Information — United States v. Stote (Dkt. 35, N.D. Ohio)

Summary

Filed November 10, 2021 in the Northern District of Ohio, this one-count information charges James Richard Stote and Phillip J. Augustin of Broward County, Florida with conspiracy to commit wire fraud under 18 U.S.C. § 1349, from around March 2020 through June 2020. It alleges that Stote, Augustin, the separately charged Ross Charno and others submitted fraudulent PPP applications for their own entities, such as USA Homes and Remodeling, Inc., Clear Vision and Top Gun, and recruited borrowers such as Apex Now and Urban Housing in Ohio, in exchange for kickbacks. Stote and Charno falsified IRS Forms 941, setting monthly payroll so that the desired loan equaled payroll multiplied by 2.5.

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FILED

NOV 10 2021

Clerk of Court, United States District Court
Ohio Norther District - CLEVELAND

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO

EASTERN DIVISION
UNITED STATES OF AMERICA, ) INFORMATION
)
Plaintiff, ) EP CR 3 5
V. ) CASENO? ™
) - Title 18, United States Code,
JAMES RICHARD STOTE, ) Section 1349
PHILLIP J. AUGUSTIN, )
JUDGE BARKER
Defendants. )

GENERAL ALLEGATIONS

At all times relevant to this Information, unless otherwise specified:

The Paycheck Protection Program

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 are 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”).

Bs 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
doplication 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 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 loan application was processed by a participating lender. If a PPP loan
application was approved, the participating lender funded the PPP loan using its own monies.
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. |
a 4. PPP loan proceeds were required to be used by the business on certain permissible
expenses—payroll costs, interest on mortgages, rent, and utilities. 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 Defendants and Related Entities and Individuals

5. JAMES RICHARD STOTE was a resident of Broward County, Florida. STOTE
was the true owner of FS Financial, Inc., and USA Homes and Remodeling, Inc. FS Financial,
Ine, had been in the business of providing credit-related services, such as improving credit scores
and obtaining commercial loans. USA Homes and Remodeling, Inc. was a corporate entity with

minimal legitimate operations.


6. PHILLIP J. AUGUSTIN was a resident of Broward County, Florida. AUGUSTIN
was the true manager and one of the true owners of Clear Vision Music Group (“Clear Vision”)
and Top Gun Consulting and Management LLC (“Top Gun”). Clear Vision and Top Gun had
limited operations prior to the COVID-19 pandemic.

7. Ross Charno (charged separately) was a resident of Broward County, Florida.
Charno was the true owner of PM Autobody, Inc. (“PM Autobody”) and OMP Enterprises LLC
(“OMP”), two entities with minimal legitimate operations.

8. Wyleia Nashon Williams (charged separately) was a resident of Broward County,
Florida.

9, Deon D. Levy (charged separately) was a resident of Bedford Heights, Ohio. Levy
was the true owner and manager of Apex Now Corp. (“Apex Now”) and Urban Housing Group
LLC (“Urban Housing”).

10... Apex Now was an Ohio corporation with its listed principal address in Solon, Ohio,
which performed construction services in Northeast Ohio and elsewhere.

Il. | Urban Housing was an Ohio corporation with its listed principal address in
Highland Heights, Ohio, which had limited operations, but performed some construction services
in Northeast Ohio.

12. Bank Processor | was a third-party company processor, based in Redwood City,
California, that processed PPP loan applications for participating lender banks. Members of the
public could access an online portal for applying for PPP loans through Bank Processor |’s
website, and it received applications through that portal submitted to its servers located in

California.


COUNT 1
(Conspiracy to Commit Wire Fraud, 18 U.S.C. § 1349)

The Acting United States Attorney charges:
13. The allegations contained in paragraphs | through 12 of this Information are
incorporated by reference as if stated fully herein.

