mr. Sheppard writes: "Hi, Satpall. What other documents
do you need? I think the office sent the 940, 941s, bank
statements, driver's license, other documents." Do you see
that?
A.
Yes.
Q.
Okay. And going further up the chain, that's when Mr. Gill
asked for the 1065s of the parent companies, partners of the
companies, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Okay. Great.
MR. ETRA: You could take that down.
BY MR. ETRA:
Q.
I want to talk about the quarter-to-quarter comparisons
for -- on revenue. Okay?
A.
Okay.
MR. ETRA: 8-6 is part of the production that's in
evidence already.
MS. JIMENEZ: I'm sorry?
MR. ETRA: 8-6 is part of the production --
MS. JIMENEZ: Which Government --
MR. ETRA: It's the first quarter-over-quarter
comparison with the bank records.
MS. JIMENEZ: And which Government exhibit is it,
please?
MR. ETRA: It's part of 17.
MR. CAVALLO: I cannot tell a specific document from
your exhibit list. It would be part of Composite 17, the
PayPal production.
MS. MARTINEZ: Can we see the Bates label?
THE COURT: Is 11460 part of the Government's exhibit?
MS. JIMENEZ: Should be. Yes, Your Honor.
THE COURT: All right. Then let's continue.
MR. CAVALLO: Your Honor, I'm sorry. I believe it's
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
19-7. 19-7.
MS. JIMENEZ: Thank you.
THE COURT: All right. Thank you, sir.
BY MR. ETRA:
Q.
Ma'am, have you had a chance to look at the document during
this time?
A.
Yes.
Q.
Great. And this is one of the documents submitted by the
applicant for the second round, correct?
A.
Correct.
Q.
And essentially what's going on here is the applicant is
providing analysis and backup to justify the loss in revenue
from a quarter in 2019 to a quarter in 2020, correct?
A.
Correct. Q4 of 2019 to Q1 of 2020.
Q.
Right. But he didn't do it right? Correct?
A.
Correct.
Q.
All right. Because you really have to do the same quarter,
like first quarter in one year compared to the first quarter in
the next year, or second quarter. But you got to be consistent
on the quarters; is that right?
A.
Exactly.
Q.
And in fact, if you saw the application, it made the same
mistake. It also compared the fourth quarter of 2019 to the
first quarter of 2020, right?
A.
Yes. The first one did.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. Nevertheless, it's the second document where the
applicant is indicating that it has two choices on how to prove
loss of revenue. One is quarter-over-quarter, the other is
year-over-year, right?
A.
Yes.
Q.
And it's the second time the applicant is saying -- is
providing information going the route of quarter-over-quarter,
right?
A.
Correct.
Q.
And if we could just skim down through the documents, you
see he is attaching bank records, right? Let's take a look.
And notwithstanding the mistake of doing the quarter
analysis wrong, the way to substantiate the loss is through
bank records, right?
A.
Yes.
Q.
Not tax returns, right?
A.
Well, the SBA -- the bank records can be provided in
addition to the tax returns.
Q.
Okay. The way the SBA has the rule, if you're doing
quarter-over-quarter, you don't need tax returns; you do need
bank records, correct?
A.
Sir, I'd have to read the SBA regulations again.
MR. ETRA: Put up Exhibit N-6 only for the witness.
And I'm not seeking to offer this into evidence, Your Honor.
THE COURT: All right.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
Do you see Exhibit N-6?
A.
Yes.
Q.
Do you recognize it?
A.
Yes.
Q.
This is an email between you and the prosecutor,
Ms. Jimenez, correct?
A.
Correct.
Q.
September 13th, 2023?
A.
Correct.
Q.
And it's also copied someone named Michael Getzler.
A.
Yes. That's PayPal's legal counsel.
Q.
Okay. And if you look at the subject line, it's got a re
in it that suggests that it's a response to an email. You know
how it has a re in it when you're responding to an email?
A.
Yes.
MR. ETRA: And could you go below and see if we have
that email from Ms. Jimenez.
Okay. I don't see it.
BY MR. ETRA:
Q.
Do you know what Jimenez asked of you?
MS. JIMENEZ: Objection. Relevance.
THE COURT: Overruled. If she knows.
THE WITNESS: I believe it was following a meeting
where we were prepping for trial.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
And in that meeting Ms. Jimenez was pressing you to try to
prove that PayPal required the 2020 fake tax returns for HM-UP?
MS. JIMENEZ: Objection. Argumentative.
THE COURT: Sustained.
MR. ETRA: Your Honor --
BY MR. ETRA:
Q.
