Affidavit of Homeland Security Investigations Special Agent Daniel Cianciolo, 24-MJ-6229-MPK (Dkt. 1-1, D. Mass.)

Summary

Homeland Security Investigations Special Agent Daniel Cianciolo's affidavit, sworn on April 26, 2024, supports a criminal complaint charging Katherine Reynolds with wire fraud. It alleges that on or about May 20, 2021 Reynolds submitted two PPP loan applications to American Lending Center for $20,833.33 each, one for a business in Reynolds's own name and one in the name of Reynolds's father, Albert D. Frasier, each describing a massage parlour with $106,000 in 2019 gross income. ALC wired both loans on June 17, 2021 to a Merrimack Valley Credit Union joint account, whose balance rose from $698.45 to $42,365.11 and reached $0.00 by August 5, 2021. Frasier told Plymouth police of never having owned a massage parlor, and the IRS and Massachusetts Department of Revenue certified no 2019 returns for either name. The affidavit states probable cause, not a finding of guilt.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Text recognized from a scanned document; may contain errors.

24-MJ-6229-MPK

AFFIDAVIT OF HOMELAND SECURITY INVESTIGATIONS SPECIAL AGENT
DANIEL CIANCIOLO

I, Daniel Cianciolo, declare and state as follows:

I. INTRODUCTION

1. I have been a Special Agent with Homeland Security Investigations (“HSI”) since
October 2020. I have over 13 years of experience as a federal law enforcement officer. Prior to
joining HSI, I was a deputy U.S. Marshal. I have been assigned to the Organized Crime Drug
Enforcement Task Force (““OCDETF’”) Strike Force since May 2023, where my duties include
investigating drug crimes and criminal drug enterprises. Previously, I was assigned to the
Document and Benefit Fraud Task Force (“DBFTF”) where my duties included conducting
investigations involving the fraudulent acquisition, production, and misuse of U.S. immigration
documents, U.S. passports, identity documents, fraudulent loan applications, and fraudulent
government benefit acquisitions. In conjunction with my position as a Special Agent with HSI, I
completed training in conducting criminal investigations at the Federal Law Enforcement
Training Center in Brunswick, Georgia. As a result of my training, experience, and
conversations with other law enforcement officers, I am familiar with the methods, routines, and
practices of document counterfeiters, vendors, and persons who fraudulently obtain or assume
false identities in order to obtain government benefits. My investigations have included the use
of surveillance techniques and the execution of search, seizure, and arrest warrants.

Il. PURPOSE OF AFFIDAVIT

2. I submit this affidavit in support of a criminal complaint charging Katherine
Reynolds (“REYNOLDS”), date of birth March 2, 1959, with wire fraud (18 U.S.C. § 1343).
The facts stated herein are based on my own personal involvement with this investigation as well

as from information provided to me by other law enforcement officers involved in the
24-MJ-6229-MPK

investigation. Because this affidavit is submitted for the limited purpose of securing a criminal
complaint, I have not included every fact known to me concerning this investigation. Instead, I
have set forth only the facts that I believe are necessary to establish the necessary foundation for
the requested complaint.

Iii. PROBABLE CAUSE

A. The Paycheck Protection Program

3. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is 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 up to $349
billion in forgivable loans to small businesses for job retention and certain other expenses,
through the Paycheck Protection Program (“PPP”). In or around April 2020, Congress
authorized over $300 billion in additional PPP funding.

4. To obtain a PPP loan, a qualifying business must submit a PPP loan application,
signed by an authorized representative of the business. The PPP loan application requires the
business (through its authorized representative) to acknowledge the program rules and make
certain affirmative certifications to be eligible to obtain the PPP loan. In the PPP loan
application, the small business (through its authorized representative) must state, among other
things, its average monthly payroll expenses and number of employees. These figures are used
to calculate the amount of money the small business is eligible to receive under the PPP.

