Statement of Facts — United States v. Kelley (Dkt. 48, E.D. Va.)

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A statement of facts in United States of America v. Kortney Thomas Kelley, Case No. 3:22-cr-35, in the U.S. District Court for the Eastern District of Virginia, Richmond Division, filed January 11, 2023. The United States and Kelley stipulate that the allegations in Count 3 of the Indictment and the facts set out are true and that the United States would have proven them beyond a reasonable doubt. The statement says Kelley lived in Richmond, Virginia from about April 8, 2020 through August 31, 2021, and that he formed and solely owned Focused Resources LLC (on or about October 17, 2018) and IntelliNest Solutions LLC (on or about January 29, 2019), which it says had no monthly payroll expenses and were not going business concerns. It is signed by Kelley and his counsel Emily Munn.

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Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 1 of 8 PagelD# 157

                     IN THE UNITED STATES DISTRICT COURT
                    FOR THE EASTERN DISTRICT OF VIRGINIA
                                   Richmond Division

 UNITED STATES OF AMERICA

 v.               .                          Case No. 3:22-cr-35

 KORTNEY THOMAS KELLEY,

               Defendant.

                               STATEMENT OF FACTS

       The United States and the defendant, KORTNEY THOMAS KELLEY (hereinafter, “the

defendant”), stipulate that the allegations contained in Count 3 of the Indictment and the

following facts are true and correct, and that had this matter gone to trial, the United States

would have proven each of them beyond a reasonable doubt.

                              Defendant and his Businesses

       1.     From on or about April 8, 2020, and continuing through on or about August 31,

2021, the defendant, KORTNEY THOMAS KELLEY, resided in Richmond, Virginia, within the

Eastern District of Virginia.

       2.     Focused Resources LLC (“Focused Resources”) was a Virginia Limited Liability

Company that the defendant formed on or about October 17, 2018. Thereafter, Focused Resources

had no monthly payroll expenses and was not a going business concern. The defendant was the

sole owner of Focused Resources.

       3.     IntelliNest Solutions LLC (“IntelliNest”) was a Virginia Limited Liability

Company that the defendant formed on or about January 29, 2019. Thereafter, IntelliNest had no

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 2 of 8 PagelD# 158

monthly payroll expenses and was not a going business concern. The defendant was the sole
owner of IntelliNest.

Small Business Administration

4, The United States Small Business Administration (“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
empowering small businesses and by assisting in the economic recovery of communities after
disaster.

5. 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.

The Paycheck Protection Program

6. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was a federal
law enacted in or around March 2020 designed to provide emergency financial assistance to the
millions of Americans suffering from the economic effects caused by the COVID-19 pandemic.
The CARES Act established several new temporary programs and provided for the expansion of
others to address the COVID-19 pandemic.

7. One source of relief provided by the CARES Act was the authorization of billions
of dollars in forgivable loans to small businesses for job retention and certain other expenses
through a program referred to as the Paycheck Protection Program (“PPP”).

8. To obtain a PPP loan, a qualifying business had to submit a PPP loan application
signed by an authorized representative of the business. The applicant of a PPP loan was required

to acknowledge the program rules and make certain affirmative certifications in order to be eligible

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 3 of 8 PagelD# 159

to obtain the PPP loan. In the PPP loan application, the applicant had to state, among other things,
the business’s: (a) average monthly payroll expenses; and (b) number of employees. In addition,
businesses applying for a PPP loan had to provide documentation showing their payroll expenses.

9. A PPP loan application had to be processed by a participating financial institution
(the lender). If the PPP loan application was approved, the lender funded the PPP loan using its
own monies, and such loans 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.

10. PPP loan proceeds could only be used by the business for certain permissible
expenses—payroll costs, interest on mortgages, rent, and utilities. The proceeds of a PPP loan
could only be spent on specific expenses authorized by the SBA.

11. While this first draw PPP program ended on May 31, 2021, certain borrowers were
eligible to apply for second draw PPP loans. Eligible borrowers included businesses that: had no
more than 300 employees; which had previously received a PPP loan and would or had already
used the full amount only for authorized uses; and which could demonstrate at least a 25%
reduction in gross receipts between comparable quarters in 2019 and 2020. Second draw PPP
loans were approved with the same general loan terms as the first draw PPP loans.

The Scheme and Artifice to Defraud

12. From on or about April 8, 2020, and continuing through on or about August 31,
2021, in the Eastern District of Virginia and within the jurisdiction of this Court, KORTNEY
THOMAS KELLEY, the defendant herein, did knowingly, unlawfully, and with intent to defraud,

execute and attempt to execute a scheme and artifice to defraud and to obtain property by means

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 4 of 8 PagelD# 160

of materially false and fraudulent pretenses and promises through the transmission of signs,
signals, and writings in interstate commerce.
Purpose of the Scheme and Artifice to Defraud
13. The purpose of the scheme was for the defendant to unlawfully enrich himself by:
1) obtaining disaster-related benefits in the form of PPP loan proceeds under false and misleading
pretenses; 2) submitting false statements, false certifications, and forged documentation in
connection with four separate PPP loan applications to FINANCIAL INSTITUTION 1 and the
SBA, for the purpose of obtaining PPP loans; 3) submitting false statements and false certifications
in connection with four separate PPP loan forgiveness applications to FINANCIAL
INSTITUTION 1 and the SBA, for the purpose of obtaining complete discharge of the defendant’s
PPP loan obligations; and 4) expending fraudulently-obtained PPP loan proceeds on expenses
unrelated to those authorized by the SBA.
Execution of the Scheme and Artifice to Defraud
14. In total, the defendant submitted four false and misleading PPP loan applications to
FINANCIAL INSTITUTION 1 for businesses that the defendant owned, to wit: first draw and
second draw PPP applications on behalf of both Focused Resources and IntelliNest. On these PPP
loan applications, the defendant made knowingly false statements and knowingly false
certifications to mislead FINANCIAL INSTITUTION 1 and the SBA, including:
a. Providing false and fabricated Internal Revenue Service tax return
documentation purporting to show legitimate business activity at Focused

Resources and IntelliNest;

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 5 of 8 PagelD# 161

b. Falsely certifying that Focused Resources and IntelliNest had over 140
workers and paid out over $220,000 in monthly payroll expenses; and

c. Falsely certifying that the loan proceeds would be and were used
exclusively for eligible business expenses.

