Information — United States of America v. Harold Dotson, District of Maryland (Wire Fraud Conspiracy Affecting a Financial Institution)

Summary

A criminal information filed May 19, 2023 as Document 1 in Case 1:23-cr-00187-RDB, United States District Court for the District of Maryland, charging Harold Dotson with wire fraud conspiracy affecting a financial institution. It alleges that Dotson, owner of H&M Tax Service LLC in Gaithersburg, Maryland, conspired with A.S. from about April 2020 to January 2022 to prepare false PPP and EIDL applications and IRS Forms 940, 941, 944 and W-3 that were never filed with the IRS. By its count, 85 PPP applications, including to Cross River, sought more than $14,807,609.37 and were all disbursed, and 183 EIDL applications produced 50 funded loans of $3,954,100. It says the conspirators took fees of 5% to 15%, and as much as 30%, of the PPP loans. The forfeiture allegation seeks a money judgment of at least $828,498.95.

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Case 128<-00187-Rof fom Fre odors Page 1 of 9

PAR: 2022R00694 FILED ENTERED
IN THE UNITED STATES DISTRICT COURP=—— /°66E° RECEIVED
FOR THE DISTRICT OF MARYLAND MAY 1 9 2023
UNITED STATES OF AMERICA * CuERK US GSTRIG COURT
, * CRIMINAL NO é
HAROLD DOTSON, * (Wire Fraud Conspiracy Affecting
* A Financial Institution, 18 U.S.C. §
Defendant. * 1349; Forfeiture, 18 U.S.C.
* § 981(a)(1)(C); 21 U.S.C. § 853(p);
* 28 U.S.C. § 2461(c))
INFORMATION
COUNT ONE

(Wire Fraud Conspiracy Affecting A Financial Institution)

Relevant Individuals and Entities

The United States Attorney for the District of Maryland charges that:

At all times material to the Information:

l. Defendant HAROLD DOTSON (“DOTSON”) was a resident of Gaithersburg,
Maryland and was the owner and principal of H&M Tax Service LLC (“H&M Tax”) d/b/a H&M
Financial Group, LLC, a tax preparation business. DOTSON prepared false and fraudulent
Paycheck Protection Program (“PPP”) loan applications and false and fraudulent supporting tax
forms for various borrowers. DOTSON also prepared false and fraudulent Economic Injury
Disaster Loan (“EIDL”) applications for various borrowers.

De Co-conspirator A.S. was a resident of Baltimore, Maryland who ran a purported
financial services business.

35 Cross River Bank (“Cross River”) was a federally insured financial institution
headquartered in Fort Lee, New Jersey. Cross River was an approved United States Small

Business Administration (“SBA”) lender and participated as a lender in the PPP.

The Paycheck Protection Program
4, The PPP was a coronavirus disease (““COVID-19”) pandemic relief program
administered by the SBA that provided forgivable loans to small businesses for job retention and
certain other expenses. The PPP permitted participating third-party lenders to approve and disburse
SBA-backed PPP loans to cover payroll, fixed debts, utilities, rent/mortgage, accounts payable and
other bills incurred by qualifying businesses during, and resulting from, the COVID-19 pandemic.
PPP loans were fully guaranteed by the SBA.

5. To obtain a PPP loan, a qualifying business had 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 to be eligible to obtain the PPP loan, including that the
business was in operation and either had employees for whom it paid salaries and payroll taxes or
paid independent contractors. A business applying for a PPP loan was required to provide
documentation, such as filed federal income tax documents, showing its payroll expenses and
substantiating that the borrowing business was in operation before or on February 15, 2020. The
payroll expenses for the qualifying business served as the basis for the amount of its PPP loan.

6. PPP loan applications were electronically submitted or caused to be submitted by
the borrower and received through SBA servers located outside of the District of Maryland. Once
approved, the business received the PPP loan proceeds via an electronic funds transfer from the
third-party lender to a financial account under the control of the business or business owner.

7. The proceeds of a PPP loan could be used for certain specified items, such as payroll
costs, costs related to the continuation of group health care benefits, or mortgage interest payments.
The proceeds of a PPP loan were not permitted to be used by the borrowers to purchase consumer

goods, automobiles, personal residences, clothing, jewelry, to pay the borrower’s personal federal
Case 1:23-cr-00187-RDB Document1 Filed 05/19/23. Page 3of9

income taxes, or to fund the borrower’s ordinary day-to-day living expenses unrelated to the
specified authorized expenses.
The Economic Injury Disaster Loan Program

8. The EJDL program was an SBA program that provided low-interest financing to
small businesses, renters, and homeowners in regions affected by declared disasters. Through the
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the SBA was authorized to
provide EIDLs to eligible small businesses experiencing substantial financial disruption due to the
COVID-19 pandemic.