That's a meeting where Ms. Jimenez was asking you to -- if
PayPal could show that PayPal had required the 2020 fake HM-UP
tax returns?
A.
I believe the discussion was asking why we requested the
2020 returns, and I referred to the SBA documentation.
Q.
I see. So were you then laboring under the misimpression
at the time that PayPal had requested the 2020 HM-UP returns?
MS. JIMENEZ: Objection. Misstates the testimony.
THE COURT: Overruled.
THE WITNESS: I don't recall the exact conversation.
I recall going out and refreshing my memory on the SBA
guidelines at the time, because again it had been three years
and I needed to read the reg myself.
BY MR. ETRA:
Q.
And then you basically are explaining that this has to do
with the reduction in revenue, correct?
A.
This is a direct copy from the SBA.
Q.
You wrote to Ms. Jimenez that: "In order" -- that the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
entity, which is the borrower, "must show the 25 percent
reduction in gross receipts substantiated by providing 2019 and
2020 tax returns." That's what you wrote to Ms. Jimenez,
correct?
A.
Yes. And down below is a copy from the SBA reg.
Q.
Right. In fact, the records show -- in fact, we saw
already that the borrower has a choice between proving a loss
year-over-year or quarter-over-quarter, correct?
A.
I don't recall that in the reg, but we can go to sba.com
and read it.
Q.
It was in the portal. Remember you saw that in the portal?
A.
They can show the reduction, but my understanding was 1065
was required regardless.
Q.
Okay. Well, let's actually look at the language you have
here. And you quote from the regulation, correct?
A.
Yes.
Q.
And the language you quote basically says that the tax
returns are required if you're using an annual reference point,
correct?
A.
Yes.
Q.
Meaning if the borrower is trying to prove loss of revenue
by comparing one year to the next, correct?
A.
Correct.
Q.
Would you like to see the regulation?
A.
No, sir.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
No?
A.
No.
Q.
Well, am I correct that the regulation says that the tax
returns are required to prove loss of revenue only if the
borrower is trying to prove loss in revenue from year to year?
Correct?
A.
Yes. It says: "If using annual reference period."
Q.
Right. And if the borrower is looking to prove loss of
revenue quarter-over-quarter, according to the SBA regulations,
you don't need to provide tax returns, correct?
A.
Correct.
Q.
Okay. I'm happy to show you the regulation, if you want.
MS. JIMENEZ: I'm sorry. What was the question?
THE COURT: "I'm happy to show you the regulation if
you want."
BY MR. ETRA:
Q.
I'll rephrase it. Would you like to see the regulation in
order to answer the question? It's up to you.
A.
No, sir. Based off this --
Q.
You're confident, then, that when the application chooses a
reduction in revenue quarter-over-quarter -- a quarter for one
year, quarter for the next -- the applicant is not required to
provide its tax returns to demonstrate that, correct?
A.
Correct. This indicates it's for annual.
Q.
Right. And you know from the documents we've seen that the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
applicant elected to prove loss of revenue only by arguing
quarter-over-quarter, correct?
A.
Correct.
MR. ETRA: Are we doing an afternoon break, Your
Honor?
THE COURT: We had a break an hour ago.
MR. ETRA: Could I have a few minutes to confer with
my colleague?
THE COURT: To see if you have completed the
cross-examination?
MR. ETRA: No. I'd like to confer with my colleague.
THE COURT: All right. Certainly.
(Pause in proceedings.)
MR. ETRA: No further questions. Thank you, Your
Honor.
THE COURT: All right. Redirect.
REDIRECT EXAMINATION
BY MS. JIMENEZ:
Q.
Ms. Hutcheson, you were asked in connection with the first
loan application by this business some questions about
affiliates. Do you recall?
A.
Yes. That's correct.
Q.
It was a while ago.
MS. JIMENEZ: All right. If we could pull up 17-4,
please.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Can we enlarge the middle section, please.
BY MS. JIMENEZ:
Q.
What was the information you were provided about the name
of the business that was applying for this loan?
A.
The legal business name was HM-UP Development Alafaya
Trails, LLC, doing business as HM Management and Development.
Q.
All right.
MS. JIMENEZ: And then if we can pull up 17-6, please.
BY MR. ETRA:
Q.
And that is -- is that -- 17-6 is a bank statement from HM
Management and Development, LLC?
A.
That's correct.
MS. JIMENEZ: And then if we can pull up 17-5, please.
BY MS. JIMENEZ:
Q.
Is that a bank statement from a business named CJUF III
Flagler, LLC?
A.
Correct.
Q.
