Court filing
Government Reply Letter — United States v. David Epstein
Summary
A letter from the United States Attorney's Office for the District of Maryland to Judge Richard D. Bennett in United States v. David Epstein, No. 1:23-cr-00210-RDB, filed March 24, 2025 as Doc. 34. Written ahead of sentencing set for March 26, 2025, it responds to the defendant's sentencing submission, ECF No. 31. The government argues that the sophisticated means enhancement under U.S.S.G. § 2B1.1(b)(10)(C) applies, citing Fourth Circuit cases. It also disputes the submission's statements about the bank statement submitted with the PPP application, the use of PPP funds and the employee count, quoting the plea agreement's statement of facts. The five-page letter asks the Court to impose a guidelines term of imprisonment and is signed by Assistant U.S. Attorney Paul A. Riley.
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
No. 1:23-cr-00210-RDB · Doc. 34 · Docket on CourtListener
Full text
Case 1:23-cr-00210-RDB Document 34 Filed 03/24/25 Page 1 of 5
U.S. Department of Justice
United States Attorney
District of Maryland
Paul Riley Suite 400 DIRECT: 410-209-4959
Assistant United States Attorney 36 S. Charles Street MAIN: 410-209-4800
Paul.Riley@usdoj.gov Baltimore, MD 21201-3119 FAX: 410-962-3091
VIA ECF March 24, 2025
The Honorable Richard D. Bennett
United States District Judge
United States District Court
for the District of Maryland
101 West Lombard Street
Baltimore, MD 21201
Re: United States of America v. David Epstein, Crim. No. RDB-23-0210
Dear Judge Bennett:
The Government writes this letter in advance of the sentencing of Defendant David
Epstein, which is currently scheduled for March 26, 2025 at 2:30 p.m. to respond briefly to a few
of the contentions in Defendant’s sentencing submission filed March 20, 2025. ECF No. 31 (Def.
Mem.).
First, Defendant contends that the sophisticated means enhancement does not apply. Def.
Mem. at 10. He is wrong. As the Probation Officer concluded, the offense involved sophisticated
means pursuant to U.S.S.G. § 2B1.1(b)(10)(C), so the offense level is properly increased by two
levels. PSR ¶ 39.
The Guidelines clarify that “sophisticated means” as used in this section “means especially
complex or especially intricate offense conduct pertaining to the execution or concealment of an
offense.” U.S.S.G. § 2B1.1 (b)(10) cmt. n.9(C). While the enhancement requires more than “the
concealment or complexities inherent in fraud,” United States v. Adepoju, 756 F.3d 250, 257 (4th
Cir. 2014), a defendant need “not utilize the most complex means possible to conceal his [criminal]
activit[y].” United States v. Jinwright, 683 F.3d 471, 486 (4th Cir. 2012). “The court need only
find the presence of efforts at concealment that go beyond (not necessarily far beyond ...) the
concealment inherent in ... fraud.” Id. (internal quotation marks omitted).
Ultimately, the enhancement is to be applied “when there is proof of complexity beyond
the ‘minimum conduct required to establish a violation of [the applicable statute] in its simplest
form.’” United States v. Savage, 885 F.3d 212, 228 (4th Cir. 2018) (quoting Adepoju, 756 F.3d at
257 (alterations in Savage) (emphasis added)).
Here, there is no question that the offense—when considered in its entirety—was
sophisticated for purposes of application of this enhancement. The Defendant submitted a fake
and fabricated document he created—a fictitious bank statement—in support of the PPP
application. After the loan was funded, Defendant immediately created two personal bank
accounts (not business accounts in the name of PEI, 1 the business that had received the loan) and
At the time of the PPP application, there was no business bank account for PEI. PEI previously had bank
1
accounts with M&T Bank, but all of the accounts were charged off by M&T in December 2019 due to overdrawn
balances.
Case 1:23-cr-00210-RDB Document 34 Filed 03/24/25 Page 2 of 5
then routinely transferred the PPP funds to these newly established accounts and among the
accounts for the purpose of concealing their source as PPP funds. And, as Defendant admitted in
the parties’ plea agreement, he attempted to further conceal the scheme by “repeatedly add[ing]
individuals whom he owed money to PEI’s payroll to make it appear as though they were
employees when they were not” and by “hiding the size of the PPP loan he received, concealing it
from his family members, other employees of PEI, and various business partners whom he owed
money.” For example, he lied to Advance Partners (Lender 2)—from whom he misappropriated
nearly $350,000—and told them that PEI had received a loan for only $237,000 (and not $1.3
million)—as set forth in the below message sent from Defendant:
2
Case 1:23-cr-00210-RDB Document 34 Filed 03/24/25 Page 3 of 5
Defendant also attempted to conceal the scheme by writing “Rent payments May
2020/June 2020” on a check to Lender 1 that constituted PPP funds but that was in fact a loan
repayment unrelated to PEI to obscure the purpose of the check.