The Conspiracy and Scheme to Defraud

14, From in or around March 2020, and continuing through in or around June 2020, in
the Northern District of Ohio, Eastern Division, and elsewhere, Defendants JAMES RICHARD
STOTE and PHILLIP J. AUGUSTIN, and Ross Charno (charged separately), Wyleia Nashon
Williams (charged separately), and Deon D. Levy (charged separately), did willfully, that is, with
the intent to further the object of the conspiracy, knowingly combine, conspire, confederate, and
agree together and with each other and with others known and unknown to the Acting United
States Attorney, to commit an offense against the United States, that is, to knowingly, and with the
intent to defraud, 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, knowing that the pretenses, representations, and promises were false and fraudulent
when made, and, for the purpose of executing the scheme and artifice, to knowingly transmit and
cause to be transmitted, by means of wire communication in interstate commerce, certain writings,
signs, signals, pictures and sounds, in violation of Title 18, United States Code, Section 1343.

Purposes of the Scheme

15. The purposes of the scheme included, but were not limited to, the following: for
Defendants and their co-conspirators to unlawfully enrich themselves by, among other things:
(a) submitting, and causing to be submitted, false and fraudulent applications for loans and grants

made available through the SBA to provide relief for the economic effects caused by the COVID-


19 pandemic, including PPP loans; (b) offering, paying, and receiving kickbacks in return for the
submission of false and fraudulent loan applications; and (c) diverting fraud proceeds for the
Defendants’ and co-conspirators’ personal use, the use and benefit of others, and to further the
conspiracy.
Manner and Means of the Scheme
16. | The manner and means by which Defendants and their co-conspirators carried out
the scheme included, but were not limited to, the following:

a. STOTE, AUGUSTIN, Charno, and other co-conspirators submitted and
caused to be submitted fraudulent PPP loan applications for entities under their control, including
USA Homes and Remodeling, Inc., FS Financial, Inc., Clear Vision, Top Gun, PM Autobody, and
OMP.

b. STOTE, AUGUSTIN, Charno, and other co-conspirators, solicited and
recruited confederate borrowers, for whom they submitted and caused to be submitted fraudulent
PPP loan applications, including for Apex Now and Urban Housing.

c. STOTE, AUGUSTIN, and Charno also worked with other co-conspirators
to recruit additional confederate borrowers interested in obtaining PPP loans.

d. STOTE coordinated submitting the fraudulent PPP applications, largely
through Bank Processor |’s online applications portal, but occasionally through other processors
of PPP loan applications for participating PPP lenders. In most instances, STOTE used the
confederate borrower’s email to create an account with Bank Processor 1, which the borrower
would then validate. In some instances, STOTE used email accounts he had created and controlled
to create an account for the borrower with Bank Processor |. The PPP loan applications included

falsified payroll tax forms and falsified bank statements, and the application materials falsely and


fraudulently represented the borrowing entities’ operations and finances, including the number of
employees and the amount of monthly payroll.

e. STOTE and Charno falsified documents that were submitted, and were
intended to be submitted, in support of the applications, which falsely reported the number of
employees and the payroll expenses, choosing figures to yield a PPP loan in the amount desired.
The falsified payroll figures were determined based on a formula in which the desired PPP loan
amount was equal to the average monthly payroll expenses for 2019, multiplied by 2.5. In
particular, STOTE and Charno created falsified Internal Revenue Service (“IRS”) Forms 941
(titled, “Employer’s Quarterly Federal Tax Return”) for all four quarters of 2019 in support of the
applications.

f. Williams assisted AUGUSTIN’s efforts to recruit confederate borrowers
and to gather information and documents from those borrowers to provide to STOTE for use in
the fraudulent PPP applications.

g. From time to time, AUGUSTIN, STOTE, and Charno arranged with the
confederate borrowers for the borrowers to pay 25% of the amount of the PPP loan as a fee or
kickback for obtaining the loan, to be wired to accounts controlled by STOTE.

h. From time to time, STOTE wired to accounts controlled by AUGUSTIN,
or otherwise transferred to AUGUSTIN’s designees, a share of the 25% kickbacks.

i. STOTE, AUGUSTIN, Charno, Williams, Levy, and other co-conspirators
coordinated their efforts, including obtaining information and documents from confederate
borrowers and submitting fraudulent PPP loan applications, through the use of interstate wire
communications.

All in violation of Title 18, United States Code, Section 1349.