5. A PPP loan application must be processed by a participating lender. Data from
the application, including information about the borrower, the total amount of the loan, and the

listed number of employees, is transmitted by the lender to the Small Business Administration
24-MJ-6229-MPK

(“SBA”) in the course of processing the loan. If a PPP loan application is approved, the
participating lender funds the PPP loan using its own monies, which are 100% guaranteed by the
SBA. The SBA is a United States government agency based in Washington, D.C.

6. PPP loan proceeds must be used by the business on certain permissible expenses,
e.g., payroll costs, interest on mortgages, rent, and utilities. In some instances, the PPP allows
the interest and principal on the PPP loan to be entirely forgiven if the business spends the loan
proceeds on these expense items within a designated period of time after receiving the proceeds
and uses a certain amount of the PPP loan proceeds on payroll expenses.

7. Beginning in or around January 2021, a “Second Draw” PPP was offered, which
allowed eligible borrowers who had previously received a PPP loan to apply for a “Second
Draw” PPP loan with the same general loan terms as their first PPP loan. Funds from Second
Draw PPP loans could be used to fund payroll costs, mortgage interest, rent, utilities, uninsured
property damage costs relating to looting or vandalism, as well as worker protection costs related
to COVID-19.

8. The PPP loan program ended on May 31, 2021.

B. Fraudulent Submission of PPP Loan for Katherine Reynolds

9. On or about May 20, 2021, REYNOLDS submitted a final, electronically signed
and submitted PPP loan application to American Lending Center (““ALC”’) for a PPP loan in the
amount of $20,833.33. REYNOLDS submitted the application on behalf of a business called
“Katherine F. Reynolds.”” REYNOLDS claimed her business was established on February 9, 2018,

and had a gross income in 2019 of $106,000.
24-MJ-6229-MPK

10. REYNOLDS identified herself as the 100% owner of the business, as well as its sole

employee. !

11. | REYNOLDS provided her residential address for the “Business Address,” her

Social Security number ending 3545 as the business owner’s Social Security number, and her cell

phone number ending 9583 as the “Business Phone.”

12. REYNOLDS indicated that the purposes of the loan were to pay for “Payroll Costs,”
“Rent/Mortgage Interest,” and “Utilities.”

13. _In the application, REYNOLDS requested that the loan funds be deposited to an
account with number ending 8597. This is actually a Magnetic Ink Character Recognition
(“MICR’’) line that is associated with Merrimack Valley Credit Union (“MVCU”) account ending
0813. The number ending 8597 is the MICR line that needed to be used for ACH transactions, like
the transfer of the PPP loan funds here.

14... MVCU account number ending 0813 has three account holders: the primary
account holder is Albert D. Frasier (“‘Frasier’’) and the two joint account holders are his daughters

REYNOLDS and Ann Stark (“‘Stark’’).

" Specifically, REYNOLDS indicated that the “number of employees (including owners)” was
one.

? REYNOLDS lived at this residence with her elderly father Albert Frasier.

> Tn the application, REYNOLDS listed the same number—(339) 832-9583—as her personal
phone number. REYNOLDS’ sister confirmed that this number was Reynolds’ personal cell
phone number.
24-MJ-6229-MPK

15. | As required by ALC, in connection with her PPP loan application, REYNOLDS
provided a photograph of herself holding her Massachusetts driver’s license* and a white piece of

paper on which was handwritten, “for ALC verification 05/05/21.”

16. | REYNOLDS also provided a copy of a 2019 Schedule C tax form in connection
with the PPP loan application. In the submitted Schedule C, REYNOLDS indicated that her
business was a “massage parlour’ that had $106,000 in gross income. She further indicated that the

business had $9,500 in total expenses, comprising $6,000 of car and truck expenses, $2,000 of

supplies expenses, and $1,000 of “other” expenses.» REYNOLDS’ Schedule C stated that her

business made a net profit of $97,000 in 2019.°

17. On or about June 17, 2021, after having approved the PPP loan application, ALC
wired $20,833.33 to MVCU account ending 0813. During the relevant time period, ALC’s servers
were located in California and the MVCU server that processed this transaction was located in
Maine. Therefore, the wire was transmitted through interstate commerce.

