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Crim Wied Unknown Us V Thomas Smith Docx Indictment - Us V Thomas Smith
Summary
A grand jury indictment in the U.S. District Court for the Eastern District of Wisconsin charging Thomas E. Smith, Stephen E. Smith, Samuel A. Davis, Robert Hamilton and Jonathan E. Henley, with a caption citing 18 U.S.C. §§ 1344, 1957, and 2. Counts One through Six charge bank fraud, alleging that from about April 2020 through July 2020 the defendants submitted PPP loan applications to Financial Institution 1 for companies that were not in operation as of February 15, 2020. The indictment alleges that the applications overstated payroll and employee counts, included falsified IRS Forms 941, and that loan funds went to personal and other non-business expenses. It alleges that at least approximately $960,000 in loan proceeds was obtained and another $442,500 attempted. The indictment closes with forfeiture allegations for Counts 1-14 and is returned as a true bill.
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UNITED RAGS IS rae COURT
EASTERN ASSEN ONSIN
FILED
UNITED STATES OF AMERICA, 2020 0CT 20 P u& 25
Plaintise, CLERK UF VSesdateD OQ) -GR-1 96
Vv. Case No. 20-CR-
[18 U.S.C. §§ 1344, 1957, and 2]
THOMAS E. SMITH,
STEPHEN E. SMITH,
SAMUEL A. DAVIS,
ROBERT HAMILTON, and
JONATHAN E. HENLEY,
Defendants.
INDICTMENT
THE GRAND JURY CHARGES THAT:
BACKGROUND
At all times material to this Indictment:
The Defendants and Relevant Entities
1. THOMAS E. SMITH was a resident of Pewaukee, Wisconsin, and the registered
agent of T & T Holdings LLC (“T&T Holdings”), a Wisconsin limited liability company. T&T
Holdings was administratively dissolved on or about March 20, 2017.
2. STEPHEN E. SMITH was a resident of Milwaukee, Wisconsin, and the registered
agent of CFA Auto Transport LLC (“CFA”), a Wisconsin limited liability company, and Complete
Fundamentals, Inc. (“Complete Fundamentals”), a Wisconsin non-stock corporation. $. SMITH
was also the orgamizer of New Beginnings Family Services LLC (“New Beginnings”), a Wisconsin
limited liability company.
3. SAMUEL A. DAVIS was a resident of Chicago, Illinois, and the registered agent
and president of Davis Development Group Inc. (“Davis Development”), an Illinois corporation.
4, ROBERT HAMILTON was a resident of Milwaukee, Wisconsin, and the president
and registered agent of Glory Transportation Services, LLC (“Glory Transportation”), a Wisconsin
limited liability company.
5. JONATHAN E. HENLEY was a resident of Chicago, Illinois, and the manager and
one of the registered agents of Premier Logistic Solutions LLC (“Premier Logistic”), an Illinois
limited liability company.
6. Individual 1 was a resident of Milwaukee, Wisconsin, and the registered agent of
Rebels Paris, LLC (“Rebels”), a Wisconsin limited liability company.
7. Jndividual 2 was a resident of Milwaukee, Wisconsin, and the registered agent of
Comfort Care Transit LLC (“Comfort Care”), a Wisconsin limited liability company.
8. Individual 3 was a resident of Milwaukee, Wisconsin. On or about May 21, 2020,
Individual 3 filed paperwork with the State of Wisconsin establishing himself as the registered
agent of New Beginnings.
The Small Business Administration
9. 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
enabling the establishment and viability of small businesses and by assisting in the economic
recovery of communities after disasters.
10. As part of this effort, the SBA enabled and provided for loans through banks, credit
unions, and other lenders. These loans had government-backed guarantees.
The Paycheck Protection Program
11. 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.