These facts are more than sufficient to support application of the sophisticated means
enhancement here. Indeed, where, as here, fictitious documents are involved and where there are
multiple attempts to conceal a scheme to defraud, courts have routinely applied the enhancement.
See United States v. Duell, 463 F. App’x 214, 215 (4th Cir. 2012) (affirming application of two-
level sentencing enhancement for sophisticated means in securities and wire fraud case in part
because defendant created false financial statements and forged signatures); see also United States
v. Davis, 753 F. App’x 154, 156–57 (4th Cir. 2018) (affirming application of two-level sentencing
enhancement for sophisticated means in mail fraud case in part because defendant “used numerous
means to conceal the fraud, including forgery [and] altering documentation”); United States v.
White, 850 F.3d 667, 675–76 (4th Cir. 2017) (affirming application of two-level sentencing
enhancement for sophisticated means in false tax preparer case in part because defendant created
a fictitious entity, created fraudulent IRS notices, and forged signatures); United States v. Adejumo,
772 F.3d 513, 531 (8th Cir. 2014) (affirming the district court’s application of the sophisticated
means enhancement where the defendant had identification documents, specifically created with
his picture on them, and benefitted from his co-conspirator’s activities in creating fake
identification documents to assist him in the scheme).
Accordingly, the Court should apply the sophisticated means enhancement under U.S.S.G.
§ 2B1.1(b)(10)(C) here.
Second, Defendant repeatedly minimizes his criminal conduct and makes various
assertions that are belied by the statements he agreed to in the parties’ plea agreement. Much of
Defendant’s sentencing submission smacks of a lack of acceptance of responsibility. The Court
should consider this apparent lack of acceptance of responsibility at sentencing.
As an initial matter, Defendant appears to suggest that the bogus bank statement he created
and submitted with the PPP application had no impact on Celtic Bank’s decision whether to fund
the loan. Not so. No PPP lender would approve a loan application that included a fake and
fabricated document in support of it. Indeed, one of the certifications in the application required
Defendant to certify as follows:
I further certify that the information provided in this application and the
information provided in all supporting documents and forms is true and accurate
in all material respects. I understand that knowingly making a false statement to
obtain a guaranteed loan from SBA is punishable under the law, including under 18
USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of
up to $250,000; under 15 USC 645 by imprisonment of not more than two years
and/or a fine of not more than $5,000; and, if submitted to a federally insured
institution, under 18 USC 1014 by imprisonment of not more than thirty years
and/or a fine of not more than $1,000,000.
Def. Mem. Ex. 2 (ECF No. 30-2) at 2 (emphasis added). Defendant certified as much in good
faith. Had he not done so, the loan would not have closed. Simply put, Defendant created a
fabricated bank statement, submitted it with his PPP application, and then lied about it.
Defendant’s suggestion that the fabricated bank statement essentially did not matter because the
“loan had already been approved at this point,” Def. Mem. at 1, is meritless, unsupported, and
wrong.
3
Case 1:23-cr-00210-RDB Document 34 Filed 03/24/25 Page 4 of 5
Defendant also appears to suggest that he used the PPP funds the way he was required to
under the PPP. This too is wrong. Defendant agreed in the plea agreement’s statement of facts
that:
Defendant spent the fraudulently obtained PPP funds in multiple ways that
were impermissible under the PPP. One day after receiving the PPP funds, on May
5, 2020, Defendant made an ACH transfer in the amount of $110,356.48 from the
SunTrust account ending in x2386 to Mercedes-Benz Financial in connection with
a payment for a 2019 Mercedes-Benz GT43C4 automobile previously purchased
by Defendant.
Plea Agreement at 11. The notion that Defendant’s $100,000 plus Mercedes—his personal
vehicle—is a “company car,” Def. Mem. at 7 n.5, beggars belief. Defendant does not even try to
explain how or why the vehicle is a “company car.” Nor do Defendant’s tax records provide any
insight. Indeed, as of tax year 2020, Defendant did not file any tax returns; his last return was for
tax year 2016. As of tax year 2020, the last return for PEI was for tax year 2017; it had no vehicles
listed as expenses. Nor were there any records of Stafquik filing tax returns at all. 2
Defendant also claims that the PPP funds he used to extensively renovate his house were
“advance monies [he] was already owed by insurers due to a flood in his home and a fire in his
office.” Def. Mem. at 7 n.5. But Defendant agreed in the plea agreement’s statement of facts that:
Beginning on May 20, 2020, and continuing through in or about August
2020, Defendant transferred approximately $138,522.22 in PPP funds to a
contractor in connection with extensive renovations to Defendant’s home and
installation of a pool there.