C. Fraudulent Submission of PPP Loan for Albert Frasier

18. Also, on or about May 20, 2021, REYNOLDS submitted a second electronically

signed and submitted application to ALC for a PPP loan in the amount of $20,833.33 in the name of

4 The photograph provided in the loan application matches the photograph of REYNOLDS in the
Massachusetts Registry of Motor Vehicles database.

> These enumerated expenses add up to $9,000, though the claimed total for expenses was
$9,500.

° This reflects the amount left after the enumerated expense amount of $9,000—rather than the
indicated total expense amount of $9,500—was subtracted from the claimed gross income of
$106,000.
24-MJ-6229-MPK

Albert Frasier, REYNOLDS’ father.’ This application and its supporting documentation was nearly

identical to the application REYNOLDS submitted in her own name.

19. | REYNOLDS submitted the application on behalf of a business called “Albert D.
Frasier,” which she indicated was established on February 5, 2018, and had a gross income in 2019
of $106,000.

20. REYNOLDS identified Albert D. Frasier as the 100% owner of the business, as well
as its sole employee.®

21. | REYNOLDS provided her residential address for the “Business Address,” her father

Frasier’s Social Security number ending 3664 as the business owner’s Social Security number, and
REYNOLDS’ phone number ending 9583 as the “Business Phone.””

22. REYNOLDS indicated that the purposes of the loan were to pay for “Payroll Costs,”
“Rent/Mortgage Interest,” and “Utilities.”

23. At the time of the application, REYNOLDS’ father was 86 years old. He has
subsequently passed away.

24. — In the application, REYNOLDS requested that the loan funds be deposited to an
account with number ending 8597. As noted above, this is actually a MICR line that is associated
with MVCU account ending 0813 that needed to be used for ACH transactions, like the transfer of

the PPP loan funds here.

7 The loan application was signed by “Alert D. Frasier,” which appears to be a typographical
error in the spelling of REYNOLDS’ father’s name, Albert.

8 Specifically, REYNOLDS indicated that the “number of employees (including owners)” was
one.

” In the application, REYNOLDS listed the same number—(339) 832-9583—as the personal and
business phone number. REYNOLDS’ sister confirmed that this number was REYNOLDS’
personal cell phone number.
24-MJ-6229-MPK

25. As noted above, Frasier was the primary account holder for MVCU account ending
0813 and REYNOLDS was a joint account holder on the account.
26. As required by ALC, in connection with her PPP loan application, REYNOLDS

provided a photograph of her father Frasier !° holding his Massachusetts driver’s license and a white

piece of paper on which was handwritten, “for ALC verification 05/05/21.”

27. | REYNOLDS also provided a copy of a 2019 Schedule C tax form in connection
with the PPP loan application she submitted in the name of Albert Frasier. In the submitted
Schedule C, REYNOLDS indicated that the business was a “massage parlour” that had $106,000 in

gross income. She further indicated that the business had $9,500 in total expenses, comprising of

$6,000 in car and truck expenses, $2,000 in supplies expenses, and $1,000 in “other” expenses. !!

This left the business with $97,000 in net profit.!?

28. On or about June 17, 2021, after having approved the PPP loan application, ALC
wired $20,833.33 to MVCU account ending 0813. During the relevant time period, ALC’s servers
were located in California and the MVCU server that processed this transaction was located in

Maine. Therefore, the wire was transmitted through interstate commerce.

"| These enumerated expenses add up to $9,000, though the claimed total for expenses was
$9,500. This is the same mathematical error reflected in REYNOLDS’ personal PPP loan
application described above.

