Indictment — No. 1:24-cr-10233 (Dkt. 18, D. Mass.)

Summary

A federal grand jury indictment in the District of Massachusetts, Criminal No. 24cr10233, returned and filed August 6, 2024, charges Katherine Reynolds of Plymouth, Massachusetts with two counts of wire fraud and aiding and abetting and one count of money laundering. It alleges that on or about May 20, 2021, two PPP loan applications were submitted to American Lending Center, one in Reynolds' name and one in the name of Reynolds' father, each falsely claiming a business with $106,000 in gross income for 2019 and backed by a false 2019 Schedule C for a "Massage Parlour" business. On or about June 17, 2021, ALC wired $20,833.33 for each loan into a Merrimack Valley Credit Union account ending in 0813. The money laundering count rests on a $20,000 cash withdrawal on or about June 25, 2021, and the forfeiture allegations seek money judgments of $41,666.66 and $20,000.

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UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

Criminal No.
UNITED STATES OF AMERICA 24cr10233

Violations:

Counts One-Two: Wire Fraud; Aiding and
Abetting
(18 U.S.C. § 1343; 18 U.S.C. § 2)

KATHERINE REYNOLDS,

Defendant

Count Three: Money Laundering
(18 U.S.C. § 1957)

Wire Fraud Forfeiture Allegation:
(18 U.S.C. § 981(a)(1)(C) and
28 U.S.C. § 2461(c))

Money Laundering Forfeiture Allegation:
(18 U.S.C. § 982(a)(1))

Ne YO OO Oe Nae ae eae eae ae aS ae

INDICTMENT

At all times relevant to this Indictment:

General Allegations

A. Relevant Individuals and Entities

1. Defendant, KATHERINE REYNOLDS (“REYNOLDS”) was a resident of
Plymouth, Massachusetts.

2. American Lending Center (ALC”) was a non-bank lending institution
headquartered in California. ALC participated as a lender in a program referred to as the

Paycheck Protection Program (“PPP”) operated by the United States Small Business
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Administration (“SBA”). As a PPP lender, ALC was authorized to lend funds to eligible
borrowers under the terms of the PPP.

3. Merrimack Valley Credit Union (““MVCU”) was a federally insured financial
institution based in Massachusetts.

4, The SBA was an executive-branch agency of the United States government that
provided support to entrepreneurs and small businesses. The mission of the SBA was to
maintain and strengthen the nation’s economy by enabling the establishment and viability of
small businesses and by assisting in the economic recovery of communities after disasters. As
part of this effort, the SBA enabled and provided for loans through banks, credit unions, and
other lenders. These loans have government-backed guarantees.

B. The Paycheck Protection Program

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

6. To obtain a PPP loan, a qualifying business was required to submit a PPP loan
application, which was signed by an authorized representative of the business. The PPP loan
application required the business (through its authorized representative) to acknowledge the
program rules and make certain affirmative certifications in order to be eligible to obtain the PPP

loan. In the PPP loan application, the small business (through its authorized representative) was

required to state, among other things, its gross income from a prior year. These figures were used
to calculate the amount of money the small business was eligible to receive under the PPP.

7. A PPP loan application was processed by a participating lender. If a PPP loan
application was approved, the participating lender funded the PPP loan using its own monies,
which were guaranteed by the SBA. Data from the application, including information about the
borrower, the total amount of the loan, and the listed number of employees, was transmitted by the
lender to the SBA in the course of processing the loan.

8. PPP loan proceeds were required to be used on certain permissible expenses,
including payroll costs, mortgage interest, rent, and utilities. Under the applicable PPP rules and
guidance, the interest and principal on the PPP loan is eligible for forgiveness if the business spent
the loan proceeds on these expense items within a designated period of time and used a certain
portion of the loan towards payroll expenses.

Scheme to Defraud

9. Beginning in or around May 2021, and continuing until in or around June 2021, in
the District of Massachusetts and elsewhere, REYNOLDS devised a scheme to defraud, and to
obtain PPP funds, by filing false and fraudulent PPP loan applications with ALC, a participant in
the PPP program.

10. The purpose of the scheme was for REYNOLDS to obtain PPP loan proceeds
under false and misleading pretenses, including false statements about the existence and
revenues of a massage business, and false documents and forms submitted in support of PPP loan

applications.

A. The PPP Loan Application in the Name of Katherine Reynolds

11. In furtherance of the scheme, on or about May 20, 2021, REYNOLDS submitted
a PPP Loan application to ALC. The application falsely claimed that REYNOLDS owned a
business that had $106,000 in gross income for 2019.

12. | REYNOLDS submitted false tax documents to support her false assertions that
she owned a business that had $106,000 in gross income for 2019, including a false 2019
Schedule C purporting to report income and expenses for a “Massage Parlour” business owned
by REYNOLDS.

13. The PPP Loan Application was approved by ALC, and, on or about June 17,
2021, ALC distributed $20,833.33 into MVCU account number ending in 0813 via an interstate
wite. REYNOLDS was a joint account holder on the MVCU account number ending in 0813.

B. The PPP Loan Application in the Name of Katherine Reynolds’ Father

14. Also on or about May 20, 2021, a second PPP Loan application was submitted to
ALC in the name of REYNOLDS’ father. The application falsely claimed that REYNOLDS’
father owned a business that had $106,000 in gross income for 2019.

15. REYNOLDS submitted, or abetted the submission of, false tax documents to
support false assertions that her father owned a business that had $106,000 in gross income for
2019, including a false 2019 Schedule C purporting to report income and expenses fora

“Massage Parlour” business owned by REYNOLDS’ father.