FORFEITURE
17. The allegations of Count 1 are hereby re-alleged and incorporated herein by
reference for the purpose of alleging forfeiture pursuant to Title 18, United States Code, Section
981(a)(1)(C) and Title 28, United States Code, Section 2461(c), As a result of the foregoing
offense, Defendants JAMES RICHARD STOTE and PHILLIP J. AUGUSTIN shall forfeit to the
United States all property, real and personal, which constitutes—or is derived from—proceeds
traceable to the commission of the offense; including, but not limited to, the following:

a. $1,107,715.13 seized pursuant to the execution of a federal seizure warrant
on or about June 25, 2020, from CITI Bank Personal Savings Account No. ******3778. The
account is in the name of JAMES STOTE.

b. $30,000.00 U.S. currency seized on or about June 25, 2020, pursuant to the
execution of a search warrant at the residence of STOTE located in or around Hollywood, Florida.

c. Rolex watch (man’s) — with gold and silver band - seized on June 25, 2020,
pursuant to the execution of a search warrant at residence of STOTE located in Hollywood,
Florida. The face of the watch reads: Rolex, Oyster Perpetual, Datejust, Superlative Chronometer,
Officially Certified.

d. Rolex watch (man’s) — with gold and silver band and gold face with
diamonds - seized on June 25, 2020, pursuant to the execution of a search warrant at residence of
STOTE located in Hollywood, Florida. The face of the watch reads: Rolex, Oyster Perpetual,
Date, Superlative Chronometer, Officially Licensed.

e. Rolex watch (woman’s) - with gold and silver band and diamonds around

the face of the watch - seized on June 25, 2020, pursuant to the execution of a search warrant at


residence of STOTE located in Hollywood, Florida. The face of the watch reads: Rolex, Oyster
Perpetual, Datejust, Officially Certified, Swiss Made.

f. Rolex watch (man’s) — with silver band - seized on June 25, 2020, pursuant
to the execution of a search warrant at residence of STOTE located in Hollywood, Florida. The
face of the watch reads: Rolex, Oyster Perpetual, Submariner, 1000 ft=300 m, Officially Certified,
_ Swiss-t, <25, Date. Back of the watch face: green holographic in color with the numbers 16233.

g. Rolex watch (man’s) — with gold and silver band and blue face with date -
seized on June 25, 2020, pursuant to the execution of a search warrant at residence of STOTE
located in Hollywood, Florida. The face of the watch reads: Rolex, Oyster, Perpetual. The bottom
of the face-reads: Submariner, 1000 ft 300m, Superlative Chronometer, Officially Certified.

h. Gold braided/linked bracelet seized on June 25, 2020, pursuant to the
execution of a search warrant at residence of STOTE located in Hollywood, Florida.

i. Gold braided/linked necklace — with 14k Italy on clasp - seized on June 25,
2020, pursuant to the execution of a search warrant at residence of STOTE located in Hollywood,
Florida.

j. Silver in color ring with diamonds down both sides of the band. A large,
square in shape, diamond is set in the top/middle of the ring. (Note: The stones appear to be
diamonds; however, the ring has not yet been appraised by an authorized jeweler to confirm). The
ring was turned over by STOTE to the FBI in Miami, Florida, on or about October 26, 2021.

k. Gold rope necklace and a “hamsa hand” charm with diamonds and secured

with a lobster claw clasp. (Note: The stones appear to be diamonds; however, the necklace has


not yet been appraised by an authorized jeweler to confirm), The necklace was turned over by
STOTE to the FBI in Miami, Florida, on or about October 28, 2021.

l, All contents (approximately $271,588.28): of Fifth Third Bank account -
number ******2627, The account is in the name of 60 Days Funding and Investment Group.
AUGUSTIN is the authorized representative of 60 Days Funding and Investment Group.

m. All contents (approximately $8,681.07) of Fifth Third Bank account
number ******2551. The account is in the name of 60 Days Funding and Investment Group.

AUGUSTIN is the authorized representative of 60 Days Funding and Investment Group.

BRIDGET M. BRENNAN JOSEPH S. BEEMSTERBOER
Acting United States Attorney Acting Chief, Fraud Section
By: Llu a By: TL a
CHELSEA S. RICE, CHIEF PHILIP TROUT

White Collar Crime Unit Trial Attorney, Fraud Section

9

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