'? This reflects the amount left after the enumerated expense amount of $9,000—rather than the

indicated total expense amount of $9,500—was subtracted from the claimed gross income of
$106,000.
24-MJ-6229-MPK

D. Subsequent Investigation and Events

29. On June 16, 2021, before the wire transfers of the PPP loan funds, the MVCU
account ending 0813 had a balance of $698.45. After both transfers on June 17, the account’s
balance was $42,365.11.

30. These funds were depleted rapidly. On June 21, 2021, REYNOLDS transferred
$5,000 by wire to JPMorgan Chase. On June 22, 2021, $10,000 in cash was withdrawn. On June
25, 2021, $20,000 in cash was withdrawn. On July 2, 2021, another $4,000 in cash was withdrawn.
By August 5, 2021, the account’s balance was $0.00.

31. | REYNOLDS’ sister, Stark, noticed the activity in the MVCU joint account ending
0813. On February 22, 2022, Stark questioned REYNOLDS via text message about taking out a
loan in Frasier’s name. REYNOLDS claimed that someone whom she referred to as “J” admitted to
taking the money, had been arrested, and that “t]he FBI is going to see him today at jail.”
REYNOLDS indicated “J” admitted to opening accounts and loans to pay his son’s hospital bills.
She indicated “J” stole a lot of money from people by getting loans from the government.

32. On February 24, 2022, Stark contacted the Plymouth Police Department and stated
that her father was retired, had been for some time, and would have no need for PPP loans.

33. On March 3, 2022, Stark spoke with the Plymouth Police Department for a second
time. Stark stated that neither REYNOLDS nor their father owned any business.

34. On June 30, 2022, the Plymouth Police Department interviewed Frasier. Frasier
stated that he had never owned a massage parlor and was not aware that REYNOLDS ever had
either. Frasier stated that if any tax return had been filed in his or REYNOLDS’ name stating that
they separately owned a massage parlor and made $106,000 in gross income in 2019, that would be

false, and he would not know why anything like that would have been filed.
24-MJ-6229-MPK

35. The Massachusetts Department of Revenue certified that upon a diligent search of its
records, no individual named Albert Frasier, with Social Security number ending 3664, had filed
any personal income tax return with the Department of Revenue for the year 2019.

36. Likewise, the Internal Revenue Service certified that that upon a diligent search of
its records, no individual named Albert Frasier, with Social Security number ending 3664, had filed
any personal income tax return with the Internal Revenue Service for the years 2019-2021.

37. The Massachusetts Department of Revenue also certified that upon a diligent search
of its records, no individual named Katherine Reynolds, with Social Security number ending 3545,
had filed any personal income tax return with the Department of Revenue for the year 2019.

38. Likewise, the Internal Revenue Service certified that upon a diligent search of its
records, no individual named Katherine Reynolds, with Social Security number ending 3545, had
filed any personal income tax return for the years 2019-2020.

IV. CONCLUSION

39. Based on the foregoing, and my training and experience, I have probable cause to
believe that REYNOLDS knowingly and with the intent to defraud, executed a scheme to obtain
money, funds, and property from the SBA through ALC and MVCU by means of materially
false and fraudulent representations, pretenses, and promises, namely, REYNOLDS submitted
applications for a PPP loans on behalf of herself and her father, Albert Frasier, that contained
false representations about the existence of a business that generated revenue of over $100,000,

in violation of 18 U.S.C. § 1343.
Subscribed and sworn before me on April 26, 2024

24-MJ-6229-MPK

Sworn to under the pains and penalties of perjury

/s/ Daniel Cianciolo

Daniel Cianciolo
Special Agent
Homeland Security Investigations

Honorable M. Page Ketiyy
United States Magistraté Judge

File and source

File: gov.uscourts.mad.273751.1.1.pdf
Size: 371,548 bytes
SHA-256: 6706c6f57c4e7aa61a32b7998413662536158b00f4c1224155d5e830c2cd8300
Our copy: gov.uscourts.mad.273751.1.1.pdf
Original: archive.org