12. One source of relief that the CARES Act provided was the authorization of up to
$349 billion in forgivable loans to small businesses for payroll, mortgage interest, rent/lease, and
utilities, through a program referred to as the Paycheck Protection Program (“PPP”). In April
2020, Congress authorized up to $310 billion in additional PPP funding.
13. The PPP allowed qualifying small businesses and other organizations to receive PPP
loans. Businesses were required to use PPP loan proceeds on 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 certain percentage of the PPP loan proceeds on payroll expenses.
14. The amount of a PPP loan that a small business was entitled to receive was
determined by the number of employees employed by the business and the business’s average
monthly payroll costs.
15. In order to obtain a PPP loan, a qualifying business was required 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 in order to be eligible to obtain the PPP
loan. In the PPP loan application, the small business (through its authorized representative) had
to state, 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
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eligible to receive under the PPP. In addition, businesses applying for a PPP loan had to provide
documentation showing their payroll expenses.
16. ‘The SBA oversaw the PPP. However, individual PPP loans were issued by private,
approved lenders who received and processed PPP applications and supporting documentation,
and then made loans using the lenders’ own funds, which were 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 thc lender to the SBA in the course of
processing the loan.
Relevant Financial Institutions
17. Financial Institution 1 was a federally insured financial institution and member of
the Federal Home Loan Bank System headquartered in Green Bay, Wisconsin. Financial
Institution 1 was an approved SBA lender and participated as a PPP lender to small businesses.
18. Financial Institution 2 was a Federal Deposit Insurance Corporation-insured bank
headquartered in Minneapolis, Minnesota.
19. Credit Union 1 was a nationally insured credit union headquartered in Racine,
Wisconsin.
COUNTS ONE THROUGH SIX
Bank Fraud —18 U.S.C. § 1344 and § 2
20. The Grand Jury re-alleges and incorporates by reference the factual allegations
contained in paragraphs 1 through 19 of this Indictment as if fully set forth herein.
The Scheme to Defraud
21. From in or about April 2020 through in or about July 2020, in the State and Eastern
District of Wisconsin and elsewhere,
THOMAS E. SMITH,
STEPHEN E. SMITH,
SAMUEL A. DAVIS,
ROBERT HAMILTON, and
JONATHAN E. HENLEY,
and others known and unknown to the Grand Jury, and aided and abetted by each other, did
knowingly execute and attempt to execute a scheme and artifice to defraud Financial Institution 1,
and to obtain, by means of materially false and fraudulent pretenses, representations, and promises,
and by omission of material facts, certain moneys, funds, credits, assets, securities, and other
property owned by and under the custody and control of Financial Institution 1.
The Purpose of the Scheme and Artifice
22. Jt was the purpose of the scheme for defendants T. SMITH, S. SMITH, DAVIS,
HAMILTON, and HENLEY, and others known and unknown to the Grand Jury, to unlawfully
enrich themselves by: (a) submitting false and fraudulent PPP loan applications to financial
institutions falsely representing that the applicant entities were functional and operational
businesses and falsely promising to use the fund proceeds on covered business expenses, and
(b) concealing and causing the concealment of these false and fraudulent applications.
Manner and Means of the Scheme
23. It was part of the scheme that defendants T. SMITH, 8. SMITH, DAVIS,
HAMILTON, HENLEY, Individual 1, Individual 2, Individual 3, and others, submitted and caused
to be submitted fraudulent PPP loan applications to Financial Institution 1 for the purpose of
obtaining funds from Financial Institution 1.
