Factual Basis for a Guilty Plea — United States v. Joseph Marsell Cartlidge (Dkt. 79, August 8, 2021)

Summary

Factual Basis for a Guilty Plea filed by the United States in United States v. Joseph Marsell Cartlidge, No. 1:20-cr-00340-WO, in the U.S. District Court for the Middle District of North Carolina, Document 79, dated August 8, 2021. It describes the CARES Act, the Paycheck Protection Program and the Economic Injury Disaster Loan program, then states that from at least in or around May 2020 into June 2020 Cartlidge, David Christopher Redfern, Eric Alexander McMiller, Jesse Kendall Griffin and others conspired to submit false PPP loan applications. It states that Cartlidge caused two PPP applications seeking $403,120 and $463,530 and that Cartlidge, Redfern, McMiller and Griffin collectively sought $2,326,874 in PPP funds. It also states that Cartlidge sought EIDLs in the names of LBRNO and Company 1, both denied.

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                IN THE UNITED STATES DISTRICT COURT

           FOR THE MIDDLE DISTRICT OF NORTH CAROLINA


UNITED STATES OF AMERICA                 :
                                         :
                 v.                      :       1:20CR 340-2
                                         :
JOSEPH MARSELL CARTLIDGE                 :


                   FACTUAL BASIS FOR A GUILTY PLEA

      NOW COME the United States of America, by and through Sandra J.

Hairston, Acting United States Attorney for the Middle District of North

Carolina, and Joseph S. Beemsterboer, Acting Chief, Criminal Division, Fraud

Section, and state that the factual basis for a guilty plea is as follows:

                                   Background

      On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security

(“CARES”) Act was signed into law in response to the economic fallout of the

COVID-19 pandemic in the United States. 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.




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        Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 1 of 10
      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) was required to state, among other things, its: (i) average

monthly payroll expenses; and (ii) number of employees. These figures were

used to calculate the amount of money the small business was eligible to

receive under the PPP. In addition, businesses applying for a PPP loan were

required to provide documentation showing their payroll expenses.

      PPP loan proceeds were required to be used by the business on certain

permissible expenses: 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 after receiving the proceeds and used a certain

amount of the PPP loan proceeds on payroll expenses.

      Another source of relief provided by the CARES Act was the expansion

of the Economic Injury Disaster Loan (“EIDL”) program administered by the

United States Small Business Administration (“SBA”), an agency of the

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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 2 of 10
executive branch of the United States Government. Specifically, the CARES

Act authorized the SBA to provide EIDLs of up to $2 million to eligible small

businesses experiencing financial disruption due to the COVID-19 pandemic.

The CARES Act also authorized the SBA to issue advances of up to $10,000 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.

      In order to obtain an EIDL and 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. The applicant was also required to certify that

all of the information in the application is true and correct to the best of the

applicant’s knowledge. EIDL funds were permitted to be used for payroll

expenses, sick leave, production costs, and business obligations, such as debts,

rent, and mortgage payments.

                   PPP Conspiracy and Scheme to Defraud

      From at least in or around May 2020, continuing up to and including in

or around June 2020, the defendant, JOSEPH MARSELL CARTLIDGE, David

Christopher Redfern, Eric Alexander McMiller, Jesse Kendall Griffin, and

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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 3 of 10
others, knowingly and intentionally conspired to devise a scheme to defraud

and to obtain money and property by means of materially false and fraudulent

pretenses, representations, and promises, by submitting and causing to be

submitted false and fraudulent loan applications in order to obtain funds

through the PPP.

      During the course of the investigation, investigators interviewed a

confidential human source (“CHS 1”) regarding CHS 1’s involvement in the

PPP scheme. CHS 1 told investigators that CHS 1 used intermediaries to

recruit individuals to apply for false and fraudulent PPP loans and, in return

for preparing PPP loan application documentation for such individuals, sought

a portion of the fraudulently obtained loan proceeds. CARTLIDGE, Redfern,

McMiller, and Griffin each communicated with CHS 1 through one or more

intermediaries and agreed to participate in the scheme and conspiracy.

      CARTLIDGE, Redfern, McMiller, and Griffin each utilized registered

businesses and claimed false business operations in furtherance of the fraud

scheme.    CARTLIDGE, Redfern, McMiller, and Griffin also utilized or

attempted to utilize business and personal bank accounts at various financial

institutions for the purpose of receiving fraudulent loan proceeds.        In

furtherance of the scheme, CARTLIDGE, Redfern, McMiller, and Griffin

provided   information,   including   personal   and   business    identifying

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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 4 of 10
information, to CHS 1 through one or more intermediaries in order to seek PPP

loans. CHS 1 then used such information to prepare and cause to be prepared

false and fraudulent supporting documentation, including bank account

statements and tax filings, for PPP applications on behalf of CARTLIDGE,

Redfern, McMiller, and Griffin.

     During the course of the conspiracy, CARTLIDGE caused the submission

of two fraudulent PPP applications. Specifically, on or about June 1, 2020,

CARTLIDGE caused the submission of a PPP application seeking a loan in the

amount of $403,120 in the name of Company 1, a company registered with the

North Carolina Secretary of State on or about January 13, 2020 and listing

Individual 1 as the registered agent and owner.     Prior to submitting the

Company 1 PPP Application, CARTLIDGE opened a business account in the

name of Company 1 with Individual 1 as the purported authorized signer

(“Company 1 Account”).