9. In addition, the CARES Act authorized the SBA to issue advances of up to
$10,000.00 to small businesses within three days of applying for an EIDL. The amount of the
advance was determined by the number of employees the applicant certified having. The advances
did not have to be repaid.

10. ‘In order to obtain an EIDL or an advance, a qualifying business was required to
submit an application to the SBA and provide information about its operations, such as the number
of employees, gross revenues for the 12-month period preceding the disaster, and cost of goods
sold in the 12-month period preceding the disaster. In the case of EIDLs for COVID-19 relief, the
12-month period was that preceding January 31, 2020. The applicant was required to also certify
that all the information in the application was true and correct to the best of the applicant's
knowledge. EIDL applications were submitted directly to the SBA and processed by the agency
with support from a government contractor. The amount of the loan, if the application was
approved, was determined, in part, on the information provided by the application about
employment, revenue, and cost of goods, as described above. Any funds issued under an EIDL or
advance were issued directly by the SBA. EIDL funds were eligible to be used for working capital

for fixed debts, payroll expenses, accounts payable, and other bills resulting from the pandemic.
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Case 1:23-cr-00187-RDB Document1 Filed 05/19/23. Page4of9

If the applicant also obtained a loan under the PPP, the EIDL funds could not be used for the same
purpose as the PPP funds.
The Conspiracy and the Scheme to Defraud

11. Beginning in or around April 2020 and continuing through in or around January

2022, in the District of Maryland and elsewhere, the defendant,
HAROLD DOTSON,

knowingly and willfully, conspired with A.S., and others known and unknown to the United States
Attorney to knowingly and willfully execute and attempt to execute a scheme and artifice to
defraud the SBA, Cross River, and other lenders and to obtain and attempt to obtain money by
means of materially false and fraudulent pretenses, representations, and promises, and for the
purpose of executing and attempting to execute the scheme to defraud, did knowingly and willfully
transmit and cause to be transmitted by means of wire communications, in interstate and foreign
commerce, writings, signs, signals, pictures, and sounds (the “scheme to defraud”), in violation of
18 U.S.C. § 1343.

The Object the Scheme to Defraud

12. It was the object of the conspiracy and scheme to defraud for DOTSON to
personally enrich himself by (1) fraudulently obtaining and attempting to obtain EIDL and PPP
loans and money for his own personal use and benefit, and for the personal benefit and use of his
associates; and (2) fraudulently obtaining and attempting to obtain fees from owners of purported
businesses for whom he helped obtain and EIDL and PPP loans, often in the amount of 5% to 15%
of the PPP loans obtained.

Manner and Means of the Scheme to Defraud

13. _ It was part of the conspiracy and scheme to defraud that DOTSON, A.S., and others

known and unknown to the United States Attorney referred, and directed others to refer, business
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Case 1:23-cr-00187-RDB Document1 Filed 05/19/23. Page5of9

owners to H&M Tax for the purpose of obtaining assistance in connection with obtaining EIDL
and PPP loans.

14. It was a further part of the conspiracy and scheme to defraud that DOTSON, A.S.,
and others known and unknown to the United States Attorney, offered to assist the business owners
in applying for EIDL and PPP loans in exchange for a fee.

15. It was a further part of the conspiracy and scheme to defraud that DOTSON, A:S.,
and others known and unknown to the United States Attorney, assisted in the preparation of
fraudulent PPP loan applications for businesses by claiming grossly inflated numbers of employees
and grossly inflated monthly payroll costs, including for businesses that did not exist in any
legitimate capacity.

16. It was a further part of the conspiracy and scheme to defraud that DOTSON and
others known and unknown to the United States Attorney, assisted in the preparation of fraudulent
EIDL applications for businesses by claiming grossly inflated numbers of employees and grossly
inflated revenue numbers, including for businesses that did not exist in any legitimate capacity.

