Felony Information - US v. Flores

Record facts

U.S. District Court, Northern District of Texas (Fort Worth Division) · No. 4:24-cr-00306-P · Doc. 1 · 2024-12-05 · Docket on CourtListener

Full text

Case 4:24-cr-00306-P | Document1 Filed 12/05/24 Page 1lofi1l PagelD1

0 R | G | N A L IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION
UNITED STATES OF AMERICA
Vv. No.
&°
JAMES FLORES (01) &
INFORMATION

The United States Attorney charges:
At all times material to this Information:

Background
1. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a
federal law enacted in or around 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 a program referred to as the Paycheck Protection Program
(“PPP”).
2. In order to obtain a PPP loan, a qualifying business submitted 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 (Small Business

Information — Page 1
Case 4:24-cr-00306-P | Document1 Filed 12/05/24 Page2of11 PagelD 2

Administration (“SBA”) Form 2483), the small business (through its authorized
representative) was required to provide, among other things, its: (a) average monthly
payroll expenses; and (b) number of employees. These figures were used to calculate the
amount of money the small business was eligible to receive under the PPP. In addition,
businesses applying for a PPP loan were required to provide documentation confirming
their payroll expenses.

3. A PPP ioan application was processed by a participating lender. While it was the
participating lender that issued the PPP loan, the loan was 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, was transmitted by the lender to the SBA in
the course of processing the loan. In return for processing PPP loans, the SBA paid these
lenders a processing fee.

4, The PPP allowed the interest and principal on the PPP loan to be entirely forgiven
if the business spent the loan proceeds on these expense items within a designated period
of time and used a defined portion of the PPP loan proceeds on payroll expenses.

The Defendant, Related Entities, and Individuals

5. Lender-1 was a Community Development Financial Institution (“CDFT”)
headquartered in Phoenix, Arizona and a PPP lender.

6. Lender-2 was a CDFI headquartered in Bedford, Texas and a PPP lender.

7. Lender-3 was a small business lender that participated in the PPP program and

was headquartered in San Diego, California.

Information — Page 2
Case 4:24-cr-00306-P } Document1 Filed 12/05/24 Page3of11 PagelD3

8. Lender-4 was a small business lender that participated in the PPP program and
was headquartered in San Francisco, California.

9. Lender-5 was a small business lender that participated in the PPP program and
was headquartered in Redwood City, California.

10. Bank-1 was a financial institution headquartered in Happy, Texas whose deposits
were insured by the Federal Deposit Insurance Corporation. Bank-1’s computer servers
that stored records of bank transactions were located in the Northern District of Texas. In
2021, Bank-1 received funds sent from the Federal Reserve Bank into an account held by
Lender-2, which was then disbursed to fund PPP loans.

11. Blueacorn refers to a number of entities that were used in 2020 and 2021 to
process PPP loans. Beginning in 2021, Blueacorn collected and reviewed PPP loan
applications as a lender service provider on behalf of Lender-1 and Lender-2.

12. Nathan Reis lived in Arizona and cofounded and co-owned Blueacorn. He was
also, at times, the Chief Executive Officer of Blueacorn. He sold his ownership interest in
2021.

13. Stephanie Hockridge a.k.a. Stephanie Reis lived in Arizona and cofounded and co-
owned Blueacorn. She sold her ownership interest in 2021. Hockridge and Reis were
married.

14. | Michael Cota was a separately charged coconspirator who lived in Arizona and

co-owned a company called Qualytics.

Information — Page 3
Case 4:24-cr-00306-P | Document1 Filed 12/05/24 Page4ofi1 PagelD 4

15. Vivian Arriaga was a separately charged coconspirator who lived in Arizona and

co-owned Qualytics.
16. James Flores lived in Arizona and was a business partner of Reis, Hockridge,

Cota, and Arriaga. Flores cofounded and co-owned both Blueacorn and Qualytics.

