Indictment — United States v. David Epstein

Summary

The indictment in United States v. David Epstein, No. 1:23-cr-00210-RDB, in the U.S. District Court for the District of Maryland, filed June 14, 2023 as Doc. 1. Counts One through Five charge wire fraud under 18 U.S.C. § 1343 and Counts Six, Seven, and Eight charge money laundering under 18 U.S.C. § 1957. The grand jury alleges that the defendant sought approximately $1,307,170.00 in PPP funds for PEI Staffing, LLC from Celtic Bank through Blue Vine, stating 382 employees where a Form 941 listed 79, and used the proceeds for a Mercedes-Benz, home renovations and a pool. It also alleges a false EIDL application for Stafquik seeking approximately $150,000 that was not disbursed after SunTrust closed the account. The 11-page indictment seeks forfeiture and is signed by United States Attorney Erek L. Barron.

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Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 1 of11

PR/USAO#2021R00148
IN THE UNITED STATES DISTRICT COU
FOR THE DISTRICT OF MARYLAND

-UNITED STATES OF AMERICA

CRIMINAL woR DADS Orno

; (Wire Fraud, 18 U.S.C. § 1343; Money
BANID EPSTEIN, ‘Laundering, 18 U.S.C. § 1957;
Defend ; Forfeiture, 18 U.S.C. § 981(a)(1)(C); 21
SASKEHRE, ‘U.S.C. § 853(p); 28 U.S.C. § 2461(c))

Vv.

UNDER SEAL
...0O0...

INDICTMENT

COUNT ONE
(Wire Fraud)

The Grand Jury for the District of Maryland charges that:

Introduction: Relevant Persons, Entities, And Accounts

At all times relevant to the Indictment, unless otherwise stated:

1. Defendant DAVID EPSTEIN (“EPSTEIN”) was a resident of Baltimore County,
Maryland.

zs On or about August 25, 2010, EPSTEIN’s family member (“Family Member #1”),
incorporated a business with state of Maryland called PEI Staffing, LLC (“PEI”). EPSTEIN was
the Chief Executive Officer of PEI from in or about January 2000 to the date of this Indictment.

3. EPSTEIN also served as the President of Stafquik, Inc. (“Stafquik”), a business
incorporated in the State of Maryland on or about May 2, 2016 and incorporated in the State of
Delaware on or about October 16, 2017.

4. Stafquik maintained an account at SunTrust Bank (“SunTrust”), a federally insured
financial institution, with account numbers ending in 2836 (“the 2836 Account”) and 5615 (the
“5615 Account”). EPSTEIN was the sole signatory on the 2836 Account and the 5615 Account.

1

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5. Celtic Bank was a federally insured financial institution headquartered in Salt Lake
City, Utah and specialized in small business finance. Celtic Bank was a United States Small
Business Administration (“SBA”) Preferred Small Business Lender and participated as a lender in
the Paycheck Protection Program (“PPP”).

6. Blue Vine was a financial technology company headquartered in California that
provided online business banking and financing to small and medium-sized businesses. Blue Vine
served as an originating agent for financial institutions such as Celtic Bank. Blue Vine used a
server located in West Virginia for the purpose of receiving PPP loan applications.

The Paycheck Protection Program

7. The PPP was a COVID-19 pandemic relief program administered by the SBA that
provided forgivable loans to small businesses for job retention and certain other expenses. The
PPP permitted participating third-party lenders to approve and disburse SBA-backed PPP loans to
cover payroll, fixed debts, utilities, rent/mortgage, accounts payable and other bills incurred by
qualifying businesses during, and resulting from, the COVID-19 pandemic. PPP loans were fully
guaranteed by the SBA.

8. To obtain a PPP loan, a qualifying business had 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 to be eligible to obtain the PPP loan, including that the
business was in operation and either had employees for whom it paid salaries and payroll taxes or
paid independent contractors. A business applying for a PPP loan was required to provide
documentation showing its payroll expenses and substantiating that the borrowing business was in

operation before or on February 15, 2020, such as filed federal income tax documents.

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 3 of 11

9. PPP loan applications were electronically submitted or caused to be submitted by
the borrower and received through SBA servers located outside of the District of Maryland. Once
approved, the business received the PPP loan proceeds via an electronic funds transfer from the
third-party lender to a financial account under the control of the business.

