Criminal Complaint — No. 2:21-mj-13426 (Dkt. 1, D.N.J.)

Summary

A criminal complaint against Kent Encarnacion filed December 13, 2021 in the U.S. District Court for the District of New Jersey, Mag. No. 21-13426, sworn by Postal Inspector Justyna Ramotowski of the United States Postal Inspection Service before Magistrate Judge Leda Dunn Wettre. Count One charges bank fraud under Title 18, United States Code, Sections 1344(2) and 2: that on or about March 18, 2021, in Middlesex County, Encarnacion submitted a fraudulent PPP loan application on behalf of Dream Works Logistics LLC to Lender 1 and obtained approximately $156,442. Counts Two and Three charge money laundering. The affidavit traces the proceeds and states that the Dream Works account balance after the withdrawals was approximately $77,442.

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Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 1 of 7 PagelD: 1

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA : Hon. Leda Dunn Wettre
v. : Mag. No. 21-13426
KENT ENCARNACION CRIMINAL COMPLAINT

I, Postal Inspector Justyna Ramotowski, being duly sworn, state that the
following is true and correct to the best of my knowledge and belief:

SEE ATTACHMENT A

I further state that I am a Postal Inspector with the United States Postal
Inspection Service and that this complaint is based on the following facts:

SEE ATTACHMENT B
continued on the attached pages and made a part hereof.

|

Postal Tape Justyna Ramotowski
United States Postal Inspection Service

Postal Inspector Justyna Ramotowski attested to this Complaint by telephone
pursuant to Federal Rule of Criminal Procedure 4.1(b)(2)(A) on December 13, 2021
in New Jersey.

December 13, 2021 at
Newark, New Jersey

HONORABLE LEDA DUNN WETTRE Hon. Leda Duan NeYceew
UNITED STATES MAGISTRATE JUDGE Signature of Judicial Officer


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 2 of 7 PagelD: 2

ATTACHMENT A

Count One
(Bank Fraud)

On or about approximately March 18, 2021, in Middlesex County, in the District
of New Jersey and elsewhere, defendant

KENT ENCARNACION

did knowingly and intentionally execute and attempt to execute a scheme and artifice
to defraud one or more financial institutions, as defined by 18 U.S.C. § 20, to wit:
Lender 1, the deposits of which were insured by the Federal Deposit Insurance
Corporation, and to obtain moneys, funds, and credits owned by and under the control
of such financial institution by means of materially false and fraudulent pretenses,
representations, and promises.

Approximate
ii Date Description
1 March 18, 2021 | ENCARNACION submitted a fraudulent loan

application for Paycheck Protection Program (“PPP”)
funds on behalf of Dream Works Logistics LLC to
Lender 1 and obtained approximately $156,442 in
PPP funds.

In violation of Title 18, United States Code, Sections 1344(2) and 2.


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 3 of 7 PagelD: 3

Counts Two and Three
(Money Laundering)

On or about the dates set forth below, in the District of New Jer sey and
elsewhere, defendant

KENT ENCARNACION

did knowingly engage and attempt to engage in a monetary transaction by, through,
and to a financial institution, affecting interstate and foreign commerce, in criminally
derived property of a greater value than $10,000, that is, the transfer of U.S. cur rency
from bank accounts to the other bank accounts, cash withdrawals, foreign bank
transfers (defined in Attachment B), such property having been derived from a
specified unlawful activity, that is, wire fraud in violation of Title 18, United States
Code, Section 1343, and bank fraud, in violation of Title 18, United States Code,
Section 1344.

Count Approximate Description of Monetary Transaction
Date

Withdrawal from a Dream Works Logistics LLC bank
9 May 6, 2021 account at Bank 1 in the amount of approximately
$46,000 to purchase a cashier’s check that was
negotiated at Bank 2.

Withdrawal from a Dream Works Logistics LLC bank
3 May 6, 2021 account at Bank 1 in the amount of approximately
$38,000 to purchase a cashier’s check that was
negotiated at Bank 3.