[Remainder of page intentionally left blank]

Information — Page 4
Case 4:24-cr-00306-P } Document1 Filed 12/05/24 PageSof11 PagelD5

Count One
Conspiracy to Commit Wire Fraud
(Violation of 18 U.S.C. § 1349, 18 U.S.C. § 1343)

17. Paragraphs 1 through 16 of this Information are realleged and incorporated.

18. From in or around Apri! 2020, through in or around May 2021, in the Fort Worth
Division of the Northern District of Texas and elsewhere, defendant James Flores, along
with others known and unknown, did knowingly and willfully combine, conspire,
confederate, and agree to commit wire fraud, that is, to devise and intend to devise a
scheme and artifice to defraud and to obtain money and property by means of
materially false and fraudulent pretenses, representations, and promises, and for the
purpose of executing the scheme and artifice and attempting to do so, caused 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.

Purpose of the Conspiracy

19. The purpose of the conspiracy was for Flores, Reis, Hockridge, Cota, Arriaga, and
others to unlawfully enrich themselves by submitting and causing the submission of false
and fraudulent applications for forgivable PPP loans.

Manner and Means of the Conspiracy and Scheme to Defraud

20. The manner and means by which Flores and his coconspirators sought to
accomplish the object and purpose of the conspiracy included, among other things, the

following:

Information — Page 5
Case 4:24-cr-00306-P , Document1 Filed 12/05/24. Page6ofi1 PagelD6

a. Beginning in or around April 2020, Flores and his coconspirators began
submitting fraudulent applications for PPP loans for themselves and their
businesses. Flores and his coconspirators fabricated tax documents,
doctored bank statements, and made other material misrepresentations in
order to deceive lenders and the SBA into issuing loans in amounts for
which applicants were not eligible.

b. Beginning in or around April 2020, Flores and his coconspirators founded
Blueacorn, purportedly to assist small businesses and individuals in
obtaining PPP loans. In order to obtain larger loans for certain PPP
applicants, Flores and other coconspirators fabricated documents, including
payroll records, tax documentation, and bank statements.

c. Beginning in or around October 2020, Flores and his coconspirators
expanded Blueacorn’s operations through a lender service provider
agreement (“LSPA”) with Lender-2. Under the LSPA, Blueacorn collected
and reviewed applications from potential borrowers on behalf of Lender-2
and worked with Lender-2 to submit applications to the SBA. In or around
April 2021, Blueacorn entered a similar LSPA with Lender-1. Under these
agreements, Blueacorn received a percentage of the fees the SBA paid to
Lender-1 and Lender-2 for approved PPP loans. Flores and his

NS

coconspirators submitted and caused to be submitted PPP loan applications

Information — Page 6
Case 4:24-cr-00306-P | Document1 Filed 12/05/24 Page7ofi1 PagelD 7

that they knew contained materially false information in order to make
more money,

d. Flores and his coconspirators also made money through a Blueacorn
program called “VIPPP” in which they offered a personalized service to
help potential borrowers complete PPP loan applications. Reis and
Hockridge recruited coconspirators to work as VIPPP referral agents and
coach borrowers on how to submit false PPP loan applications. In exchange
for their service, Reis, Hockridge, and their coconspirators charged VIPPP
borrowers kickbacks based on a percentage of their loans that were funded,
despite knowing that borrowers were prohibited from using PPP loan
proceeds to make such payments. In order to obtain a greater volume of
kickbacks from borrowers and fees from the SBA, Flores, Reis, Hockridge,
and their coconspirators submitted PPP loan applications that they knew
contained materially false information.

21. Reis, Hockridge, and their coconspirators also took the following steps, among
others, to carry out their conspiracy and scheme to defraud:

a. In or around May 2020, Flores and Cota applied to Lender-3 for a PPP loan

for Qualytics in the amount of $62,610. The loan application falsely
represented the amount of payroll that Qualytics paid in 2019, knowing that

Qualytics did not qualify for the loan amount.