10. The proceeds of'a PPP loan could be used for certain specified items, such as payroll
costs, costs related to the continuation of group health care benefits, or mortgage interest payments.
The proceeds of a PPP loan were not permitted to be used by the borrowers to purchase consumer
goods, automobiles, personal residences, clothing, jewelry, to pay the borrower’s personal federal
income taxes, or to fund the borrower’s ordinary day-to-day living expenses unrelated to the
specified authorized expenses.

EIDL Loans

11. In order to obtain an EIDL, a small business submitted an electronic EIDL
application (SBA Form 5) directly to SBA via its website, covidl9relief.sba.gov. The EIDL
application was certified by an authorized representative of the business. The EIDL application
required the business, through its authorized representative, to acknowledge the program rules and
to make certain certifications in order to be eligible for the EIDL loan.

12. The authorized representative of the small business certified eligibility information.
Further, the authorized representative submitted combined annual operating expenses for the 12
months prior to January 31, 2020 as well as gross revenues and costs of goods sold for that same
period. Loans were calculated based on 6 months of gross revenues minus cost of goods sold.
Applicants could also receive a grant known as an EIDL advance up to $10,000 calculated as a

$1,000 grant per employee up to a maximum of $10,000.

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 4 of 11

13. An EIDL application was processed by the SBA. If an EIDL application was
approved, the SBA directly funded the loan through a deposit to a bank account of the business
borrower.

14. EIDL proceeds were required to be used by the business on certain permissible
expenses—fixed debts including rent and utilities, payroll, accounts payable and other bills
resulting from the pandemic. The EIDL program lent the money at a fixed annual percentage rate.

The Scheme to Defraud

15. Beginning in and around May 2020 and continuing through in and around August

2020, in the District of Maryland and elsewhere, the defendant,
DAVID EPSTEIN,

knowingly and willfully devised and intended to devise a scheme and artifice to defraud the SBA,
Celtic Bank, and Blue Vine to obtain money by means of materially false and fraudulent pretenses,
representations, and promises, and for the purpose of executing and attempting to execute the
scheme to defraud, did knowingly and willfully transmit and cause to be transmitted by means of
wire communications, in interstate and foreign commerce, writings, signs, signals, pictures, and
sounds, in violation of 18 U.S.C. § 1343 (the “scheme to defraud”).

The Object of the Scheme to Defraud

16. It was the object of the scheme to defraud for EPSTEIN to personally enrich
himself by fraudulently obtaining and attempting to obtain EIDL and PPP loan funds for his own
personal use and benefit, and for the personal benefit and use of his associates, including payments
for the purchase of a Mercedes-Benz automobile, renovations to EPSTEIN’s home and the
installation of a pool there, and other unauthorized expenditures.

Manner and Means of the Scheme to Defraud

It was part of the scheme to defraud that:

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 5 of 11

PPP Loan for PEI ($1.307,170.00)

17. On or about April 30, 2020, EPSTEIN submitted and caused to be submitted a
false and misleading PPP loan application to Celtic Bank, through Blue Vine, in the name of PEI,
seeking approximately $1,307,170.00 in PPP funds.

18. In the application, EPSTEIN made and caused to be made false statements,
misrepresentations and omissions related to PEI including the number of PEI employees, the
wages paid to PEI employees, and the intended use of the PPP loan proceeds.

19. In the application, EPSTEIN falsely promised to spend PPP funds on allowable
expenses such as payroll, business rent and business utilities when he intended to spend the funds
on personal expenses and other unauthorized expenditures.

20. In the application, EPSTEIN attested that the information presented in the
application and all supporting documents and forms to obtain the loans were true and accurate.

21. Inthe application, EPSTEIN falsely stated that PEI had 382 employees. In fact, a
2020 IRS Form 941 for PEI for the second quarter of 2020, listed 79 employees for PEI.

22. In the PPP loan application, EPSTEIN falsely answered “NO” to the following
question: “Is the Applicant or any owner of the Applicant an owner of any other business, or have
common management with, any other business? If yes, list all such businesses and describe the
relationship on a separate sheet identified as addendum A.” In fact, when submitting the
applications, EPSTEIN was a common manager of both PEI and Stafquik: EPSTEIN was the
Chief Executive Officer of PEI and the President of Stafquik.

23. In the PPP loan application, EPSTEIN provided a bank account number into which
PPP loan proceeds were deposited, namely the 2836 Account at SunTrust.

