Statement of Facts — United States v. Joseph M. Cherry, II (E.D. Va., Dkt. 19, filed 10/23/20)

Summary

Statement of Facts, Document 19, filed October 23, 2020, in United States v. Joseph M. Cherry, II, Criminal No. 4:20cr27, in the U.S. District Court for the Eastern District of Virginia, Newport News Division. It states that if the matter proceeded to trial, the United States would prove the listed facts beyond a reasonable doubt. The statement first describes the SBA, the Paycheck Protection Program and the Economic Injury Disaster Loan, then alleges that on or about March 30, 2020, Cherry applied online for an EIDL in the name of Global Concepts. It states that the proceeds of $196,900 were received on April 24, 2020, and lists cash withdrawals that day. The closing pages carry the signature block of U.S. Attorney G. Zachary Terwilliger by Brian J. Samuels and a stipulation block for Cherry and his counsel.

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“Statement of Facts — United States v. Joseph M. Cherry, II (E.D. Va., Dkt. 19, filed 10/23/20).” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-e-d-va-no-4-20-cr-00027-dkt-19-e-d-va-5479607a2a/, SHA-256 3bbee7ac5c2d71447066c17472c86dafd875f54aecea3cfcabfd7703e88ba16b.

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Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 1 of 9 PageID# 55

FILED
IN OPEN cm tRT

IN THE UNITED STATES DISTRICT COURT FOR TF
EASTERN DISTRICT OF VIRGINIA OCT 2 3 2020

Newport News Division CLERK, U.S. DISTRICT COURT
NORFOl K VA

UNITED STATES OF AMERICA

CRIMINAL NO.4:20cr27

JOSEPH M. CHEI 1^,II,
Defendant.

STATEMENT OF FACTS

Ifthis matter were to proceed to trial, the United States of America would prove beyond a

reasonable doubt, by competent and admissible evidence, the following facts:

1. The United States Small Business Administration (SBA) is an executive-branch

agency of the United States government that provides support to entrepreneurs and small

businesses. The mission of the SBA is to maintain and strengthen the nation's economy by

enabling the establishment and viability of small businesses and by assisting in the economic

recovery ofconununities after disasters.

2. As part ofthis effort, the SBA enables and provides for loans through banks,credit

unions and other lenders. These loans have government-backed guarantees. In addition to

traditional SBA funding programs. The CARES Act, which was signed into law in March 2020,

established several new temporary programs and provided for the expansion of others to address

the COVID-19 outbreak.

3. One ofthese new programs is the SBA Paycheck Protection Program (PPP), which

is a loan designed to provide a direct incentive for small businesses to keep their workers on the

'
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 2 of 9 PageID# 56

payroll. Under this program, the SBA will forgive all or part of loans if all employees were kept

on the payroll for eight weeks and borrowers submit documentation confirming that the loan

proceeds were used for payroll, rent, mortgage interest, or utilities. Interested applicants apply

through an existing SBA lender or any other participating federally insured financial institution.

4. The PPP application process requires applicants to submit a Borrower Application

Form through an SBA-approved financial entity. The application contains information as to the

purpose of the loan, average monthly payroll, number of employees and background of the

business and its owner, including questions relating to criminal history. Applicants are also

required to make good faith certifications, including that economic uncertainties have necessitated

their loan requests for continued business operations and that they intend to use loan proceeds only

for the authorized and not any duplicative purposes.

5. Another related response to the COVID-19 outbreak is an expansion ofan existing

disaster-related program - the Economic Injury Disaster Loan (EIDL) - to provide for loan

assistance (including $10,000 advances)for small businesses and other eligible entities for loans

up to $2 million. The EIDL proceeds can be used to pay fixed debts, payroll, accounts payable

and other bills that could have been paid had the disaster not occurred; however, such loan

proceeds are not intended to replace lost sales or profits or for expansion ofa business.

6. Unlike certain other types ofSBA-guaranteed loans,EIDL funds are issued directly

from the United States Treasury and applicants apply through the SBA via an online portal and

application. The EIDL application process, which also uses certain outside contractors for system

support, collects information concerning the business and the business owner, including:

information as to the gross revenues for the business prior to January 31,2020; the cost of goods

U
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 3 of 9 PageID# 57

sold; and infonnation as to any criminal history ofthe business owner. Applicants electronically

certify that the information provided is accurate and are warned that any false statement or

misrepresentation to the SBA or any misapplication of loan proceeds may result in sanctions,

including criminal penalties.