Did you have any indication from the records that you
reviewed that CJUF Flagler was an affiliate of any other
business?
MR. ETRA: Objection. Leading.
THE COURT: Overruled.
THE WITNESS: I believe there was the one payroll
report that listed both business names.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Listed both business names. Was there any statement
provided in the records that you received telling PayPal that
CJUF was an affiliate of HM-UP Development Alafaya Trails?
A.
No, there was not.
Q.
And when the question was asked by PayPal in its portal
whether the business HM-UP Development Alafaya Trails had any
affiliates, what was the answer that was provided?
A.
"No."
Q.
Now, there -- does -- why does PayPal ask -- want to know
whether or not there are affiliates of a business that's
applying for the loan?
A.
It's requested by the SBA, as that would impact the
business eligibility for the loan.
Q.
When a business applies as a business with employees, is
there a limit on the number of employees that the business
could have to qualify for a Paycheck Protection Program loan?
A.
Yes, there is.
Q.
In round one, it was a certain number. Do you recall what
that number was? Five hundred --
A.
I was going between 300 and 500, yes.
Q.
And then for round two, or in 2021, there was a different
number?
A.
Correct.
Q.
Three hundred; is that right?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And so did the SBA indicate to businesses who were applying
that for purposes of indicating when they were applying as a
business with employees, how many employees they had, that they
are to consider the number of employees of their affiliates?
Is that what the SBA indicated?
A.
Yes.
Q.
And then -- but for purposes of establishing the loan
amount, the loan amount was based on -- I think you testified
it was based on wages, the payroll; is that right?
A.
Yes. Correct.
Q.
And was the payroll or the wages of the business that was
applying -- was that supposed to be based on the wages of the
business applying or the payroll of the business and its
affiliates?
A.
Based on the business applying.
Q.
The business applying only; is that correct?
A.
Yes. That is correct.
MS. JIMENEZ: Can we go to Exhibit 17-3, which is
somewhere else -- spreadsheet.
BY MS. JIMENEZ:
Q.
Now, this is something that the applicant would see when
they log into the portal to apply for a PPP loan from PayPal,
right?
A.
Correct.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Was this interface -- was this page similar in round one
and round two, or 2020 and 2021?
A.
It was not. This was not provided in 2021.
Q.
This was not provided at all in 2021?
A.
Correct.
Q.
Okay. And in 2020 you have columns for different
categories on the right side. Do you see that in light blue?
A.
Yes.
Q.
And so a self-employed individual, or a sole
proprietorship, or an independent contractor is separate from
either an LLC or a partnership; is that right?
A.
That is correct.
MS. JIMENEZ: Can we go to 17-8, please.
BY MS. JIMENEZ:
Q.
All right. You were shown this document before. Was this
document submitted with the first loan application in April of
2020?
A.
Yes, it was.
Q.
Now, this business had indicated it was an LLC; is that
right?
A.
Correct.
Q.
And on this document, does it indicate that there is a
partner -- that there are partners? You see the name Eric
Sheppard?
A.
No.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
If you go down to the name Eric Sheppard...
A.
Yes.
Q.
And then the last name on this list -- do you see a name?
A.
Yes.
Q.
And that is?
A.
My apologies. Jeff Graff is listed as a partner.
Q.
All right. Per SBA guidance, were the earnings of partners
allowed to be included toward the wage calculation?
A.
(No verbal response.)
Q.
Up to a hundred thousand dollars?
A.
Yes.
Q.
And so those were included here; is that right?
A.
Correct.
Q.
And then, in 2021 --
MS. JIMENEZ: If we can go to the applications that
were submitted by the applicant, 19-12 and 19-7.
If you would put those side by side.
Oh, no. Sorry. Wrong.
Is that 19-7?
Okay. Sorry. 19-6, I meant. Sorry. 19-6.
If you can go down to Page 4.
All right. Is that Page 4?
I'm sorry. Exhibit 19-12, Page 4.
Keep going, please.
All right. I've got to get my paper exhibits. Can
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
you scroll back up one page.
Stop.
Just a moment.
19-6 is on the left or the right?
The right. Okay.
Is that Page 4 that we're looking at?
Okay. Scroll up, please.
Okay. Here. Stop. Stop. Sorry.
All right. If you could hone in on this second
paragraph under the instructions.
Okay. "For purposes."
No. The whole paragraph.
BY MR. ETRA:
Q.
Now, in 2021, there were some questions about what was
required for businesses to produce in terms of tax records.
This business -- based on the application that was submitted in
2021 and the tax records that were submitted in 2021, they
indicated that it was a partnership; is that right? The 1065s?
