Criminal complaint affidavit - United States v. Hines PPP fraud case (2020-07-23)

Summary

A criminal complaint and supporting affidavit entered on the docket July 24, 2020 as Document 1 in United States of America v. David Tyler Hines, Case No. 1:20-MJ-03237-BECERRA, in the U.S. District Court for the Southern District of Florida. It charges violations of 18 U.S.C. § 1014, § 1344 and § 1957 and was attested by telephone on July 23, 2020. The affidavit of a United States Postal Inspector states that the defendant submitted seven Paycheck Protection Program loan applications to a lender seeking $13,542,741.00, of which the lender funded three totalling $3,984,557.00. It states the applications claimed at least 70 employees and monthly payroll of approximately $4 million, that bank and state revenue records show far smaller amounts and no wage records, and that $318,497.53 of loan proceeds was wired for a 2020 Lamborghini sports car.

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

Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 1 of 11

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. _1:20-MJ-03237-BECERRA

UNITED STATES OF AMERICA
v.
DAVID TYLER HINES,

Defendant.
/

CRIMINAL COVER SHEET

1. Did this matter originate from a matter pending in the Central Region of the United States
Attomey’s Office prior to August 9, 2013 (Mag. Judge Alicia Valle)? __ Yes X_No

2. Did this matter originate from a matter pending in the Northern Region of the United States
Attorney’s Office prior to August 8, 2014 (Mag. Judge Shanick Maynard)? | Yes X No

3. Did this matter originate from a matter pending in the Central Region of the United States
Attorney’s Office prior to October 3, 2019 (Mag. Judge Jared Strauss)? __ Yes X_ No

Respectfully submitted,

ARIANA FAJARDO ORSHAN
UNITED STATES ATTORNEY

py. Uli 7 4°
MICHAEL N. BERGER
Assistant United States Attorney
Southern District of Florida
Court ID No. A5501557
99 Northeast 4th Street, 4th Floor
Miami, Florida 33132-2111
Telephone: (305) 961-9445

E-mail: michael. berger? @usdoj.gov

EMILY SCRUGGS

Trial Attorney

Court ID No. A5502310
Department of Justice

1400 New York Ave, NW
Washington, DC 20530
Telephone: (202) 616-2488
Email: Emily.scruges(@usdoj.gov

Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 2 of 11
AO 91 (Rev. 08/09) Criminal Complaint

UNITED STATES DISTRICT COURT

for the

Southern District of Florida

United States of America
Vv.

Case No. 1:20-MJ-03237-BECERRA

David Tyler Hines,

Nee eee ee

Defendant(s) .
CRIMINAL COMPLAINT BY TELEPHONE OR OTHER RELIABLE ELECTRONIC MEANS

1, the complainant in this case, state that the following is true to the best of my knowledge and belief.

On or about the date(s) of _ May 9, 13,&18,2020  _—_sinthecountyof | Miami-Dade in the
_. Southern _ District of _Florida  _—_—__, the defendant(s) violated:
Code Section Offense Description
18 U.S.C. § 1014 False Statement to Lending Institution
18 U.S.C. § 1344 Bank Fraud
18 U.S.C, § 1957 Engaging in Transactions in Unlawful Proceeds

This criminal complaint is based on these facts:
SEE ATTACHED AFFIDAVIT.

Continued on the attached sheet.

< OT

7 Complainant's signature

Printed name and title

Attested to by the Applicant in accordance with the requirements of Fed.R.Crim. 4.1 by telephone.

Date: __ 7.23.20

Judge's fipuatire

City and state: Miami, Florida _. Hon. Jacqueline Becewa, U.S. Magistrate Judge

Printed name and title
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 3 of 11

AFFIDAVIT IN SUPPORT OF A CRIMINAL COMPLAINT

I, Bryan Masmela, being first duly sworn, state:

AGENT BACKGROUND AND INTRODUCTION

1. I am a United States Postal Inspector and have been employed by the United States
Postal Inspection Service since February 2003. As a U.S. Postal Inspector, your affiant is
responsible for the investigation of violations of United States law, including violations of Title
18 of the United States Code. Iam currently assigned to the mail fraud team in the Miami Division
and my duties include investigating cases related to mail fraud, wire fraud, bank fraud, money
laundering, and related financial crimes. I am authorized to obtain and execute federal arrest,
search, and seizure warrants.

2. This affidavit is made in support of a criminal complaint charging DAVID TYLER
HINES (“HINES”) with violations of Title 18, United States Code, Sections 1014 (False
Statements to a Financial Institution), 1344 (Bank Fraud), and 1957 (Engaging in Transactions in
Unlawful Proceeds).