15. For instance, on or about January 26, 2021, the defendant submitted a second draw
PPP loan application (last four digits 8401) through FINANCIAL INSTITUTION 1 for IntelliNest
containing false statements, misrepresentations, and omissions related to the defendant’s business

‘entity, employees, income, and payroll expenses. As a result, FINANCIAL INSTITUTION 1
deposited $457,082 in the IntelliNest bank account at FINANCIAL INSITTITION 1 on or about
February 12, 2021.

16. ‘ In total, the defendant improperly obtained $1,143,224 via four PPP loans from
FINANCIAL INSTITUTION 1.

17. Furthermore, the defendant submitted a separate loan forgiveness application in
connection with each of these four PPP loan applications, resulting in the SBA completely
discharging the defendant’s PPP loan obligations. On these PPP loan forgiveness applications, the
defendant made knowingly false statements and knowingly false certifications to mislead the SBA,
including, but not limited to:

a. Falsely certifying that the loan proceeds were used exclusively for eligible
business expenses; and

b. Providing false and fabricated documentation from HUMAN RESOURCE
VENDOR | as supporting justification, purporting to substantiate claimed

payroll expenses.

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 6 of 8 PagelD# 162

18. The defendant expended the PPP loan proceeds on purposes unrelated to those
authorized by the SBA, including (1) spending at least $142,711 in loan proceeds at various
casinos and on gaming; and (2) transferring at least $834,077 in loan proceeds to KELLEY’s
personal brokerage accounts. As an illustrative example, on or about February 22, 2021, ten
days after receiving second draw PPP loan funds for IntelliNest, the defendant spent $9,352 in
PPP loan funds at the Mardi Gras Casino in Cross Lanes, West Virginia. Then, on March 2,
2021, the defendant transferred $254,377 in second draw PPP loan funds for IntelliNest to his
personal brokerage account in FINANCIAL INSTITUTION 2.

19. For the purpose of executing the aforesaid scheme and artifice to defraud, the
defendant routinely caused wire transmissions in interstate commerce, including wire
transmissions of PPP loan applications from FINANCIAL INSITITUTION 1 servers and SBA
servers located outside of the Commonwealth of Virginia to SBA servers within the Eastern
District of Virginia.

20. For example, on or about January 26, 2021, for the purpose of executing and
attempting to execute the scheme and artifice described above, the defendant caused to be
transmitted by means of wire communication in interstate commerce the signs, signals, and
writings described herein: the defendant’s electronic submittal of the IntelliNest second draw PPP
application, which caused an electronic transmission of that application from SBA servers located
in California to SBA servers located in Sterling, Virginia, within the Eastern District of Virginia.

21. It was further part of the scheme and artifice to defraud for the defendant to submit
to the Virginia Employment Commission, as part of separate claims for unemployment insurance

throughout 2020 and 2021, false certifications and false representations: 1) that the defendant was

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 7 of 8 PagelD# 163

laid off from his job as a sales manager at Focused Resources, a business the defendant solely
owned, in or about March 28, 2020; and 2) that the defendant did not apply for or receive any PPP
funds.

22. — It was further part of the scheme and artifice to defraud for the defendant to submit
to the SBA a false and misleading application under a separate CARES Act program — the
Economic Injury Disaster Loan (“EIDL”) program — on behalf of IntelliNest. Such an application
contained a false certification that the loan proceeds would be used exclusively for eligible
business expenses. In response to one of the false and misleading applications the defendant
submitted, the SBA disbursed a $10,000 advance to the IntelliNest bank account designated by the
defendant. Ultimately, these funds were not spent on eligible expenses under the EIDL program.

23. This statement of facts includes those facts necessary to support the plea agreement
between the defendant and the United States. It does not include each and every fact known to the
defendant or to the United States, and it is not intended to be a full enumeration of all of the facts
surrounding the defendant’s case.

24. The actions of the defendant, as recounted above, were in all respects knowing and

deliberate, and were not committed by mistake, accident, or other innocent reason.

Respectfully submitted,

Jessica D. Aber
United States Attorney

By:

Avi Panth
* Assistant United States Attorney

Case 3:22-cr-00035-DJN Document 48 Filed 01/11/23 Page 8 of 8 PagelD# 164

J] have consulted with my attorney regarding this Statement of Facts. I knowingly and
voluntarily agree that each of the above-recited facts is true and correct and that had this matter

gone to trial the United States could have proven each one beyond a reasonable doubt.

VWVA033

Date

I am counsel for defendant, KORTNEY THOMAS KELLEY. I have carefully reviewed
this Statement of Facts with him and, to my knowledge, his decision to agree to this Statement of

Facts is an informed and voluntary decision.

i/ulz4 | low

Date Emily Munn
Counsel

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