A.
Correct.
Q.
All right. And then here, on the Second Draw Borrower
Application Form for 2021, the business or the applicant is
told -- if you read the last paragraph -- I'm sorry. Not the
last paragraph. That would be very painful. The last sentence
of this paragraph for applicants that are partnerships, what
does it tell them they need to provide?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
"For applicants that are partnerships, payroll costs are
computed using net earnings from self-employment of individual
general partners, as reported on IRS Form 1065 K-1, reduced by
Section 179, expense deduction claimed, unreimbursed
partnership expenses claimed, and depletion claimed on oil and
gas properties, multiplied by .9235, that is not more than
$100,000, plus any eligible payroll costs for employees."
Q.
So partnerships -- because the partners or at least general
partners in a partnership could provide -- could include their
net earnings toward the payroll calculation -- in addition to
the wages they pay employees, partnerships were required to
submit their 1065 tax returns?
MR. ETRA: Objection, Your Honor.
THE COURT: And the basis?
MR. ETRA: The basis is beyond the scope, a new
argument as to why 1065s are required that I was not able to
respond to on cross.
THE COURT: Overruled.
THE WITNESS: Yes. That's correct.
BY MS. JIMENEZ:
Q.
Okay. In this case, in -- in the 2021 records that you
reviewed, there were two partnership tax returns that were
included with those records that you reviewed, right? A 2019
signed return; is that right?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And then a 2020 signed return, right?
A.
Correct.
MS. JIMENEZ: If we can take a look at Exhibit 19 --
Exhibit -- the 19-13. 19-13, the 2020 return.
BY MS. JIMENEZ:
Q.
That is a partnership return for this business, right, a
1065 partnership return?
A.
Correct.
Q.
You had indicated whether -- you had indicated -- well,
it's unclear. You had indicated that the return was required
to be signed or -- was that your testimony?
A.
Although it didn't specify signed, that is kind of --
that's part of completing the return.
Q.
All right.
MS. JIMENEZ: Can we go back to 17-3 for a moment,
please.
BY MS. JIMENEZ:
Q.
For PayPal in 2019, did you require that tax return --
well, in 2019 you required -- I'm sorry -- in 2020 you required
them to submit 2019 returns that were actually filed; is that
correct?
A.
If they were supplying a tax return, yes.
Q.
Right. Those had to be filed.
Now, generally speaking, were the SBA rules in 2021
for the second round more stringent than they were in 2020?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes, they were.
Q.
Now, in 2020 -- I'm sorry -- in 2021, with respect to tax
returns, if a tax return is not filed because it's the first
quarter of the year, did PayPal require that the return be
signed?
A.
Yes.
Q.
All right.
MS. JIMENEZ: Let's go back to the 2020 return and
let's go back to the signature block.
BY MS. JIMENEZ:
Q.
The signature block for a signed tax return that PayPal
required is signed under penalty of perjury by the individual
signing the return; is that correct?
A.
That is correct.
Q.
And they're indicating, when they sign under penalty of
perjury, that all of the information is true, correct, and
complete; is that right?
A.
Correct.
Q.
Now, the attorney for the Defendant, when he first got up,
told you -- it was a long time ago, but he told you that there
were fraudulent documents supplied with this loan application.
Do you remember that?
A.
I do.
Q.
Now, when you -- when PayPal requests -- or when PayPal
receives an application from an applicant, there was some
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
discussion you had about what was an applicant. If you have a
business applying, the business information is provided,
correct?
A.
Correct.
Q.
And then you require -- or do you require that the business
apply through its owners or authorized representatives?
A.
Yes, we do.
Q.
In this case, who was the owner or authorized
representative of the business that applied for these loans?
A.
Eric D. Sheppard.
Q.
And does PayPal want to know who is sitting at a computer
terminal potentially doing entries and hitting a send button or
does PayPal want to know who is the authorized representative,
who is the responsible party submitting the documents on behalf
of this business?
A.
We ask for the authorized party, authorized representative.
Q.
Who was the authorized representative and the person
responsible for the documents that were submitted to PayPal in
this case?
MR. ETRA: Leading and asked and answered.
THE COURT: Sustained on the second ground.
BY MS. JIMENEZ:
Q.
Was there anyone besides the name Eric Sheppard provided to
PayPal as the authorized representative and owner of the
business that was applying for this loan?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No, there was not.
Q.
And for this loan, the Defense attorney told you there were
fraudulent documents submitted; is that right?
MR. ETRA: Objection. Asked and answered.
THE COURT: Sustained.
MS. JIMENEZ: Can we go to 17-10, please.