     CARTLIDGE provided the name and other personal identifying

information of Individual 1 to complete the Company 1 PPP Application. The

Company 1 PPP Application appended as supporting documentation: (i) a false

and fraudulent purported IRS Form 941 for the first quarter of 2020 showing

$483,746.04 paid in wages to twenty-four employees and purportedly signed

by Individual 1 and (ii) a false and fraudulent bank account statement for

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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 5 of 10
Company 1 dated February 27, 2020, showing a balance of $290,028.70. At the

time the Company 1 PPP Application was submitted, Individual 1 was

incarcerated in correctional facilities in North Carolina. Moreover, Individual

1 was unaware that CARTLIDGE sought PPP funds in the name of Company

1 using Individual 1’s identifying information.

      In addition, on or about June 2, 2020, CARTLIDGE caused a PPP

application seeking a loan in the amount of $463,530 in the name of LBRNO

LLC (“LBRNO”), a company that was registered with the North Carolina

Secretary of State on or about December 29, 2016 listing CARTLIDGE as the

registered agent and owner. In the LBRNO PPP Application, CARTLIDGE

falsely affirmed or caused to be falsely affirmed, among other information, that

LBRNO had twenty-three employees and an average monthly payroll of

$185,412.     The   LBRNO      PPP   Application    appended    as   supporting

documentation: (i) false and fraudulent purported IRS Forms 941 for all four

quarters of 2019 showing $556,237.44 paid in wages to twenty-three employees

per quarter; and (ii) a false and fraudulent bank statement for LBRNO dated

February 27, 2020, showing a balance of $290,028.70.

      As a result of these false and fraudulent PPP applications, CARTLIDGE

caused the disbursement of PPP funds in the requested loan amounts. Upon

receiving the PPP funds, CARTLIDGE subsequently transferred, caused to be

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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 6 of 10
transferred, and attempted to transfer fraudulently obtained PPP loan

proceeds to accounts under his co-defendants’ control, and used PPP loan

proceeds for his personal benefit, and for the benefit of others.

      With respect to the Company 1 PPP Application, on or about June 2,

2020, $403,120 in PPP funds were deposited into the Company 1 Account. The

following day, on or about June 3, 2020, CARTLIDGE attempted to make two

wire transfers in the amount of $75,000 each to accounts controlled by Redfern

and Griffin. In addition, on June 10, 2020, McMiller attempted to deposit a

$250,000 check drawn from the Company 1 Account and purportedly signed by

Individual 1 into an account controlled by McMiller.

      With respect to the LBRNO PPP Application, on or about June 3, 2020,

$463,530 in PPP funds were deposited into an account in the name of LBRNO

controlled by CARTLIDGE (“LBRNO Account). Between June 3, 2020 and

June 19, 2020, CARTLIDGE withdrew approximately $454,000 via cash and

cashier’s check from the LBRNO Account. CARTLIDGE also made numerous

debit card purchases in late June, including from Louis Vuitton, Neiman

Marcus, Gucci, and a yacht and boat rental company. Records obtained from

Instagram reveal that CARTLIDGE and McMiller tagged each other in various

photographs and/or Instagram stories during this time period.           These




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        Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 7 of 10
photographs and videos show CARTLIDGE and McMiller with large amounts

of cash and/or making luxury purchases.

      Over the course of the conspiracy, CARTLIDGE, Redfern, McMiller, and

Griffin, collectively sought to fraudulently obtain $2,326,874 in PPP funds. All

of the relevant disbursements and subsequent transfers were made by means

of interstate wire to bank accounts controlled by CARTLIDGE and his co-

defendants.

                           EIDL Scheme to Defraud

      CARTLIDGE also devised a scheme to defraud by submitting and

causing to be submitted false and fraudulent loan applications to the SBA in

order to obtain funds through the EIDL program. In particular, in or around

March and April 2020, CARTLIDGE fraudulently sought EIDLs in the name

of LBRNO and Company 1, both of which were denied. CARTLIDGE also

allowed an account under his control to be used for the receipt of fraudulently

obtained EIDL funds on behalf of others. Specifically, on or about June 18,

2020, $10,000 in EIDL advance funds were deposited into the LBRNO Account,

in connection with a fraudulent EIDL application submitted by McMiller in

the name of McMiller Enterprises.




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       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 8 of 10
This the 8th day of August, 2021.

                             Respectfully submitted,

                             SANDRA J. HAIRSTON
                             Acting United States Attorney


                             /S/ MEREDITH C. RUGGLES
                             Assistant United States Attorney
                             DC Bar #1020537
                             United States Attorney’s Office
                             Middle District of North Carolina
                             101 S. Edgeworth Street, 4th Floor
                             Greensboro, NC 27401
                             Phone: 336/333-5351

                             JOSEPH S. BEEMSTERBOER
                             Acting Chief, Fraud Section
                             United States Department of Justice
                             Criminal Division



                             /S/ JESSEE ALEXANDER-HOEPPNER
                             NYSB #4871406
                             Trial Attorney




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 Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 9 of 10
                IN THE UNITED STATES DISTRICT COURT

          FOR THE MIDDLE DISTRICT OF NORTH CAROLINA


UNITED STATES OF AMERICA                 :
                                         :
                 v.                      :       1:20CR 340-2
                                         :
JOSEPH MARSELL CARTLIDGE                 :


                            CERTIFICATE OF SERVICE

      I hereby certify that on August 8, 2021, I electronically filed the foregoing

with the Clerk of the Court under seal using the CM/ECF system, which will

send notification of such filing to the following: Bruce Allen Lee, Esq.

                                      Respectfully submitted,

                                      SANDRA J. HAIRSTON
                                      Acting United States Attorney


                                      /S/ MEREDITH C. RUGGLES
                                      Assistant United States Attorney
                                      DC Bar #1020537
                                      United States Attorney’s Office
                                      Middle District of North Carolina
                                      101 S. Edgeworth Street, 4th Floor
                                      Greensboro, NC 27401
                                      Phone: 336/333-5351




       Case 1:20-cr-00340-WO Document 79 Filed 08/08/21 Page 10 of 10


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