Indictment — U.S. v. David Christopher Redfern (M.D.N.C.)
Summary
A grand jury indictment in United States v. David Christopher Redfern, Case 1:20-cr-00340, in the U.S. District Court for the Middle District of North Carolina, filed August 31, 2020 as Document 9. Counts One, Two, and Three charge wire fraud under Title 18, United States Code, Sections 1343 and 2, and Count Four charges bank fraud under Sections 1344(2) and 2. The indictment alleges that Redfern submitted EIDL applications and a PPP application for Wilder Effects LLC that falsely stated its employees, revenues and payroll, supported by a false IRS Form 941 and a false bank statement. It states that $410,322 in PPP funds was deposited on or about June 2, 2020, and that EIDL-related deposits of $2,000 were made on May 5, 2020 and June 18, 2020. A forfeiture allegation follows.
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“Indictment — U.S. v. David Christopher Redfern (M.D.N.C.).”
Original at www.justice.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-1-20-cr-00340-dkt-9-d25afe6adb/
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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
UNITED STATES OF AMERICA
V. l:20CR 3YV-1
DAVID CHRISTOPHER REDFERN
The Grand Jury charges:
General Allegations
At all times material to this Indictment:
The Defendant and Related Entity
1. The defendant, DAVID CHRISTOPHER REDFERN, was a
resident of Trinity, North Carolina, in the Middle District of North Carolina.
2. REDFERN was the registered agent and owner of Wilder Effects
LLC ("Wilder Effects"), a company that was registered with th e North Carolina
Secretary of State on or about January 17, 2020. The register ed business
a ddress for Wilder Effects was REDFERN's r esidential address.
The Small Business Administration and the CARES Act
3. The United States Small Business Administration ("SBA") was an
executive-branch agency of the United States government that provided
support to entrepreneurs and small businesses. The mission of the SBA was
to maintain and strengthen the nation's economy by enabling the
Case 1:20-cr-00340 Document 9 Filed 08/31/20 Page 1 of 14
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to maintain and strengthen the nation's economy by enabling the
establishment and viability of small businesses and by assisting in the
economic recovery of communities after disasters.
4. As part of this effort, the SBA enabled and provided for loans
through banks, credit unions, and other lenders that had government-backed
guarantees. The SBA also provided direct loans.
5. In or around March 2020, the Coronavirus Aid, Relief, and
Economic Security ("CARES") Act was enacted to provide emergency financial
assistance to the millions of Americans suffering adverse economic effects
caused by the COVID-19 pandemic. The CARES Act established several new
temporary programs and provided for expansion of others, including programs
created and/or administered by the SBA.
The Paycheck Protection Program
6. 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.
7. In order to obtain a PPP loan, a qualifying business was required
to submit a PPP loan application, which was signed by an authorized
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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 app4cation, 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.
8. A PPP loan application was required to be processed by a
participating financial institution ("lender"). If a PPP loan application was
approved, the lender funded the PPP loan using its own moneys, which were
100% guaranteed by the SBA. Data from the application, including
information about the borrower, the total amount of the loan, and the listed
number of employees, was transmitted by the lender to the SBA in the course
of processing the loan.
9. 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
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within a designated period of time after receiving the proceeds and used a
certain amount of the PPP loan proceeds on payroll expenses.
The Economic Injury Disaster Loan Program
10. The Economic Injury Disaster Loan ("EIDL") program was an SBA
program that provided low-interest financing to small businesses, renters, and
homeowners in regions affected by declared disasters.
11. The CARES Act authorized the SBA to provide EIDLs to eligible
small businesses experiencing substantial financial disruptions due to the
COVID-19 pandemic. In addition, the CARES Act authorized the SBA to issue
advances ofup to $10,000 to small businesses. The amount of the advance was
determined by the number of employees the applicant certified having. The
advances did not have to be repaid.
12. 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 revenue for the 12·
month period preceding the disaster, and cost of goods sold in the 12-month
period preceding the disaster. In the case of EIDLs for COVID-19 relief, the
12-month period was that preceding January 31, 2020. The applicant was also
required to certify that all of the,information in the application was true and
correct to the best of the applicant's knowledge.
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13. EIDL applications were submitted directly to the SBA and
processed by the agency with support from a government contractor, Rapid
Finance. The amount of the loan, if the application was approved, was
determined based, in part, on the information provided in the application
concerning the number of employees, gross revenue, and cost of goods, as
described above. Any funds issued under an EIDL or advance were issued
directly by the SBA. EIDL funds were permitted to be used for payroll
expenses, sick leave, production costs, and business obligations, such as debts,
rent, and mortgage payments. If the applicant also obtained a loan under the
PPP, the EIDL funds were not permitted to be used for the same purpose as
the PPP funds.
Relevant Financial Institutions and Related Entities
14. Financial Institution 1 was a federally insured financial
institution based in Utah. Financial Institution 1 was an SBA Preferred
Lender and participated as a PPP lender to small businesses.
15. FinTech 1 was a financial technology company based in California.
FinTech 1 participated in the SBA's PPP by, among other things, acting as a
service provider between small businesses and certain lenders, including
Financial Institution 1. Small businesses seeking PPP loans could apply
through FinTech 1 for PPP loans. FinTech 1 would review the loan
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applications. If a loan application received by FinTech 1 was approved for
funding, a partner lender, such as Financial Institution 1, disbursed the loan
funds to the applicant.