We'll come back to that.
17-10. Can you hone in on the email.
BY MS. JIMENEZ:
Q.
Do you see the email that -- well, you reviewed a couple of
emails with the Defense attorney. But there were some
questions posed to you about whether the applicant could add
information to the application or make changes to the
application. Do you remember that?
A.
Yes.
Q.
Now, this email was -- I can't see -- April 22nd. Do you
remember when the SBA Form 2483 was DocuSigned and executed by
the Defendant in this case?
A.
It was first sent to the business on April 23rd, and it was
signed on May 1st.
Q.
So it was signed on May 1st. And that --
MS. JIMENEZ: Let's go to Exhibit 17-11, please, the
DocuSign page.
Here. Stop. Stop.
No. Go up.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Okay. The last two paragraphs and the signature.
BY MS. JIMENEZ:
Q.
So at the point in time when the applicant signs this
document, at this point in time, are they certifying to you
that all the information provided is true and accurate in all
material respects?
A.
Yes. They're certifying everything on this form and all
supporting documents are true and accurate.
Q.
So if something important is mistaken, would that
certification be valid?
A.
No, it would not.
MS. JIMENEZ: Could we go back into the document,
first page.
Okay. Here. The top box.
BY MS. JIMENEZ:
Q.
There were some questions posed to you about number of
employees being 80, and could that be changed, could that not
be changed. At this point, May 1st, 2020, the applicant, Eric
Sheppard, has signed and certified this document, right?
MR. ETRA: Objection. Leading.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Was it signed on this day?
A.
Yes, it was.
Q.
Was it certified on this day?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And so what did PayPal believe when you received this
DocuSigned document back that was signed and certified?
MR. ETRA: Objection. Personal knowledge or belief.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Based on your experience at PayPal, and your participation
in the Paycheck Protection Program, when PayPal received
DocuSigned, executed 2483 forms, what was PayPal's
understanding about the loan process?
A.
That all information was true and accurate.
Q.
You were asked some questions about whether the tax returns
were relied on -- or you were asked that there was no
indication that anyone at PayPal relied on a tax return. I
want to ask you: Do you know -- were you -- did you
participate specifically in this loan -- in either the first
loan application that was submitted in April 2020 or the second
loan application that was submitted in January of 2021, did you
participate in reviewing the loan?
A.
I did not. I never reviewed any documentation until 2023.
Q.
And was there -- what you reviewed in the record was a
receipt of a 2019 tax return. Did you see that?
A.
Yes.
MR. ETRA: Objection.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
And you saw -- was there a request for a 1065 return?
MR. ETRA: Objection. Leading.
THE COURT: Sustained. Rephrase.
BY MS. JIMENEZ:
Q.
Yes. The -- was there a February 16th, 2021 email that you
reviewed?
A.
There was.
Q.
What did that request?
A.
It requested a 1065 tax return.
Q.
And then was there a 1065 tax return supplied that you
reviewed in the records that you had been provided that were --
I'm sorry. Let me try to ask a question.
Did you -- in the records that you were provided to
review, was there a tax return submitted after February 16th,
2021?
MR. ETRA: Objection. Personal knowledge. She
doesn't know the dates of these documents.
THE COURT: If the witness knows. Overruled.
THE WITNESS: I do recall that on February 26th of
2021 the applicant submitted a 2021 tax return 1065.
BY MS. JIMENEZ:
Q.
Do you have records at PayPal, internal records, that tell
you when documents are actually uploaded into your system?
A.
Yes. Within the Salesforce system, you can see where they
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
are uploaded. It's not necessarily time-stamped here. But
that is one of the things I requested personally, so that I
could validate the date, was a screenshot of our system.
Q.
So from the records that you reviewed, you saw a request
for a tax return on February 16 and a tax return provided
February 26; is that right?
MR. ETRA: Objection. Leading.
THE COURT: I'll allow it. Overruled.
THE WITNESS: That is correct.
MS. JIMENEZ: Can we pull up Defense Exhibit P-1.
MS. MARTINEZ: I think we only got a paper copy.
MR. ETRA: Sorry.
THE COURT: Ladies and Gentlemen, how is everyone
doing?
I know we're expected to conclude at 4:30. Is anyone
in need of a break?
Okay. All right.
(Pause in proceedings.)
BY MS. JIMENEZ:
Q.
Okay. Now, this email string and whatever is attached, was
this something that was provided to you to review as a part of
the records that PayPal produced to the Government in this
case?
A.
No. I had not seen this document until today.
Q.
