Factual Basis for a Guilty Plea — United States v. David Christopher Redfern (Dkt. 87, September 22, 2021)

Summary

Factual Basis for a Guilty Plea filed by the United States in United States v. David Christopher Redfern, No. 1:20-cr-00340-WO, in the U.S. District Court for the Middle District of North Carolina, Document 87, dated September 22, 2021. After background on the CARES Act, PPP and EIDL, it states that from at least in or around May 2020 into June 2020 Redfern, Joseph Marsell Cartlidge, Eric Alexander McMiller, Jesse Kendall Griffin and others conspired to submit false PPP applications. It states that Redfern caused a PPP application seeking $410,322, in the name of Wilder Effects LLC, and that Redfern, Cartlidge, McMiller and Griffin collectively sought approximately $2,326,874 in PPP funds. It also states that Redfern sought two EIDLs in the name of Wilder Effects and that the second application was 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 340-1
                                         :
DAVID CHRISTOPHER REDFERN                :


                   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 87 Filed 09/22/21 Page 1 of 9
      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 87 Filed 09/22/21 Page 2 of 9
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, DAVID CHRISTOPHER REDFERN,

Joseph Marsell Cartlidge, Eric Alexander McMiller, Jesse Kendall Griffin, and

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        Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 3 of 9
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. One such intermediary

recruited REDFERN into the scheme and conspiracy, who in turn connected

the intermediary to Cartlidge, McMiller, and Griffin. REDFERN, Cartlidge,

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

intermediaries and agreed to participate in the scheme and conspiracy.

      REDFERN, Cartlidge, McMiller, and Griffin each utilized registered

businesses and claimed false business operations in furtherance of the fraud

scheme.     REDFERN, Cartlidge, 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

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          Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 4 of 9
furtherance of the scheme, REDFERN, Cartlidge, McMiller, and Griffin

provided   information,   including   personal   and   business    identifying

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 REDFERN,

Cartlidge, McMiller, and Griffin.

      During the course of the conspiracy, REDFERN, in the Middle District

of North Carolina, caused the submission of one fraudulent PPP application.

Specifically, on or about June 1, 2020, REDFERN caused the submission of a

PPP application seeking a loan in the amount of $410,322 in the name of

Wilder Effects LLC (“Wilder Effects”), a company that was registered with the

North Carolina Secretary of State on or about January 17, 2020 and listed

REDFERN as the registered agent and owner.          The registered business

address for Wilder Effects was in Trinity, North Carolina.        Prior to the

submission of the Wilder Effects PPP application, on or about January 23,

2020, REDFERN opened a business account at bank branch located in High

Point, North Carolina in the name of Wilder Effects (“Wilder Effects Account

1”), over which REDFERN had sole signatory authority.




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        Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 5 of 9
      In the Wilder Effects PPP application, REDFERN falsely affirmed or

caused to be affirmed, among other information, that Wilder Effects had

twenty employees and an average monthly payroll of $164,129. The Wilder

Effects PPP application appended as supporting documentation: (i) a false and

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

$492,389.01 paid in wages to twenty employees; and (ii) a false and fraudulent

bank statement for Wilder Effects dated February 27, 2020, showing a balance

of $290,028.70.

      As a result of this false and fraudulent PPP application, REDFERN

caused the disbursement by interstate wire transfer, on or about June 2, 2020,

of $410,322 in loan funds owned by, or under the custody and control of, a

financial institution. Upon receiving the PPP funds in Wilder Account 1,

REDFERN subsequently transferred, caused to be transferred, and attempted

to transfer fraudulently obtained PPP loan proceeds to accounts under his co-

defendant’s and CHS 1’s control, and used PPP loan proceeds for his personal

benefit, and for the benefit of others. Specifically, that same day, REDFERN

attempted to wire from Wilder Effects Account 1 (i) $102,580 to an account in

Florida controlled by CHS 1; and (ii) $30,000 to an account controlled by

Griffin. REDFERN attempted the $102,580 wire transfer in person at a bank

branch located in Greensboro, North Carolina. The next day, on or about June

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        Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 6 of 9
3, 2020, an $8,000 counter check written to “cash” was withdrawn from Wilder

Effects Account 1 at a second bank branch located in Greensboro, North

Carolina.

      Over the course of the conspiracy, REDFERN, Cartlidge, McMiller, and

Griffin collectively sought to fraudulently obtain approximately $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 REDFERN

and his co-defendants.

                          EIDL Scheme to Defraud

      REDFERN 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 April and

May 2020, REDFERN fraudulently sought two EIDLs in the name of Wilder

Effects, on or about April 12, 2020 and May 17, 2020, respectively. As a result

of the first false and fraudulent EIDL application, REDFERN caused the

disbursement by interstate wire transfer, on or about May 5, 2020, of $2,000

in EIDL advance funds from the SBA to Wilder Effects Account 1. On or about

June 2, 2020, REDFERN opened a second business account in the name of

Wilder Effects (“Wilder Effects Account 2”), over which REDFERN had sole

signatory authority. Also, in connection with the first false and fraudulent

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        Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 7 of 9
EIDL application, REDFERN caused the disbursement by interstate wire

transfer, on or about June 18, 2020, of $2,000 in EIDL funds to Wilder Effects

Account 2. The second false and fraudulent EIDL application was denied.

      This the 22nd day of September, 2021.

                                    Respectfully submitted,

                                    SANDRA J. HAIRSTON
                                    Acting United States Attorney


                                    /S/ NICOLE R. DUPRE
                                    Assistant United States Attorney
                                    NCSB: 41214
                                    United States Attorney’s Office
                                    Middle District of North Carolina
                                    101 S. Edgeworth Street, 4th Floor
                                    Greensboro, NC 27401
                                    Phone: 336/333-5351

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



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




                                      8




        Case 1:20-cr-00340-WO Document 87 Filed 09/22/21 Page 8 of 9
               IN THE UNITED STATES DISTRICT COURT

          FOR THE MIDDLE DISTRICT OF NORTH CAROLINA


UNITED STATES OF AMERICA               :
                                       :
                v.                     :       1:20CR 340-1
                                       :
DAVID CHRISTOPHER REDFERN              :


                           CERTIFICATE OF SERVICE

      I hereby certify that on September 22, 2021, I electronically filed the

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

send notification of such filing to the following: Thomas King, Esq.

                                    Respectfully submitted,

                                    SANDRA J. HAIRSTON
                                    Acting United States Attorney

                                    /S/ NICOLE R. DUPRE
                                    Assistant United States Attorney
                                    NCSB: 41214
                                    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 87 Filed 09/22/21 Page 9 of 9


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