In violation of Title 18, United States Code, Sections 1957 and 2.


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 4 of 7 PagelD: 4

ATTACHMENT B

I, Justyna Ramotowski, a Postal Inspector with the United States Postal
Inspection Service, having conducted an investigation and having discussed this
matter with other law enforcement officers who have participated in this
investigation, have knowledge of the following facts. Because this Complaint is being
submitted for the limited purpose of establishing probable cause, I have not included
each and every fact known to me concerning this investigation. Rather, I have set
forth only the facts that I believe are necessary to establish probable cause. Unless
specifically indicated, all dates described in this affidavit are approximate and all
statements or representations described in this affidavit are related in substance and
in part.

Overview

1. On or about March 18, 2021, defendant KENT ENCARNACION
(CENCARNACION”) used a variety of false statements and representations to
fraudulently obtain approximately $156,442 in federal COVID-19 emergency relief
loans meant for distressed small businesses. To obtain the loans, ENCARNACION
submitted a falsified loan application on behalf of ENCARNACION’s purported
business. On the loan application, ENCARNACION falsified various types of
information associated with his purported business, including: the number of
employees; the names of employees; payroll records; and federal tax documents.
ENCARNACION then misused the loan proceeds, including by transferring the
money to his personal account and to the business of a known associate.

Background
The Paycheck Protection Program

2. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a
federal law enacted in or about March 2020 and designed to provide emergency
financial assistance to the millions of Americans who are suffering the economic
effects caused by the COVID-19 pandemic. One source of relief provided by the
CARES Act was the authorization of up to $349 billion in forgivable loans to small
businesses for job retention and certain other expenses, through a program referred
to as the Paycheck Protection Program (“PPP”). In or around April 2020, Congress
authorized over $300 billion in additional PPP funding.

3. In order to obtain a PPP loan, a qualifying business must submit a PPP
loan application, which is signed by an authorized representative of the business. The
PPP loan application requires 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 must state, among other things, its: (a) average monthly payroll expenses;
and (b) number of employees. These figures are used to calculate the amount of money

4


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 5 of 7 PagelD: 5

the small business is eligible to receive under the PPP. In addition, businesses
applying for a PPP loan must provide documentation showing their payroll expenses.

4. A PPP loan application must be processed by a participating lender. Ifa
PPP loan application is approved, the participating lender funds the PPP loan using
its own money, which is 100% guaranteed by the SBA. Data from the application,
including information about the borrower, the total amount of the loan, and the listed
number of employees,is transmitted by the lender to the SBA in the course of
processing the loan.

5. PPP loan proceeds must be used by the business on certain permissible
expenses—payroll costs, interest on mortgages, rent, and utilities. The PPP allows
the interest and principal on the PPP loan to be entirely forgiven if the business
spends the loan proceeds on these expense items within a designated period of time
after receiving the proceeds and uses a certain amountof the PPP loan proceeds on
payroll expenses.

The Defendant and Relevant Entities
6. At all times as relevant to this Complaint:

a. ENCARNACION was a resident of Perth Amboy, New Jersey and the
sole owner or “member/manager” of Dream Works Logistics, LLC
(“Dream Works”), a company which purported to be a New Jersey limited
liability company in the wholesale and logistics agency and an entity
through which ENCARNACION fraudulently applied for PPP loan
funds.

b. Company 1 was purported to be a New Jersey limited liability company
providing consulting services. A known associate of ENCARNACION
was identified as a member of the company.

c. Lender 1 was a financial institution insured by the Federal Deposit
Insurance Corporation (“FDIC”) headquartered in Boston,
Massachusetts.

d. Bank 1 was a financial institution insured by the FDIC headquartered in
Boston, Massachusetts.

e. Bank 2 was a financial institution insured by the FDIC headquartered in
New York, New York.