A. First EIDL Application

7. On or about March 30, 2020, JOSEPH M. CHERRY, II, the defendant herein

(hereinafter "CHERRY"),electronically applied for an EIDL (loan number ending 872-04) using

the company name of Global Concepts (doing business as "Joes Tortured Sol"), described as a

limited liability company (LLC). CHERRY claimed that Global Concepts was located at 7**0

Tidewater Drive in Norfolk, Virginia, which is the address of a strip mall where a UPS Store is

located. The application questions for the EIDL specified that the primary business address could

not be a P.O. Box.

8. CHERRY claimed to have opened this business on July 1, 2015, and listed it as

a clothing and apparel retail business with three(3)employees. Although CHERRY represented

to the SBA that his business opened in 2015, CHERRY did not attempt to register this entity with

the Virginia State Corporation Commission (SCC) until January 5, 2020. This attempt was

unsuccessful, and CHERRY successfully registered this business on April 8, 2020. On this

second SCC registration, CHERRY used the address 1**5 Fordham Dr. Virginia Beach, Virginia

as the principal office address. This is a strip mall containing a UPS store.

9. Based on his EIDL application, CHERRY was offered loan proceeds of$197,000,

of which $196,900 were related to claimed economic injury, with a $100.00 Uniform Commercial

Code (UCC) filing fee. CHERRY provided an employer identification number (EIN) on the

i.P''
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 4 of 9 PageID# 58

application that did not belong to Global Concepts. CHERRY further falsely claimed his

business had received $1,250,000 in gross revenue in the past twelve (12) months prior to the

disaster and incurred cost of goods of $725,000. CHERRY responded in the negative to a

question about whether he had been convicted, plead guilty or placed on any form of parole or

probation related to any criminal offense other than a minor vehicle violation. In fact, CHERRY

was currently serving a term of federal supervised release related to a prior federal conviction.

Under the terms ofthis supervision, CHERRY was not permitted to obtain a loan or credit or open

a bank accoimt without permission.

10. Following the submission ofthis EIDL application, CHERRY regularly contacted

the SBA for status updates from at least April 17,2020, through and until the funding ofthe loan

on April 23, 2020. CHERRY electronically signed a Loan Authorization and Agreement and

other associated documentation on or about April 22, 2020. This agreement contained

certifications that all representations in the EIDL application were "true, correct and complete and

are offered to induce SBA to make this Loan[,]" and contained warnings of penalties for

misapplication of proceeds and false statements or misrepresentations to the SBA.

11. On April 22, 2020, CHERRY opened a personal checking and savings accounts,

member number (last four digits) 0837, with Langley Federal Credit Union(LFCU)in Norfolk,

Virginia. At the same time, CHERRY also attempted to open a business account, advising an

LFCU employee that he owned a business for several years. Langley Federal Credit Union,

headquartered in Newport News, Virginia, is a financial institution (as defined under 18 U.S.C. §

1956) which operates in and the activities of which affect interstate commerce.

in
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 5 of 9 PageID# 59

12. On April 24, 2020, CHERRY received a $196,900 Automated Clearing House

(ACH)wire transfer from the United States Treasury for the EIDL(loan number ending 872-04).

The $196,900 proceeds, which were routed electronically in interstate commerce, were deposited

into CHERRY'S LFCU checking account at LFCU in Newport News, Virginia.

13. On the same day, April 24, 2020, CHERRY withdrew $34,500 in cash and made

a $296.77 purchase at an ABC Store. CHERRY conducted one $500 cash withdrawal at a PNC

Bank Automated Teller Machine (ATM)and two $500 cash witlidrawals at the LFCU Ward's

Comer Branch ATM location, in Norfolk, Virginia. CHERRY then conducted a $33,000 cash

withdrawal at the LFCU Old Dominion University(ODU)Branch located in Norfolk, Virginia.

CHERRY advised the bank teller he was employed as a general contractor when withdrawing the

$33,000. All ofthese transactions occurred from the LFCU account.

14. Also on April 24,2020,at approximately 9:36 a.m., CHERRY changed the mailing

address on his LFCU account to an address in Virginia Beach, Virginia. At 5:57 p.m. that same

day, CHERRY changed the mailing address back to a Norfolk, Virginia address.

15. On April 25, 2020, CHERRY attempted to withdraw $9,700 in cash from at the

Ward's Comer LFCU branch, but was turned away. CHERRY then returned to the ODU branch

and obtained a cashier's check for $70,000, made payable to Global Concepts of Virginia, LLC,

and also withdrew $35,000 in cash. These withdrawals all occurred out of the LFCU account

(member number ending in 0837). CHERRY falsely advised a bank teller he was purchasing

houses at auction and would return to the branch the following day to obtain the remaining

$56,000.
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B. Second EIDL Application

16. On April 3, 2020, CHERRY applied for a second EIDL, this time using the

business name Contra Surplus LLC (hereinafter "Contra Surplus"). CHERRY listed the

business address as 2** West 21st Street, in Norfolk, Virginia, which is a Pak Mail store in which

CHERRY maintained a personal box in his name. CHERRY also falsely indicated he employed

five(5)individuals and received gross revenue of$1,600,000 in the past twelve(12)months prior

to the disaster, with cost of goods sold of $1,300,000. CHERRY responded in the negative to a

question about whether he had been convicted, plead guilty or placed on any form of parole or

probation related to any criminal offense other than a minor vehicle violation.