Now, at the top, on sort of the left side of the screen
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Miami, Florida 33128
(305) 523-5698
here, the attachments indicate two different companies; is that
right?
A.
Yes. The names are titled HM Four, LLC and HM Eight, LLC.
Q.
And does the attachment that you reviewed -- I don't know
whether you had the opportunity to review it -- did it include
a return or a document for HM Four, LLC?
A.
Yes. I believe the one we reviewed earlier did.
MS. JIMENEZ: Well, can we go to Page -- whatever page
number -- Page 5 of Defense Exhibit...
BY MS. JIMENEZ:
Q.
See the top there is HM Eight. Do you see that?
A.
Yes.
Q.
Did you see a tax return included here for HM Four?
A.
I thought there was. I don't recall. Can we scroll down?
MR. ETRA: Is she asking --
THE COURT: She's asking to look.
THE WITNESS: Yes. Here's HM Four.
MS. JIMENEZ: I'm sorry. Is that in here?
(Pause in proceedings.)
MS. JIMENEZ: If I could just have a moment, Your
Honor.
THE COURT: All right.
(Pause in proceedings.)
MS. JIMENEZ: Could we go to Page -- whatever the K-1
is for HM Eight, please.
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Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Okay. Here, for this tax return, which obviously you
haven't seen before, it indicates -- well, it's unclear what it
indicates -- but that for the partner HM Eight, this other
entity owns 48 percent, right?
A.
Correct.
Q.
Okay.
MS. JIMENEZ: Now, there's -- I see HM Four now. So
if we can go to HM Four -- could we go to the K-1 for HM Four,
please.
Is my copy wrong?
I apologize, Your Honor. I was just handed this this
afternoon.
(Pause in proceedings.)
MS. JIMENEZ: We'll come back to this. Let's go to
the emails in the front.
All right. The next page, the third page.
BY MS. JIMENEZ:
Q.
Okay. So it appears that PayPal is asking Mr. Sheppard for
tax records. Do you see that in the middle of the page?
A.
Yes. That's correct.
Q.
And -- thank you. The tax records are -- can you read
starting at "IRS Form 941"?
A.
Yes. "We're requesting IRS Form 941, taxable Medicare
wages and tips from each quarter or equivalent payroll
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 227 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
processer records or IRS wage and tax statements" --
Q.
Okay. Stop for a second. Based on your experience at
PayPal, in reviewing Paycheck Protection Program loans, are IRS
Form 941 records provided for independent contractors?
A.
No.
Q.
All right. Read the next statement, the 1120. Do you know
what the 1120 is?
A.
It's a tax form.
Q.
Is that a corporate tax return?
A.
I believe so.
Q.
Now, in this case, we have a partnership, right? And the
partnership return, is that the 1065?
A.
Yes. We have the 2019 partnership return.
Q.
All right. And you have the 2020 partnership return as
well, right?
A.
(No verbal response.)
Q.
Well, the February 26th submission?
A.
Yes.
Q.
Okay. So they're requesting the corporate tax return here;
is that right?
A.
Correct.
Q.
And then they're asking for W-2s and W-3s. Is that -- are
those requested of wage employees or is that requested of
independent contractors?
MR. ETRA: Objection. Leading.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 228 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Overruled.
THE WITNESS: If there's not a 941, we request the IRS
W-2 or W-3 for employees.
BY MS. JIMENEZ:
Q.
And so my question is: Are W-2s and W-3s requested of wage
employees or of independent contractors?
A.
Wage employees only.
Q.
Okay.
MS. JIMENEZ: And then go to Page 2.
BY MS. JIMENEZ:
Q.
All right. And then Mr. Sheppard, at the top of this page,
February 11, asks -- what does he ask?
A.
He asks: "What other documents do you need?"
Q.
And then what does he say?
A.
"I think the office sent the 940, 941s, bank statements,
driver's license, and other documents."
Q.
Do you know the size of Mr. Sheppard's office? Do you know
how many people work there?
A.
I do not. I only know the number of employees he
submitted.
Q.
Eighty?
A.
Correct.
Q.
Is that right?
Okay. Then, on the bottom of Page 2 -- this is from
Mr. Sheppard -- what does he indicate that he received?
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 229 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
He said: "I received the 941s for 2020 from our accounting
department and submitted them to the portal. I believe the
controller provided check registry and bank accounts to the
portal at some point."
Q.
And then what does he say?
A.
"If you need any tax returns or other information that I
can access, kindly let me know. Thank you for your help."
Q.
"Eric Sheppard"?
A.
Signed Eric Sheppard, CEO.
Q.
That would be -- okay. Now, does it indicate in this email
that Mr. Sheppard submitted the 941s for 2020 to the portal?