24.  Onor about April 28, 2020, EPSTEIN placed a phone call to Blue Vine in which

EPSTEIN and a Blue Vine representative discussed the status of the PPP loan application. During

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that call, EPSTEIN stated that he planned to upload a February 2020 bank statement for the 2836
Account at SunTrust in connection with the PPP loan application.

25. In connection with the application, EPSTEIN submitted a fictitious bank
statement, which falsely indicated that the 2836 Account at SunTrust was in the name of PEI, when
the 2836 Account at SunTrust was in truth and in fact in the name of Stafquik.

26. On or about April 30, 2020, EPSTEIN used the Internet Protocol (IP) address
associated with his residence in Baltimore County, Maryland, namely IP address 68.134.115.1 71,
when applying for the PPP loan for PEI.

27. On or about April 30, 2020, EPSTEIN caused interstate wire communications from
Maryland to West Virginia, the location of Blue Vine’s server, when applying for the PPP loan for
PEI.

28. On or about May 4, 2020, EPSTEIN caused Celtic Bank to distribute
approximately $1,307,170 through an ACH transfer sent to the 2836 Account at SunTrust.

29. On or about May 4, 2020, EPSTEIN established personal accounts at SunTrust
with account numbers ending in 2066 (the “2066 Account”) and 5607 (the “5607 Account”).
EPSTEIN was the sole signatory on these accounts.

30. On or about May 8, 2020, EPSTEIN established personal accounts at Capital One
Bank with account numbers ending in 3424 (the “3424 Account”) and 3554 (the “3554 Account”).
EPSTEIN was the sole signatory on these accounts.

31. After the PPP loan funds were disbursed, EPSTEIN transferred PPP funds from
the 2836 Account at SunTrust to the 2066 and 5607 Accounts at SunTrust and the 3424 and 3554
Accounts at Capital One.

32: Beginning on or about May 5, 2020 and continuing until in or about August 2020,

EPSTEIN caused PPP loan proceeds to be transferred and used for personal and unauthorized

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 7 of 11

expenses not permissible under the PPP, including the purchase of a luxury automobile,
renovations to EPSTEIN’s home, the payment of various debts, and payments to various other
associates.

33. Among other transfers, on or about May 5, 2020, EPSTEIN transferred and caused
to be transferred $110,356.48 in PPP funds from the 2836 Account at SunTrust to Mercedes Benz
Financial Services in connection with a payment for a 2019 Mercedes-Benz GT53C4 automobile
purchased by EPSTEIN.

34. On or about May 7, 2020, EPSTEIN obtained an official check in amount of
$20,000 from the 2836 Account at SunTrust, which EPSTEIN provided and caused to be provided
to Lender 1, an entity which had in or about December 2019 provided a $50,000 loan to Stafquik.
On the memo line of the check, EPSTEIN wrote “Rent payments May 2020/June 2020.” In fact,
the payment was not for rent, but instead for loan repayment to Lender 1.

35. Beginning on or about May 20, 2020 and continuing through in or about August
2020 EPSTEIN transferred and caused to be transferred approximately $138,522.22 in PPP funds
to a contractor (“Contractor 1”) in connection with renovations to EPSTEIN’s home and
installation of a pool there.

EIDL for Stafquick ($150,000)

36. On or about November 18, 2020, EPSTEIN electronically submitted and caused to
be submitted a false and misleading application for an EIDL to be submitted to the SBA, seeking
approximately $150,000 in funds. On or about November 18, 2020, EPSTEIN falsely represented
in the EIDL application that Stafquik had three employees and gross revenues of $428,571 as of
January 31, 2020.

37. On or about November 18, 2020, EPSTEIN provided the SBA a bank account

number into which the EIDL proceeds were to be deposited, namely the 5615 Account at SunTrust.

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 8 of 11

38. On or about November 19, 2020, SunTrust closed the 5615 Account after being
notified by Celtic Bank that the $1,307,170.00 in PPP funds disbursed to the 2836 Account was
an unauthorized transaction.
EPSTEIN in the EIDL application for Stafquik were not ultimately disbursed. On or about

November 19, 2020, EPSTEIN placed a phone called to SunTrust seeking to reverse closure of

the 5615 Account, but SunTrust did not reverse the closure.