17. It was a further part of the conspiracy and scheme to defraud that in support of the
PPP applications, DOTSON prepared various false and fraudulent records, which were submitted
with the PPP applications, including false United States Internal Revenue Service (“IRS”) Forms
940 (Employer’s Annual Federal Unemployment Tax Return), 941 (Employer’s Quarterly Federal
Tax Return), 944 (Employer’s Annual Federal Tax Return), and W-3 (Transmittal of Wage and
Tax Statements) for the businesses. The purpose of the false IRS and fraudulent Forms 940, 941,
944, and W-3 was to circumvent Cross River’s requirement and the requirement of other SBA
approved lenders that prospective borrowers submit documentation to support the payroll figures
that served as the basis for the PPP loan amount. None of these false and fraudulent and IRS

Forms 940, 941, 944, and W-3 that DOTSON prepared were ever filed with the IRS.
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Case 1:23-cr-00187-RDB Document1 - Filed 05/19/23. Page 6of9

18. It was a further part of the conspiracy and scheme to defraud that DOTSON
prepared these false and fraudulent and IRS Forms 940, 941, 944, and W-3 and included false
information concerning, among other things, payroll costs and the number of employees in order
to achieve a loan of the amount desired by the prospective borrower.

19. It wasa further part of the conspiracy and scheme to defraud that DOTSON would
frequently forge the signatures of prospective borrowers on the false and fraudulent IRS Forms
940, 941, 944, and W-3s submitted in connection with fraudulent PPP applications.

20. It was a further part of the conspiracy and scheme to defraud that DOTSON, A.S.,
and others known and unknown the United States Attorney communicated with one another and
with prospective clients electronically by sending messages and documents about their efforts to
obtain PPP loans.

21. It was a further part of the conspiracy and scheme to defraud that A.S., and others
known and unknown the United States Attorney told the prospective borrowers that in order to
complete the PPP loan applications, they would have to provide, among other things, a copy of
their driver’s license, biographical information, and banking information for their business.

22. ‘It was a further part of the conspiracy and scheme to defraud that, after a PPP loan
was funded, DOTSON, A.S., and others known and unknown the United States Attorney collected
a fee of as much as a 30% of the PPP loan amount the borrower, which was then split among the
conspirators.

23. It was a further part of the conspiracy and scheme to defraud that DOTSON used
IP address 108.56.251.159, associated with his residence at the time, when applying for EIDL and

PPP loans.
Case 1:23-cr-00187-RDB Document1 Filed 05/19/23. Page 7 of9

24. It was a further part of the conspiracy and scheme to defraud that when DOTSON
and his co-conspirators applied for EJDL and PPP loans, they caused interstate wire
communications, including from Maryland to other states.

25. It was a further part of the conspiracy and scheme to defraud that DOTSON and
his co-conspirators transferred money via Zelle, ATM withdrawals, and other financial
transactions that caused interstate wire communications, including from Maryland to other states.

26. It was a further part of the conspiracy and scheme to defraud that 85 PPP loan
applications, including to Cross River, seeking more than $14,807,609.37 which had material false
representations and included false and fraudulent IRS Forms 940, 941, 944, or W-3 prepared by
DOTSON, were submitted in connection with the conspiracy and scheme to defraud. All of these
loans were ultimately disbursed.

27. It was a further part of the conspiracy and scheme to defraud that 183 EIDL
applications which had material false representations, were submitted by DOTSON in connection
with the conspiracy and scheme to defraud. Of these loans, 50 loans reflecting $3,954,100 in EIDL
funds were ultimately funded.

18 U.S.C. § 1349
Case 1:23-cr-00187-RDB Document1 Filed 05/19/23. Page 8of9

FORFEITURE ALLEGATION

The United States Attorney for the District of Maryland further alleges that:

1. Pursuant to Federal Rule of Criminal Procedure 32.2, notice is hereby given to the
defendant that the United States will seek forfeiture as part of any sentence in accordance with 18
U.S.C. § 981(a)(1)(C), 21 U.S.C. § 853(p), and 28 U.S.C. § 2461(c), as a result of the defendant’s
conviction under the offense in Count One of this Information.

Wire Fraud Forfeiture
2. Upon conviction of the offense in Count One of this Information, the defendant,

HAROLD DOTSON

shall forfeit to the United States, pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 USS.C. § 2461(c),

any property, real or personal, which constitutes or is derived from proceeds traceable to the

scheme to defraud.

3. The property to be forfeited includes, but is not limited to, a money judgment in the

amount of at least $828,498.95.

Substitute Assets
4, If any of the property described above, as a result of any act or omission of the
defendant:
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,


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