A.
Yes, it does.
MS. JIMENEZ: Now, can we take a look at Exhibit 19-8,
please.
BY MS. JIMENEZ:
Q.
Do you recall seeing these documents --
MS. JIMENEZ: If we could scroll down, please. That
was fourth quarter 2020. And then please keep going.
BY MS. JIMENEZ:
Q.
Signed by Eric Sheppard; is that right?
A.
Correct.
Q.
Okay.
MS. JIMENEZ: Keep going.
BY MS. JIMENEZ:
Q.
And then third quarter 2020. Yes?
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 230 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
MS. JIMENEZ: Keep going.
BY MS. JIMENEZ:
Q.
Signed by Eric Sheppard?
MR. ETRA: Objection. Leading. No basis to say.
THE COURT: Overruled.
MS. WEINTRAUB: Contrary testimony.
THE WITNESS: Yes.
BY MS. JIMENEZ:
Q.
And then we saw this earlier. All of the 941s for every
quarter of 2020 were provided, right?
A.
That's correct.
Q.
And an extra one for HM management as well; is that right?
A.
Correct.
Q.
And who were they all signed by?
MR. ETRA: Objection. No foundation.
THE COURT: Overruled.
THE WITNESS: They all were signed by Eric Sheppard.
BY MS. JIMENEZ:
Q.
And the Defense attorney told you that there were
fraudulent documents submitted in this case, did he not?
A.
He did.
MS. JIMENEZ: Can we go back to the emails, please --
oh. P-1.
Okay. Page 2.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 231 of 239
232
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
So that email we were looking at, February 11th, 2021, at
the bottom of this page, where he says he submitted the 941s to
the portal --
MR. ETRA: Objection. It doesn't say that in the
document.
BY MS. JIMENEZ:
Q.
Can you read that statement, please.
THE COURT: The objection is sustained. Rephrase,
please.
BY MS. JIMENEZ:
Q.
Can you read that sentence.
A.
Yes. It says: "I received the 941s from 2020 from our
accounting department and submitted them to the portal."
Q.
All right. And then what does the next sentence say?
A.
"I believe the controller provided check registry and
accounts to the portal at some point. If you need any tax
returns or other information" --
Q.
Okay. That's fine. So the accounting department and the
comptroller apparently, as indicated here, were assisting
Mr. Sheppard. Is that indicated here?
MR. ETRA: Objection. No foundation. She's
already --
THE COURT: Sustained.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 232 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
And again, you don't know how many people actually work in
Mr. Sheppard's office?
MR. ETRA: Asked and answered.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
But it could be 80; is that right?
MR. ETRA: Same.
THE COURT: Sustained.
MS. JIMENEZ: Can we go to Exhibit 19-6 again,
please -- to the second page, so she could see --
BY MS. JIMENEZ:
Q.
This was 2021 --
MS. JIMENEZ: I'm sorry. Third page.
BY MS. JIMENEZ:
Q.
This was in the second -- in the 2021 round. Do you
recall?
A.
Yes.
Q.
Okay.
MS. JIMENEZ: Yeah. Let's go back to the first page.
BY MS. JIMENEZ:
Q.
This was a document provided to PayPal that was not
DocuSigned, right?
A.
That is correct.
Q.
Okay.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 233 of 239
234
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Could we go in the middle, indicate the
ownership.
The ownership.
BY MS. JIMENEZ:
Q.
All right. So what is the ownership that's provided on
this document?
MR. ETRA: Beyond the scope.
THE COURT: Overruled.
THE WITNESS: Listed Eric Sheppard as managing member
with 52 percent ownership and Jennifer Sheppard member with
30 percent ownership.
BY MS. JIMENEZ:
Q.
Okay. And then if we go back to P-1 -- your P-1 -- the
Defense P-1. The request that was made on February 16 by
someone at PayPal at the bottom, what does it ask?
A.
It says: "Can you please upload the following documents of
both partners of the company: IRS Form 1065, including
Schedule K-1. Please provide a complete bank statement. The
business name and address must match the information provided
on your application. Upload the statement of February 2020."
Q.
So what did -- so did PayPal want to know -- PayPal wanted
to receive the tax returns of both partners of the business.
Is that fair?
A.
Yes. That's correct.
Q.
And the record that you have in the records that you
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 234 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
reviewed --
MS. JIMENEZ: Can we pull up 19-4.
Nope. Sorry. 19-13.
BY MS. JIMENEZ:
Q.
The records that you have is that on a certain date this
Exhibit 19-13 was submitted to PayPal?