THE CHARGES

Because the 5615 Account was closed, the funds sought by

39. On or about the dates set forth below, in the District of Maryland, the Defendant

for the purpose of executing and attempting to execute the scheme and artifice to defraud described

above, did knowingly transmit and cause to be transmitted in interstate commerce by means of a

DAVID EPSTEIN

wire communication, certain signals, signs and sounds: as set forth below:

COUNT DATE DESCRIPTION INTERSTATE WIRE
COMMUNICATION
DETAILS
1 April 28, 2020 | Phone call from EPSTEIN | From Maryland to a location
to Blue Vine outside of Maryland
2 April 30, 2020 | Submission of PPP loan From Maryland to a location
application for PEI outside of Maryland
3 May 4, 2020 ACH transfer of From Maryland to a location
$1,307,170 from Celtic outside of Maryland
Bank to the 2836 Account
at SunTrust
4 November 18, | Submission of EIDL From Maryland to a location
2020 Application for Stafquik outside of Maryland
5 November 19, | Phone call from EPSTEIN | From Maryland to a location
2020 to SunTrust outside of Maryland

18 U.S.C. § 1343
Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 9 of 11

COUNTS SIX, SEVEN, and EIGHT

The Grand Jury for the District of Maryland further charges:

es

Defendant,

Paragraphs | — 14 and 16 — 39 of Counts One to Four are incorporated here:

THE CHARGES

On or about the dates listed below, in the District of Maryland and elsewhere, the

DAVID EPSTEIN,

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 value greater than $10,000, that is the transfer and withdrawal of funds, as set forth below, such

property being derived from a specified unlawful activity, that is, wire fraud, in violation of 18

U.S.C. § 1343:

COUNT

APPROXIMATE
DATE

DESCRIPTION OF MONETARY TRANSACTION

6

May 5, 2020

ACH transfer in the amount of $110,356.48 from the
2836 Account at SunTrust to Mercedes-Benz Financial

in connection with a payment for a 2019 Mercedes-
Benz GT53C4 automobile purchased by EPSTEIN.

May 7, 2020

Official check in the amount of $20,000 from the 2836
Account at SunTrust that EPSTEIN provided and
caused to be provided to Lender 1.

May 21, 2020

Check in the amount of $28,000 from the 3424 Account
at Capital One with the memo line “pool deposit” that
EPSTEIN provided and caused to be provided to
Contractor 1.

18 U.S.C. § 1957

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 10 of 11

FORFEITURE ALLEGATION

The Grand Jury for the District of Maryland further finds that:

1. Pursuant to Federal Rule of Criminal Procedure 32.2, notice is hereby given to the
defendant that the United States will seek forfeiture as part of any sentence in accordance with 18
U.S.C. §§ 981(a)(1)(C) and 982, 21 U.S.C. § 853(p), and 28 U.S.C. § 2461(c), as a result of the
defendant’s conviction under any of the offenses in Counts One through Eight of this Indictment.

Wire Fraud Forfeiture

De Upon conviction of any of the offenses set forth in Counts One through Five of this
Indictment, the defendant,
DAVID EPSTEIN
shall forfeit to the United States, pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c),
any property, real or personal, which constitutes or is derived from proceeds traceable to the
scheme to defraud.

Money Laundering Forfeiture

3. Upon conviction of any of the offenses set forth in Counts Six through Eight
of this Indictment, the defendant,
DEFENDANT,
shall forfeit to the United States, pursuant to 18 U.S.C. § 982(a)(1), any property, real or personal,
involved in the offenses, or any property traceable to such property.

Property Subject to Forfeiture

4, The property to be forfeited includes, but is not limited to, a money judgment in
the total amount of proceeds the defendant obtained as the result of the scheme to defraud and/or

the property involved in the money laundering.

10

Case 1:23-cr-00210-RDB Document1 Filed 06/14/23 Page 11 of 11

Substitute Assets
5. If any of the property described above, 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;
@. 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,
the United States shall be entitled to forfeiture of substitute property pursuant to 21 U.S.C.
§ 853(p), as incorporated by 18 U.S.C. § 982(b) and 28 U.S.C. § 2461(c).

18 U.S.C. § 981(a)(1)(C)
18 U.S.C. §§ 982(a)(1), (b)
21 U.S.C. § 853(p)

28 U.S.C. § 2461(c)

Fed. R. Crim. P. 32.2(a)

Zn L, Gow A

Erek L. Barron
United States Attorney

A TRUE BILL

SIGNATURE REDACTED

Foreperson

Date: & haloo23

11

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