24. Jt was further part of the scheme that each of the PPP loan applications falsely
claimed that the PPP loan applicant company was in operation as of February 15, 2020, when in
fact it was not, and that it employed individuals for whom it paid salaries and payroll taxes, or paid
independent contractors (as reported on IRS Form 1099-MISC). In fact, CFA, Davis
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Development, New Beginnings, Comfort Care, and Premier Logistic were not in operation in
February 2020. Specifically:
a. CFA’s loan application falsely claimed that it was operational as of February 15,
2020, when in fact it was not and went into “delinquent” status with the Wisconsin Department of
Financial Institutions (“WDFT’) on or about July 1, 2019. CFA’s application did not report that
S. SMITH restored the active status of CFA with WDFI on or about May 5, 2020.
b. Davis Development’s loan application falsely claimed that it was operational as of
February 15, 2020, when in fact Davis Development had been administratively dissolved with the
Illinois Secretary of State (““ILSOS”) as of on or about August 10, 2018. Davis Development’s
application did not report that DAVIS reinstated the company on or about May 2, 2020.
c. New Beginnings’ loan application falsely claimed that it was operational as of
February 15, 2020, when in fact New Beginnings had been administratively dissolved with WDFI
as of on or about April 13, 2020. New Beginnings’ application did not report that S. SMITH
reinstated the company on or about May 1, 2020.
d. Comfort Care’s loan application falsely claimed that it was operational as of
February 15, 2020, when in fact Comfort Care was administratively dissolved with WDFT on June
13, 2017. Comfort Care’s application did not report that Individual 2 restored the active status of
Comfort Care with WDFI on or about May 12, 2020.
e. Premier Logistic’s loan application falsely claimed that it was operational as of
February 15, 2020, when in fact Premier Logistic had been administratively dissolved with the
ILSOS as of on or about June 14, 2019. Premier Logistic’s application did not report that
HENLEY reinstated the company on or about May 14, 2020.
25. it was further part of the scheme that each of the PPP loan applications falsely
certified that the PPP loan applicant company employed individuals for whom it paid salaries and
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payroll taxes, or paid independent contractors (as reported on IRS Form 1099-MISC) and falsely
represented the number of employees each company employed. Each of the PPP loan applications
also included falsified Employer’s Quarterly Federal Tax Returns (IRS Forms 941) for each
quarter of 2019 and the first quarter of 2020. In fact, none of the businesses had filed Forms 941
in any quarter of 2019 or the first quarter of 2020, meaning that the company had no employees
for which federal taxes were paid during that period. Specifically:
a. CFA’s loan application falsely claimed that its average monthly payroll was
$97,000 and that it employed 38 people.
b. Comfort Care’s loan application falsely claimed that its average monthly payroll
was $92,000 and that it employed 23 people.
c. Davis Development’s loan application falsely claimed that its average monthly
payroll was $71,000 and that it employed 20 people.
d. New Beginnings’ loan application falsely claimed that its average monthly payroll
was $92,000 and that it employed 28 people.
e. Premier Logistic’s loan application falsely claimed that its average monthly payroll
was $85,000 and that it employed 23 people.
f. Rebels’ loan application falsely claimed that Rebels’ average monthly payroll was
$62,000 and that it employed 17 people.
g. Glory Transportation’s loan application falsely claimed that Glory Transportation’s
average monthly payroll was $62,000 and that it employed 14 people.
26. it was further part of the scheme that defendants T. SMITH, 8. SMITH, DAVIS,
HAMILTON, HENLEY, Individual 1, Individual 2, Individual 3, and others falsely represented
the intended use of the funds, claiming that the funds would be used for legitimate business
expenses. Specifically, CFA, Comfort Care, Davis Development, New Beginnings, Premier
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Logistic, and Rebels’ loan applications each falsely claimed that it intended to spend Joan proceeds
on payroll, lease or mortgage expenses, interest, and utilities. In fact, the loan funds were used
for, among other things, personal expenses and other non-business expenses.