17. CHERRY contacted the SBA on or about April 27, 2020, stating he wanted to

change the bank account information he had provided.

C. PPP Application

18. On April 5, 2020, CHERRY applied for a PPP loan through Readycap Lending,

LLC,for Contra Surplus,and requested $35,000 in loan proceeds. On this application, CHERRY

falsely claimed that the business had ten (10) employees with an average monthly payroll of

$10,000. CHERRY claimed that the purpose ofthe loan was for payroll and lease expenses.

19. Question 5 of the PPP Borrower Application Form asked "Is the Applicant fif an

individual^) or anv individual owning 20% or more of the equity of the Applicant subject to an

indictment, criminal information, arraignment, or other means bv which formal criminal charges

are brought in anv jurisdiction, or presently incarcerated, or on probation or parole?" CHERRY

responded "NO" to this question and electronically signed his initials on this documentation,

verifying the accuracy of his response.

6
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20. Question 6 of the PPP Borrower Application Form asked "Within the last 5 years,

for any felony, has the Applicant (if an individual') or any owner of the Applicant 11 been

convicted: 2) pleaded guilty: 3) pleaded nolo contendere: 4^) been placed on pretrial diversion: 51

been placed on any form of parole or probation fincluding probation before iudemenf)?"

CHERRY checked "NO" for this question and electronically signed his initials, verifying the

accuracy of his response.

21. CHERRY electronically signed this PPP application on April 5,2020,attesting that

the information provided was true and accurate and that he understood the criminal penalties

associated with providing false statements to the SEA.

22. According to the Virginia State Corporation Commission, CHERRY registered

Contra Surplus on September 26, 2018. As of January 2,2020, the business was inactive for not

having paid the registration fee.

23. From on or about at least March 30,2020 to at least in or about May 2020, in the

Eastern District of Virginia and elsewhere, JOSEPH M. CHERRY, II, the defendant herein,

devised and intended to devise a scheme and artifice to defraud, and to obtain money by means of

materially false and fraudulent pretenses, representations, promises and omissions.

24. The defendant sought to fraudulently obtain disaster-related benefits in the form of

SBA-sponsored Economic Injury Disaster(EIDL)loans and an SBA Paycheck Protection Program

(PPP)loan.

25. The defendant submitted applications for loans under the EIDL and PPP programs

that contained false statements, misrepresentations and omissions related to the defendant's

income, employment, claimed business entities and his prior criminal record.
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 8 of 9 PageID# 62

26. The defendant falsely attested on the aforementioned loan applications that the

information presented was true and accurate.

27. The defendant opened a bank account at Langley Federal Credit Union(LFCU)for

the purposes ofreceiving EIDL proceeds.

28. In the course ofsubmitting the aforementioned loan applications and receiving the

aforementioned proceeds,the defendant caused the transmission ofinformation and fimds by wire

between the Eastem District ofVirginia and locations outside ofthe Commonwealth of Virginia.

29. On or about May 8,2020,a search warrant was located at the defendant's residence.

Among other things, investigators located a LFCU cashier's check for $70,000, made payable to

Global Concepts of Virginia, LLC,that represented proceeds ofthe scheme; a bill ofsale and title

for a 2000 Sterling Dump truck for $19,000; approximately $13,000 in cash; and a fictitious

(fraudulent/forged) City of Virginia Beach Certificate of Business License for Global Concepts of

Virginia.

Respectfully Submitted,

G.ZACHARY TERWILLIGER
UNITED STATES ATTORNEY

By:
Brian J. Samuels
Assistant United States Attorney
Case 4:20-cr-00027-RBS-LRL Document 19 Filed 10/23/20 Page 9 of 9 PageID# 63

After consulting with my attorney, I hereby stipulate that the above Statement ofFacts

are true and accurate, and that had the matter proceeded to trial, the United States could prove

these facts beyond a reasonable doubt.

JOSEPH M.CHERRY,II
Defendant

I am counsel for JOSEPH M.CHERRY,II. I have carefully reviewed the above

Statement ofFacts with him. To my knowledge, his decision to stipulate to these facts is an

informed and voluntary one.

Lawrence H. Woodward, Jr., EsjC
Counsel for the Defendant

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