3. This affidavit is based on my personal investigation and investigation by others,
including federal and local law enforcement officials whom I know to be reliable and trustworthy.
The facts contained herein have been obtained by interviewing witnesses and examining
documents obtained in the course of the investigation as well as through other means. This
affidavit does not include every fact known to me about this investigation, but rather only those

facts sufficient to establish probable cause.
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 4 of 11

OVERVIEW _OF THE SCHEME AND THE PAYCHECK PROTECTION PROGRAM

Overview of the Paycheck Protection Program

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

5. In order to obtain a PPP loan, a qualifying business must submit a PPP loan
application, which is 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 in order 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: (a) average monthly payroll expenses; and (b) number of employees.
These figures are used to calculate the amount of money the small business is eligible to receive
under the PPP. In addition, businesses applying for a PPP loan must provide documentation to the
lending institution showing their payroll expenses; typically, businesses would supply documents
showing the amount of payroll taxes reported to the Internal Revenue Service (“IRS”).

6. A PPP loan application must be processed by a participating lender. If a PPP loan
application is approved, the participating lender funds the PPP loan using its own monies, which
are 100% guaranteed by Small Business Administration (“SBA”). Data from the application,

including information about the borrower, the total amount of the loan, and the listed number of
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 5 of 11

employees, is transmitted by the lender to the SBA in the course of processing the loan. In the
ordinary course of providing the loan guaranty, neither the SBA nor any other government agency
checked IRS records to confirm that the applicant had paid the payroll taxes represented in the PPP
applications.

7. PPP loan proceeds must be used by the business on certain permissible expenses—
payroll costs, interest on mortgages, rent, and utilities. 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.

Background of HINES and Overview of the Scheme

8. The United States is investigating fraudulent applications submitted in the name of
companies operated by DAVID TYLER HINES, to a lender approved by the SBA. HINES sought
approximately $13.5 million in PPP funds, purportedly for the purpose of paying employees.
Those purported employees either did not exist or earned a fraction of what HINES claimed in his
PPP applications. Collectively, HINES falsely claimed his companies paid millions of dollars in
payroll in the first quarter of 2020. State and bank records, however, show little to no payroll
expense during this period.

9. The lender approved three applications and paid $3,984,557.00 in PPP loans.
Instead of funding payroll, HINES spent the PPP money on personal expenses at dating websites,
luxury jewelry and clothing retailers, and Miami Beach resorts. HINES also spent PPP funds to
purchase a 2020 Lamborghini sportscar for $318,497.53 that he registered jointly in his name and

the name of his company.
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 6 of 11

10. HINES was aresident of Miami, Florida at all times relevant to the events described
herein. HINES lists himself as authorized representative and either manager or president of four
companies that applied for PPP loans.

11. The website for the Florida State Division of Corporations
(https://dos.myflorida.com/sunbiz/) lists the following information for each of the four companies

(collectively, the “HINES Companies”):

Entity Name Principal Address Status as of this
Filing

Unified Relocation Solutions, LLC (“URS”) | 150 SE 2nd Ave Active —

EIN 82-1949494 Miami, FL 33131 Reinstatement filed
11/16/19

Promaster Movers, Inc. (“Promaster”) 4000 Hollywood Blvd | Inactive

EIN 82-4192745 Suite 555-S

Hollywood, FL 33021

Cash in Holdings LLC (“CIH”) 8150 SW 72nd Ave Active —

EIN 81-3594154 Suite 1822 Reinstatement filed
Miami, FL 33143 3/4/20

We-Pack Moving LLC (“WPM”) 2054 Vista Parkway Active —

EIN 81-1412635 Suite 400 Reinstatement filed

Name changed to JB Hunt Movers LLC | West Palm Beach, FL | 3/4/20
effective 9/3/2019

HINES is listed as the registered agent for each company.
12. The undersigned conducted an Internet search for these businesses and found no
record of any operating websites.’
The Lending Bank
13. Bank A is a financial institution federally insured by the Federal Deposit Insurance

Corporation (“FDIC”). Bank A is based in Charlotte, North Carolina with branches throughout

The only recorded activity of a business online comes from reviews on the Better Business Bureau website
for Promaster and WPM. Both businesses are F-rated businesses on the site. Based on customer comments,
it appears that Promaster and WPM acted as brokers for moving services. Virtually all of the reviews include
complaints relating to bait-and-switch practices and other deceitful activities.

Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 7 of 11

the United States. Bank A participated in the SBA’s PPP as a lender and, as such, was authorized
to lend funds to eligible borrowers under the terms of the PPP.
PPP Loan Applications Submitted by HINES to Bank A
14. The government has obtained and I have reviewed a copy of seven PPP loan

applications that were submitted by HINES to Bank A. Bank A funded three of the seven loans:

Loan | Entity Application | Number of | Amount Sought/Claimed Amount Date

# Name Start Date Employees | Average Monthly Payroll | Disbursed Deposited
Claimed

“A” URS 4/18/20 8 $10,380.00 $10,380.00 5/11/20

#7631 $40,000/month

“B” CIH 5/9/20 49 $794,835.00 $794,835.00 5/13/20

#6106 $317,934.25/month

“Cc” Promaster | 5/9/20 13 $3,179,342.00 $3,179,342.00 | 5/26/20

#6065 $1,271,736.99/month

“D” URS d/b/a | 5/10/20 9 $6,358,684.00 Closed by

#0803 | WPM $2,543,473.60/month BOA

“hk” Promaster | 5/23/20 170 $1,800,000 Closed by

#2010 $720,000/month BOA

“FR” CIH $/26/20 49 $787,500.00 Closed by

#6437 $315,000/month BOA

“G” | CIH $/27/20 49 - | $612,000.00 Closed by

#1132 $244,800/month BOA
Total $13,542,741.00 $3,984,557.00

15. On each loan application, HINES identified himself as the manager and authorized

representative of the applicant business. According to Bank A, HINES signed and submitted his
applications electronically through his online Bank A accounts. HINES also submitted purported
copies of Internal Revenue Service (“IRS”) tax forms in support of his applications.

16. The proceeds for these accounts were to be disbursed in the following four Bank A
accounts that HINES opened in Miami, Florida between 2016 and 2018 (collectively, the “HINES

Companies Accounts”): (1) checking account x7423 (in the name of URS), (2) savings account
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 8 of 11

x0857 (in the name of URS), (3) checking account x6470 (in the name of Promaster), and (4)
checking account x6016 (in the name of CIH). HINES was the sole signer on the CIH and the
URS checking accounts, and one of only two authorized signers on the Promaster checking and
URS savings accounts. I have reviewed account opening records and bank statements for these
accounts from January through June 2020. Bank A verified the identity of HINES when he opened
the Promaster and CIH accounts by recording the number of his Florida driver’s license. The same
license number and name are associated with the registration of the Lamborghini sportscar.
False Statements on PPP Applications

17. HINES made a number of false representations on his PPP loan applications.

18. First, HINES made false representations regarding the number of employees and
monthly payroll. HINES claimed in the applications to have at least 70 employees and monthly
payroll of approximately $4 million at the HINES Companies.

19. A review of the HINES Companies Accounts from January through April of 2020
shows monthly inflows and outflows averaging around $200,000—far less than the millions of
dollars in payroll that HINES sought in the PPP applications.

20. From January through April 2020, the bank records show payments to at most a
dozen different individuals from HINES Companies’ accounts. Payments identified as work or
pay-related were typically made by electronic money transfer services Zelle or Venmo and in no
case amounted to more than $3,000 (e.g., Zelle transfer to “Gerard Work” for $704.81; Zelle
transfer to “Jordan Work” for $1,531.64; Check for $1,698, memo line: “Pay through 2/16”).

21. The Florida Department of Revenue requires employers to report records of wages

paid to employees by Florida corporations as part of the payment of reemployment tax. The
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 9 of 11

Florida Department of Revenue had no record of wage information paid to employees of HINES
Companies from the first quarter of 2015 through the first quarter of 2020.
PPP Proceeds Spent on Luxury and Personal Items, Including Lamborghini Sportscar

22. Moreover, HINES made a number of false statements relating to the use of the PPP
funds in his loan applications. For example, HINES electronically certified that:

All SBA loan proceeds will be used only for business-related purposes as specified

in the loan application and consistent with the Paycheck Protection Program

Rule...

The funds will be used to retain workers and maintain payroll or make mortgage

payments, lease payments, and utility payments; as specified under the Paycheck

Protection Program Rule; I understand that if the funds are knowingly used for

unauthorized purposes, the federal government may hold me legally liable, such as

for charges of fraud....

These statements were knowingly false when made because, as further detailed below, HINES
never had the payroll obligations that he claimed to have, and HINES immediately diverted loan
proceeds for unauthorized uses.

23. On May 11, 2020 and May 13, 2020, Bank A deposited $10,380.00 and
$794,835.00 in PPP funds in the respective URS and CIH checking accounts. Prior to those
deposits, the respective balances in those accounts were $.30 and -$31,369.17. Between May 11
and May 14, $408,100.00 in PPP money was transferred from those accounts to the URS savings
account. There were no other deposits into that account between May 1 and May 14, 2020, which
opened the month with a balance of $8,693.08. On May 18, 2020, a wire for $318,497.53 was sent
from URS savings account to “Car Dealership” with the following note: “Lamborghini Huracan
Evo.”