Information — Page 7
Case 4:24-cr-00306-P , Document1 Filed 12/05/24. Page8ofi1 PagelD8

b. On or about May 15, 2020, Cota digitally signed the promissory note
through which Qualytics obtained a PPP loan in the amount of $62,610 and
sent the note via electronic wire to Lender-3.

c. In or around July 2020, Reis contacted Flores, Cota, and Arriaga and
offered to help them apply for additional PPP loans.

d. Thereafter, in or around July 2020, Reis and Cota helped Flores submit a
materially false loan application to Lender-4 for a PPP loan in the amount of
about $20,006. That application falsely represented that Flores maintained a
sole proprietorship in his own name. As part of the application, Reis created
a fake tax document purporting to show that the company paid Flores over
$106,000 in 2019, and Cota created a false bank statement for Flores.

e. In or around August 2020, Flores used these fabricated documents to submit
another PPP loan application, again falsely representing that Flores
maintained a sole proprietorship in his own name, and also seeking a loan in
the amount of about $20,0006, to Lender-5.

f. In or around February 2021, Arriaga obtained a second-draw PPP loan from
Lender-2 through Lender Service Provider-1 with guidance and assistance
from Flores and Cota. The application falsely represented that Arriaga
maintained a sole proprietorship and falsely represented the monthly payroll

for that purported business.

Information — Page 8
Case 4:24-cr-00306-P , Document1 Filed 12/05/24 Page9of11 PagelD 9

g. On or about February 5, 2021, Arriaga digitally signed the application form
for a PPP loan in the amount of about $20,833, causing Lender-2, located in
or around Bedford, Texas, in the Northern District of Texas, to disburse the

~ joan proceeds to a bank account located outside the state of Texas.
All in violation of 18 U.S.C. § 1349 (18 U.S.C. § 1343).

[Remainder of page intentionally left blank]

Information — Page 9
Case 4:24-cr-00306-P Document1 Filed 12/05/24 Page10of11 PagelD 10

Forfeiture Notice
(18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c))

22. The allegations of this Information are hereby realleged and by this reference fully
incorporated herein for the purpose of alleging forfeiture to the United States of America of
certain property in which the defendant, James Flores, has an interest.
23. | Uponconviction of the offenses in violation of Title 18, United States Code, Section
1349, as alleged in this Information, the defendant, James Flores, shal! forfeit to the United
States of America, 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.
24. ‘If any of the property described above, as a result of any act or omission of the
defendants:
“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,

the United States of America shall be entitled to forfeiture of substitute property pursuant
to Title 21, United States Code, Section 853(p), as incorporated by Title 28, United States

Code, Section 2461(c).

Information — Page 10
Case 4:24-cr-00306-P “Document1 Filed 12/05/24 Pagei1lofi11 PagelD 11

All pursuant to 18 U.S.C. § 981(a)(1)(C), 21 U.S.C. § 853, and 28 U.S.C.

§ 2461(c).

LEIGHA SIMONTON
UNITED SPATES ATTORNEY

MATTHEW WEYBRECHT
Assistant United States Attorney
State Bar of Texas No. 24102642
Telephone: 817-252-5200

Fax: 817-252-5455
Email: matthew.weybrecht@usdoj.gov

MARGARET A. MOESER

CHIEF, MONEY LAUNDERING & ASSET
RECOVERY SECTION

Criminal Division, U.S. Department of Justice

/s/ Elizabeth R. Carr

ELIZABETH R. CARR

RYAN MCLAREN

Trial Attorneys, Money Laundering & Asset
Recovery Section

Criminal Division, U.S. Department of Justice
Telephone: 202-875-1535

Email: Elizabeth.carr@usdoj.gov

GLENN S. LEON

CHIEF, FRAUD SECTION

Criminal Division, U.S. Department of Justice

/s/ Philip Trout

PHILIP TROUT

Trial Attorney, Fraud Section

Criminal Division, U.S. Department of Justice
Telephone: 202-616-6989

Fax: 202-514-0152

Email: Philip. Trout@usdoj.gov

Information — Page 11

File and source

File

CRIM_TXND_4-24-cr-00306_US-v-Flores_doc1_INFO_2024-12-05.pdf

Size

268,746 bytes

SHA-256

911f8416e9b8b80627773377f90243c2c6184095a05271582be0645f988128e9

Our copy

CRIM_TXND_4-24-cr-00306_US-v-Flores_doc1_INFO_2024-12-05.pdf

Original

archive.org