27. It was further part of the scheme that defendants T. SMITH, S. SMITH, DAVIS,
HENLEY, Individual 1, Individual 2, Individual 3, and others opened or directed others to open
bank accounts at Financial Institution 1 to facilitate and expedite obtaining PPP loan funds,
including:
a. On or about May 5, 2020, S. SMITH opened bank account No. x&659 at Financial
Institution | in the name of CFA.
b. On or about May 5, 2020, DAVIS opened bank account No. x8733 at Financial
Institution | in the name of Davis Development.
c. On or about May 8, 2020, Individual 1 opened bank account No. x9383 at Financial
Institution | in the name of Rebels.
d. On or about May 13, 2020, Individual 2 opened bank account No. x2840 at
Financial Institution 1 in the name of Comfort Care.
e. On or about May 19, 2020, HENLEY opened bank account No. x7764 at Financial
Institution 1 in the name of Premier Logistic.
f. On or about May 22, 2020, Individual 3 opened bank account No. x6862 at
Financial Institution | in the name of New Beginnings.
28. It was further part of the scheme that after the PPP loans were deposited into the
applicant company’s bank account at Financial Institution 1, defendants T. SMITH, S. SMITH,
DAVIS, HAMILTON, Individual 1, Individual 2, and Individual 3 transferred or directed the
transfer of the loan proceeds to each other, and to entities controlled by one of the defendants,
enabling them to enrich themselves from the loan proceeds.
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29. It was further part of the scheme that when defendants T. SMITH, 8. SMITH,
DAVIS, HAMILTON, HENLEY, Individual 1, Individual 2, and Individual 3 lcarned that
Financial Institution 1 froze or inquired about their loan applications, that Defendants, Individual
1, Individual 2, and Individual 3 took steps to misrepresent, conceal, hide and cause to be
misrepresented, concealed, and hidden, the existence, purpose, and acts done in furtherance of the
scheme.
30. It was further part of the scheme that in total, at least approximately $960,000 was
provided to Defendants, Individual 1, Individual 2, and Individual 3 in fraudulently obtained Joan
proceeds, and an additional $442,500 was attempted to be fraudulently obtained by Defendants,
Individual 1, Individual 2, and Individual 3.
Executions
31. On or about the following dates, in the State and Eastern District of Wisconsin and
elsewhere, Defendants T. SMITH, S. SMITH, DAVIS, HAMILTON, and HENLEY, aided and
abetted by each other and by others known and unknown to the Grand Jury, did knowingly execute
and attempt to execute the above-described scheme to defraud by committing and willfully causing
others to commit the following acts, each of which constituted an execution of the fraudulent
scheme:
Defendant(s
, . Submission of fraudulent PPP loan
T. SMITH April 26, application for Davis Development to $177,500
DAVIS 2020 ; . ae
Financial Institution 1
T. SMITH Submission of fraudulent PPP loan
‘ May 1, 2020 | application for CFA to Financial Institution $242,500
S.SMITH 1
T. SMITH Submission of fraudulent PPP loan
‘ May 1, 2020 | application for Glory Transportation to $155,000
HAMILTON , . wy:
Financial Institution 1
Approximate
Sie a
T. SMITH
Submission of fraudulent PPP loan
Ss. SMITH May 8, 2020 application for Rebels to Financial $155,000
Institution 1 |
Submission of fraudulent PPP loan
T. SMITH May 15, 2020 | application for Comfort Care to Financial $230,000
Institution 1
T SMITH Submission of fraudulent PPP loan
HENLEY May 20, 2020 | application for Premier Logistic to Financial $212,500
Institution 1
Each in violation of Title 18, United States Code, Sections 1344(2) and 2.
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COUNTS SEVEN THROUGH FOURTEEN
Money Laundering — 18 U.S.C. § 1957
32. The Grand Jury re-alleges and incorporates by reference the factual allegations
contained in paragraphs | through 31 of this Indictment as if fully set forth herein.