A.
Correct.
Q.
And what was the date that this tax return was submitted
that made it into the PayPal records?
MR. ETRA: Asked and answered.
THE COURT: Sustained.
MS. JIMENEZ: If I could have a moment, please.
THE COURT: All right.
MR. ETRA: Your Honor, I request permission to briefly
recross in light of the new theory on the 1065 that was stated
on redirect.
THE COURT: That request is denied.
(Pause in proceedings.)
MS. JIMENEZ: No other questions of this witness.
THE COURT: All right. Is the witness excused?
MS. JIMENEZ: Yes, Your Honor.
THE COURT: On behalf of the Defendant?
MR. ETRA: Yes, Your Honor.
THE COURT: Thank you, Ms. Hutcheson. You are
excused.
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 235 of 239
236
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
(Witness excused.)
THE COURT: Ladies and Gentlemen, we will adjourn for
the evening.
Recall that we will not be in session tomorrow. As
well, we will be in session for half a day on Monday,
December 4th. So I will see each of you -- if you'll be in the
jury room, ready to come into the courtroom right at one p.m.
We will not be taking a lunch break so please have lunch ahead
of time.
Please remember that as we adjourn you are not to
discuss this case with anyone, nor permit anyone to speak with
you. Everything learned about the case is learned in the
courtroom. You're not to conduct any independent research.
Have a pleasant day tomorrow, a pleasant weekend, and
I'll see you Monday, December 4th, at one p.m.
Thank you.
COURT SECURITY OFFICER: All rise for the jury.
(Jury not present, 4:27 p.m.)
MS. WEINTRAUB: Judge -- sorry.
THE COURT: All right. Have a seat for just a moment.
Ms. Hutcheson, thank you. You are excused.
And Monday, December 4th, who will be the witnesses on
behalf of the Government?
MS. JIMENEZ: Your Honor, we have witnesses who have
had to fly themselves back home. We still hope for Carlos
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 236 of 239
237
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Granda, David Toye from Northeast Bank. We hope not to have to
call Ian Zalewski from ACAP.
THE COURT: All right. So these three witnesses you
think will take up the afternoon on Monday?
MS. JIMENEZ: Yes.
MS. WEINTRAUB: Granda is not -- Granda is five
minutes.
MS. JIMENEZ: We certainly hope so, yes.
THE COURT: All right. Do you believe --
MS. JIMENEZ: We have --
THE COURT: -- that you will be able to include more
witnesses other than the three?
MS. JIMENEZ: We would like to. Tamara Och as well.
THE COURT: All right. The conference rooms will
remain locked; however, we have a sentencing hearing right now.
So I am going to need you to move your items, if you will.
And have a nice day tomorrow, a nice weekend. And
I'll see everyone here on Monday, December 4th. We'll have the
courtroom open at 12:30.
MS. JIMENEZ: And Your Honor, I just want to put
something on the record -- and it's just for the record because
there was a suggestion made earlier about the PayPal witness on
the record. The Government has had no communication with this
witness while she has been testifying, and I just want the
record to reflect that. The witness went into one of the rooms
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 237 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
to retrieve her purse and her belongings, and then left that
room, and there was no communication with that witness.
THE COURT: All right. And I don't believe that there
was any insinuation. There was a comment about the witness
texting. And I expect the attorneys to remain officers of the
court, and the Court's instruction was very clear.
MR. ETRA: Did Your Honor say we're here 12:30 on
Monday?
THE COURT: The courtroom will be open at 12:30, and
we'll begin right at one p.m.
MR. ETRA: Thank you very much. Have a good weekend.
(Proceedings adjourned at 4:30 p.m.)
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Case 1:22-cr-20290-BB Document 310 Entered on FLSD Docket 02/25/2025 Page 238 of 239
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
UNITED STATES OF AMERICA )
ss:
SOUTHERN DISTRICT OF FLORIDA
)
C E R T I F I C A T E
I, Yvette Hernandez, Certified Shorthand Reporter in
and for the United States District Court for the Southern
District of Florida, do hereby certify that I was present at,
and reported in machine shorthand, the proceedings had the 30th
day of November, 2023, in the above-mentioned court; and that
the foregoing transcript is a true, correct, and complete
transcript of my stenographic notes.
I further certify that this transcript contains pages
1 - 239.
IN WITNESS WHEREOF, I have hereunto set my hand at
Miami, Florida, this 25th day of February, 2025.
/s/Yvette Hernandez
Yvette Hernandez, CSR, RPR, CLR, CRR, RMR
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
yvette_hernandez@flsd.uscourts.gov
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