24. Records from “Car Dealership” show HINES, identified by his Florida driver's

license. purchased a Lamborghini sportscar (vehicle —_ identification — number
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 10 of 11

ZHWUF4ZF3LLA13255) for $318,497.53 on May 18 in North Miami Beach, Florida. Florida
department of motor vehicles records show the Lamborghini sportscar is registered jointly in the
name of HINES and Unified Relocation Solutions LLC, a self-described moving company.

25, The largest payments drawn on these accounts in May and June are listed below.

There does not appear to be any business purpose for most, if not all, of these expenses.

Date Payee Amount
5/13/20 “Mom” $15,000.00
5/14/20 HINES cash $9,500.00
5/27/20 “Mom” $15,000.00
5/27/20 Saks Fifth Ave $4,622.40
6/3/20 Subject B $15,000.00
6/5/20 Fontainebleau Miami $4,089.00
6/8/20 HINES cash $9,500.00
6/8/20 Subject A $10,000.00
6/9/20 Subject C $15,000.00
6/10/20 The Setai Hotel Miami Beach $7,264.97
6/10/20 Subject C $6,200.00
6/15/20 Subject D $5,000.00
6/15/20 Graff Diamonds $8,530.00
6/22/20 The Miami Beach E $5,988.02

26. Many of the smaller payments made from the HINES Companies Accounts in May
and June were for rideshare and food delivery services. HINES himself does not have any personal
accounts at Bank A but appears to use the HINES Companies Accounts for personal purposes.

27. Bank A closed the HINES Companies Accounts on June 24, 2020. The account
balances totaled $3,463, 162.68 and there have been no repayments on the loans.

Conclusion

28. Based on my training and experience, and the information provided in this affidavit,
I respectfully submit that there is probable cause to believe that:

° On or about May 9, 2020, in the Southern District of Florida and elsewhere, the

defendant, DAVID T. HINES. did knowingly make a false statement and report for

the purpose of influencing the action of a financial institution whose deposits are
insured by the Federal Deposit Insurance Corporation in connection with a loan
Case 1:20-mj-03237-JB Document1 Entered on FLSD Docket 07/24/2020 Page 11 of 11

application, in that the defendant falsely represented on his application for a PPP
loan to Bank A that he had average monthly payroll for his company Cash in
Holdings LLC of approximately $245,135, in violation of Title 18, United States
Code, Section 1014.

° On or about May 13, 2020, in the Southern District of Florida and elsewhere, the
defendant, DAVID T. HINES, did knowingly, and with intent to defraud, execute,
and attempt to execute, and cause the execution of, a scheme and artifice to defraud
a financial institution, which scheme and artifice employed a material falsehood,
and did knowingly, and with intent to defraud, execute, and attempt to execute, and
cause the execution of a scheme and artifice to moneys and funds owned by, and
under the custody and control of a financial institution, by means of false and
fraudulent pretenses, representations, and promises relating to a material fact, that
is, by causing Bank A to deposit $794,835.00 into an account controlled by the
defendant, in violation of Title 18, United States Code, Section 1344.

e On or about May 18, 2020, in the Southern District of Florida, and elsewhere, the
defendant, DAVID T. HINES, did knowingly engage and attempt to engage in a
monetary transaction affecting interstate and foreign commerce in criminal derived
property of a value greater than $10,000, which the defendant knew was derived
from a specified unlawful activity, to wit: the purchase of a 2020 Lamborghini
sportscar in the amount of $318,497.53, which funds represented the proceeds of
funds obtained through Wire Fraud and Bank Fraud, in violation of Title 18, United
States Code, Section 1957.

FURTHER YOUR AFFIANT SAYETH NAUGHT.

Bryan Masmela
United States Postal Inspector

Attested to by the Applicant in accordance with the requirements of
Fed.R.Crim.P. 4.1 by Telephone this 23 day of July 2020.

Ch

HONORABLE JAVCQUELINE BECERRA
UNITED STATS MAGISTRATE JUDGE
SOUTHERN DISTRICT OF FLORIDA

File and source

File

gov.uscourts.flsd.574880.1.0.pdf

Size

660,964 bytes

SHA-256

47ac4aac91cf6fb829c852f394f7463bb54c613e901b940ebfba9a1543f98392

Our copy

gov.uscourts.flsd.574880.1.0.pdf

Original

PACER (login required)