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 6 of 7 PagelD: 6

f. Bank 3 was a financial institution insured by the FDIC headquartered in
Cherry Hill, New Jersey.

March 18, 2021 Falsified Dream Works PPP Application to Lender 1

7. On or about March 18, 2021, ENCARNACION submitted, or caused to be
submitted, a fraudulent loan application to Lender 1, an approved PPP lender, in order
to fraudulently obtain funds through the PPP program. Specifically, Lender 1 received
a PPP application in the name of Dream Works seeking a PPP loan in the amount of
approximately $156,422. The application was submitted in ENCARNACION’S name
and listed his social security number. In addition, the application listed
ENCARNACION as the 100% owner of Dream Works, his home address in Perth
Amboy, New Jersey, and a telephone number associated with ENCARNACION.

8. The PPP application submitted to Lender 1 stated that Dream Works’s
average monthly payroll was approximately $62,577 and that the company had 114
employees. In connection with the company’s purported payroll numbers, the PPP
application included a payroll summary for February through March 2020, an annual
Transmittal of Wage and Tax Statements (IRS Form W3) for 2019, and a Schedule C
(IRS Form 1040) Profit or Loss From Business for 2019.

9. The Dream Works application to Lender 1 contained the following
materially false and fraudulent information:

a. The purported 2019 Form W3 claimed that Dream Works had paid
employees approximately $712,815.58 for 2019 and withheld
approximately $42,820.24 in federal income tax. In addition, the
Dream Works, Form 1040, Schedule C for 2019 claimed purported
wages in the amount of approximately $712,815.58. The
purported 2019 Form W3 also stated that Dream Works issued
2019 IRS Form W2 to 114 employees.

b, Information obtained from the Social Security Administration
(“SSA”) revealed that Dream Works reported no wages paid for the
period between 2018 and 2020. No Forms W-3, Transmittal or
Wage and Tax Statements, nor Forms W-2, Wage and Tax
Statements, were received by the SSA. Likewise, a review of
information obtained from the Internal Revenue Service (“IRS”)
revealed that no Forms 941 were filed by Dream Works for the
2019 tax year as represented on the 2019 IRS Form W-3,
Transmittal of Wage and Tax Statements. IRS records also
revealed that ENCARNACION did not file a Schedule C with his
filed 2019 IRS Form 1040.


Case 2:21-mj-13426-LDW Document1 Filed 12/13/21 Page 7 of 7 PagelD: 7

10... Bank records show that the Dream Works bank account at Bank 1
(the “Dream Works Account”) was opened on or about March 8, 2021, that
ENCARNACION was the authorized signatory on the account, and that on or
about March 29, 2021, the full loan amount of approximately $156,442 was
transferred into the Dream Works Account.

11. Prior to the deposit of $156,442 from the PPP loan on March 29,
2021, the Dream Works Account had a balance of approximately $5,000.

12. From March 29, 2021 through May 5, 2021, the Dream Works
Account had debits of approximately $4,639, consisting of cash withdrawals,
and credits of approximately $4,639, consisting of credit corrections or refunds.

13.  Onor about May 6, 2021, the balance in the Dream Works
Account had an account balance of $161,442, representing the same amount
that it had in the account on March 29, 2021 following the receipt of the PPP
loan proceeds.

14. On or about May 6, 2021, ENCARNACION withdrew
approximately $46,000 from the Dream Works Account to purchase a cashier’s
check payable to ENCARNACION, which was subsequently deposited into
another bank account in ENCARNACION’S name at Bank 2.

15. On or about May 6, 2021, ENCARNACION also withdrew
approximately $38,000 from the Dream Works Account to purchase a cashier’s
check payable to Company 1, which was subsequently deposited into a
Company 1 bank account at Bank 2.

16. Following the withdrawals for ENCARNACION’S bank account at
Bank 2 and the Company 1 bank account at Bank 3, the balance in the Dream
Works Account was approximately $77,442.

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