16. | The PPP Loan Application was approved by ALC, and, on or about June 17,
2021, ALC distributed $20,833.33 into MVCU account number ending in 0813 via an interstate

wire.

Unlawful Monetary Transactions with Proceeds of the Scheme

17. Between in or about June 17, 2021 and August 5, 2021, REYNOLDS used the
funds fraudulently obtained from the PPP loans.

18. For example, on or about June 25, 2021, REYNOLDS withdrew $20,000 in cash

from MVCU account number ending in 0813.

COUNTS ONE - TWO
Wire Fraud; Aiding and Abetting
(18 U.S.C. § 1343; 18 U.S.C. § 2)

The Grand Jury charges:

19. The Grand Jury re-alleges and incorporates by reference paragraphs 1-16 of this
Indictment.

20. On or about the dates set forth below, in the District of Massachusetts and
elsewhere, the defendant,

KATHERINE REYNOLDS,

having devised and intending to devise a scheme and artifice to defraud, and for obtaining money
and property by means of materially false and fraudulent pretenses, representations, and
promises, did transmit and cause to be transmitted by means of wire communications in
interstate and foreign commerce, writings, signs, signals, pictures, and sounds for the purpose of

executing the scheme to defraud, as set forth below:

‘Count | Approximate Date | __ Description —

1 June 17, 2021 A wire transfer of $20,833.33 to MVCU account number
ending in 0813 from ALC that was for the loan approved in
the name of Katherine Reynolds and processed via servers in
California and other locations outside Massachusetts.

2 June 17, 2021 A wire transfer of $20,833.33 to MVCU account number
ending in 0813 from ALC that was for the loan approved in
the name of Albert Frasier and processed via servers in
California and other locations outside Massachusetts.

All in violation of Title 18, United State Code, Sections 1343 and 2.

COUNT THREE
Money Laundering
(18 U.S.C. § 1957)

The Grand Jury further charges:

21, The Grand Jury re-alleges and incorporates by reference paragraphs 1-18 of this
Indictment.

22. On or about the date set forth below, in the District of Massachusetts and
elsewhere, the defendant,

KATHERINE REYNOLDS,

did knowingly engage and attempt to engage in a monetary transaction in criminally derived
property of a value greater than $10,000, as set forth below, where such property was derived
from specific unlawful activity, that is, wire fraud, in violation of Title 18, United States Code,

Section 1343 as charged in Counts One and Two:

Count | Approximate Date -. Description of Transaction

3 June 25, 2021 Cash withdrawal of $20,000 from REYNOLDS’ MVCU_
account number ending in 0813

All in violation of Title 18, United State Code, Section 1957.

WIRE FRAUD FORFEITURE ALLEGATION
(18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c))

The Grand Jury further finds:
23. Upon conviction of one or more of the offenses in violation of Title 18, United
States Code, Section 1343, set forth in Counts One and Two, the defendant,
KATHERINE REYNOLDS,
shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981 (a)(1)(C),
and Title 28, United States Code, Section 2461(c), any property, real or personal, which
constitutes or is derived from proceeds traceable to the offenses. The property to be forfeited
includes, but is not limited to, the following asset:

a. $41,666.66 in United States currency, to be entered in the form a forfeiture
money judgment.

24.  Ifany of the property described in Paragraph 23, above, as being forfeitable
pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United States Code,
Section 2461(c), as a result of any act or omission of the defendant --

a. cannot be located upon the exercise of due diligence;

b. has been transferred or sold to, or deposited with, a third party;
c. has been placed beyond the jurisdiction of the Court;

d. has been substantially diminished in value; or

e, has been commingled with other property which cannot be divided without
difficulty;

it is the intention of the United States, pursuant to Title 28, United States Code, Section 2461(c),
incorporating Title 21, United States Code, Section 853(p), to seek forfeiture of any other
property of the defendant up to the value of the property described in Paragraph 23 above.

All pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United

States Code, Section 2461(c).

MONEY LAUNDERING FORFEITURE ALLEGATION
(18 U.S.C. § 982(a)(1))

The Grand Jury further finds:

25.  Uponconviction of one or more of the offenses in violation of Title 18, United
States Code, Section 1957, set forth in Count Three, the defendant,
KATHERINE REYNOLDS
shall forfeit to the United States, pursuant to Title 18, United States Code, Section 982(a)(1),
any property, real or personal, involved in such offenses, and any property traceable to such
property. The property to be forfeited includes, but is not limited to, the following:

a. $20,000 in United States currency, to be entered in the form of a forfeiture
money judgment.

26.  Ifany of the property described in Paragraph 25, above, as being forfeitable
pursuant to Title 18, United States Code, Section 982(a)(1), as a result of any act or omission of

the defendant --
a. cannot be located upon the exercise of due diligence;
b. has been transferred or sold to, or deposited with, a third party;
c. has been placed beyond the jurisdiction of the Court;
d. has been substantially diminished in value; or

e, has been commingled with other property which cannot be divided without,
difficulty;

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it is the intention of the United States, pursuant to Title 18, United States Code, Section 982(b),
incorporating Title 21, United States Code, Section 853(p), to seek forfeiture of any other
property of the defendant up to the value of the property described in Paragraph 25 above.

All pursuant to Title 18, United States Code, Section 982(a)(1).

A TRUE BILL

WANA _Z 1ZOr>.—

FORBPERSON “>”

BRIAN J. SULLIVAN
ASSISTANT UNITED STATES ATTORNEY
DISTRICT OF MASSACHUSETTS

District of Massachusetts: August 6, 2024
Returned into the District Court by the Grand Jurors and filed.

/s/ Leonardo T. Vieira, 1:23pm
DEPUTY CLERK

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