33. On the dates specified below, in the State and Eastern District of Wisconsin and
elsewhere, Defendants T. SMITH, S.SMITH, DAVIS, and HAMILTON, aided and abetted by
each other and by others known and unknown to the Grand Jury, knowingly engaged in, attempted
to engage in, and caused others to engage in a monetary transaction by, through, and to a financial
institution, affecting interstate and foreign commerce, knowing that such transaction involved
criminally derived property of a value greater than $10,000, such property having been derived
from a specified unlawful activity, that is, bank fraud, in violation of Title 18, United States Code,
Section 1344:
Count:|} Defendant(s) Approximate Description of Transaction
Cashier’s check for approximately $30,000
withdrawn from Glory Transportation’s Financial
Institution 1 account No. x2240, written to T.
SMITH.
7 HAMILTON | May 6, 2020
Cashier’s check for approximately $50,000
withdrawn from Glory Transportation’s Financial
8 HAMILTON _ | May 8, 2020 Institution 1 account No. x2240, deposited into Credit
Union | account No. x2707, held in the name of
HAMILTON.
Cashier’s check for approximately $20,000
withdrawn from Rebels’ Financial Institution 1
9 T. SMITH May 18, 2020 | account No. x9383, deposited into Financial
Institution 1 account ending in 1719, held in the
name of T&T Holdings.
Cashier’s check for approximately $20,000
withdrawn from Rebels’ account No. x9383,
deposited into Financial Institution 2 account No,
x4088, held in the name of S$. SMITH d/b/a Complete
Fundamentals.
10 S. SMITH May 18, 2020
11
Approximate
Count | Defendant(s) Date
Description of Transaction —
{1 T. SMITH May 20, 2020
Cashier’s check for approximately $40,000
withdrawn from Comfort Care’s Financial Institution
1 account No. x2840, deposited into Financial
Institution 1 account No. x4241, held in the name of
T. SMITH.
T. SMITH
DAVIS May 21, 2020
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Cashier’s check for approximately $75,000
withdrawn from Davis Development’s Financial
Institution 1 account No. x8733, deposited into
Financial Institution 1 account No. x1719, held in the
name of T&T Holdings.
T. SMITH
S. SMITH May 22, 2020
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Cashier’s check for approximately $25,000
withdrawn from CFA’s Financial Institution 1
account No. x8659, deposited into Financial
Institution 1 account No. x1719, held in the name of
T&T Holdings.
14 S. SMITH May 22, 2020
Cashier’s check for approximately $25,000
withdrawn from CFA’s Financial Institution |
account No. x8659, deposited into Financial
Institution 2 account No. x4088, held in the name of
S. SMITH d/b/a Complete Fundamentals.
Each in violation of Title 18, United States Code, Section 1957 and Section 2.
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FORFEITURE ALLEGATIONS
The allegations contained in Counts 1-14 of this Indictment are hereby realleged and
incorporated by reference for the purpose of alleging forfeiture. Upon conviction of an offense
alleged in Counts 1-14, Defendants shall forfeit to the United States, pursuant to Title 18, United
States Code, Section 981(a)(1)(C), by way of Title 28, United States Code, Section 2461(c), any
property that constitutes or is traceable to proceeds of the offense. This property includes, but is
not limited to, a sum of money reflecting the proceeds Defendants obtained from the offense.
The allegations contained in Counts 1-14 of this Indictment are hereby realleged and
incorporated by reference for the purpose of alleging forfeiture. Upon conviction of an offense
alleged in Counts 1-14, Defendants shall forfeit to the United States, pursuant to Title 18, United
States Code, Section 982(a)(1), any property involved in the offense, or any property traceable to
such property. This property includes, but is not limited to, a sum of money reflecting the proceeds
Defendants obtained from the offense.
If any of the above-described forfeitable property, 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;
it is the intent of the United States, pursuant to Title 21, United States Code, Section 853(p), and
Title 28, United States Code, Section 2461(c), to seek the forfeiture of any other property of the
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Defendants, up to the value of the above-described forfeitable property.
A TRUE BILL:
FOREPERSON
“2—MATTHE WD. KRURGHR
United States > KRU
~C-DANIEL KAHN
Acting Chief, U.S. Departinent of Justice, Fraud Section
Lar)
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