Plea Agreement at 11. Further, it’s obvious that the installation of a pool at Defendant’s home (or
the renovation the home’s kitchen) has no relationship to water damage from a flood. And
Defendant does not even try to explain away his other impermissible spending of PPP funds as set
forth in the statement of facts:
Defendant also used the PPP funds to pay $100,000 in connection a
settlement agreement pertaining to a 2013 litigation involving unpaid insurance
premiums and to pay off a $344,341.05 debt related to funds Defendant
misappropriated from a business partner (Lender 2) and used for personal expenses.
None of these were permissible uses of the PPP funds.
Defendant likewise used the PPP funds to pay various personal expenses
(including a trip to a luxury golf resort) and provided PPP funds to various family
members and associates for purposes unrelated to employment with PEI (including
his family’s nanny), making withdrawals for himself, and paying off various
personal debts.
Plea Agreement at 11. He cannot. What’s more, Defendant glosses over the fact that PPP loan
application expressly required him to certify that the PPP “funds will be used to retain workers
and maintain payroll or make mortgage interest payments, lease payments, and utility payments,
as specified under the Paycheck Protection Program Rule” and his further certification that “I
understand that if the funds are knowingly used for unauthorized purposes, the federal government
2
Defendant claims, without support, that “Stafquik is a wholly-owned subsidiary of PEI.” Def. Mem. at 4.
But this not reflected in the entities’ tax filings with the IRS—or lack thereof. Indeed, PEI could have elected using
an IRS Form 8869 to treat Stafquik as a subsidiary of PEI in the eyes of the IRS. It did not. To be sure, Stafquik did
exist on paper; however, the application—the very purpose of the business—never launched.
4
Case 1:23-cr-00210-RDB Document 34 Filed 03/24/25 Page 5 of 5
may hold me legally liable, such as for charges of fraud.” Def. Ex. 2 at 2. There can be no question
that Defendant violated this provision here.
Finally, Defendant appears to claim that the number of employees he listed in the PPP
application doesn’t matter and that the information as to the number of employees in the PPP
application was in fact accurate. Def. Mem. at 4. But this contention cannot be squared with the
following statement in the plea agreement’s statement of facts:
The PPP loan application contained multiple material misrepresentations,
including that PEI had 382 employees and an average monthly payroll of $522,868.
In fact, IRS Forms 941 for PEI Staffing show that in the first quarter of 2020, the
business had 134 employees and in the second quarter that it had just 79 employees.
Further, Forms 941 for PEI Staffing from 2019 show a steady decline in the number
of PEI Staffing’s employees in 2019, as follows: First Quarter – 493 employees;
Second Quarter – 454 employees; Third Quarter; 154 employees; Fourth Quarter –
128 employees. And in an EIDL application Defendant submitted for PEI on April
2, 2020—one month before he submitted the PPP loan application—Defendant
claimed that PEI had 220 employees.
Plea Agreement at 10-11. Moreover, Defendant’s statement that “the number of employees is not
material to a PPP loan application,” Def. Mem. at 4 n.2, is unsupported and wrong. Indeed, any
lie or misrepresentation in a PPP loan application is sufficient to render the application invalid,
and Defendant certified to the accuracy of all of the information in the application. Celtic Bank—
the PPP lender—was relying on Defendant to tell the truth in the PPP application. But he did not.
He lied about the number of employees of the business at the time of the application, 3 and he lied
about how much they were being paid.
For all of these reasons, the Court should sentence Defendant to a guidelines term of
imprisonment.
Respectfully submitted,
Kelly O. Hayes
United States Attorney
/s/
By: Paul A. Riley
Assistant United States Attorney
cc: Rich Bardos, Esq. (by ECF)
Nicole Wonneman, U.S. Probation Officer (by electronic mail)
3
Indeed, at the time of the application, PEI had lost one of its major clients (and sources of employees):
Trader Joes. Defendant of course was aware of this.
5
File and source
- File
- gov.uscourts.mdd.538629.34.0.pdf
- Size
- 231,142 bytes
- SHA-256
- da2f49c4ef91413a56249f8abf2aca3a9f7bc8f2cd55664eff9f7e1ffa5e6a87
- Our copy
- gov.uscourts.mdd.538629.34.0.pdf
- Original
- PACER (login required)