16. Financial Institution 2 was a federally insured financial
institution based in California with branches throughout the United States.
'
Neither REDFERN nor Wilder Effects maintained an account at Financial
Institution 2.
17. Financial Institution 3 was a federally insured financial
institution based in North Carolina with branches throughout the United
States. On or about January 23, 2020, REDFERN opened a business account
in Wilder Effects' name at Financial Institution 3 ("Wilder Effects account").
18. Financial Institution 4 was a fed'erally insured financial
\
institution based in Texas with branches throughout the United States. On or
about June 2, 2020, REDFERN opened a business account in Wilder Effects'
name at Financial Institution 4. REDFERN had previously opened two
individual accounts at Financial Institution 4.
The Scheme to Defraud
19. From in or around April 2020, continuing up to and including at
least in or around June 2020, REDFERN devised a scheme to defraud by
submitting and causing to be submitted false and fraudulent loan applications
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(i) to the SBA in order to obtain funds through the EIDL program and (ii) to
Financial Institution 1 and FinTech 1 in order to obtain funds through the
PPP.
Purpose of the Scheme to Defraud
20. It was the purpose of the scheme for REDFERN to unjustly enrich
himself and others by obtaining EIDL and PPP loan proceeds under false and
misleading pretenses, including by making false statements about the number
of Wilder Effects employees and the intended use of the loan proceeds and by
providing false documentation.
Manner and Means
EIDL Applications Submitted to the SBA
21. On or about April 12, 2020, REDFERN applied electronically for
an EIDL from the SBA ("EIDL Application -4729"). In connection with EIDL
Application -4729, REDFERN falsely affirmed, among other information, that
Wilder Effects had two employees, had suffered $3,000 in rental losses due to
the disaster, and in the twelve months prior to the disaster had $21,000 in
gross revenues and $13,000 in cost of goods sold. On or about June 16, 2020,
EIDL Application -4 729 was approved for an EIDL ("EIDL Loan •7904") in the
amount of $2,000.
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22. On or about May 17, 2020, REDFERN applied electronically for an
EIDL from the SBA ("EIDL Application -4452"). In connection with EIDL
Application -4452, REDFERN falsely affirmed, among other information, that
Wilder Effects had nine employees, and in the twelve months prior to the
disaster, had $30,000 in gross revenues and $27,500 in cost of goods sold. EIDL
Application -4452 was not approved.
PPP Loan Application Submitted to Financial Institution 1
23. On or about June 1, 2020, REDFERN caused an electronic PPP
application in the name of Wilder Effects to be sent to FinTech 1. The Wilder
Effects PPP application requested $410,322 to support Wilder Effects'
purported payroll. In the Wilder Effects PPP application, REDFERN falsely
affirmed or caused to be falsely affirmed, among other information, that: (i) he
was the sole owner of Wilder Effects; and (ii) Wilder Effects had twenty
employees and an average monthly payroll of $164,129.
24. The Wilder Effects PPP application appended as supporting
documentation: (i) a false and fraudulent purported IRS Form 941 (Employer's
Quarterly Federal Tax Return) for the first quarter of 2020 showing
$492,389.01 paid in wages to twenty employees; and (ii) a false and frauduleiit
Financial Institution 2 bank statement for Wilder Effects dated February 27,
2020, showing a balance of $290,028.70.
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25. Individual 1 prepared the false and fraudulent supporting
documentation for the Wilder Effects PPP application.
EIDL and PPP Loan Proceeds
26. On or about May 5, 2020, an EIDL advance totaling approximately
$2,000 was deposited in the Wilder Effects account at Financial Institution 3.
a. On or about May 6, 2020, three separate cash withdrawals
totaling $1,400 were made from the Wilder Effects account.
b. On or about May 10, 2020, an additional $560 in cash was
withdrawn from the Wilder Effects account.
27. On or about June 2, 2020, $410,322 in PPP funds were deposited
into the Wilder Effects account.
a. On or about June 2, 2020, an attempt was made to wire
$102,580 from the Wilder Effects account to an account in
Florida controlled by Individual 1.
b. On or about June 3, 2020, an $8,000 counter check written to
"cash" was withdrawn from the Wilder Effects account.
28. On or about June 18, 2020, $2,000 in EIDL funds in connection
with EIDL Loan -7904 were deposited into the business account in Wilder
Effects' name at Financial Institution 4.
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a. On or about June 18, 2020, $800 was transferred from the
business account to an individual account in REDFERN's name
at Financial Institution 4.
b. On or about June 21, 2020, an additional $500 was transferred
from the business account to an individual account in
REDFERN's name at Financial Institution 4.
COUNTS ONE, TWO, AND THREE
(Wire Fraud)
29. Paragraphs 1 through 28 of the Indictment are incorporated by
reference as if fully set forth herein.
30. On or about the dates specified as to each count below, in the
Middle District of North Carolina, and elsewhere, DAVID CHRISTOPHER
REDFERN, having knowingly devised and intended to devise a scheme and
artifice to defraud, and to obtain money and property by means of materially
false and fraudulent pretenses, representations, and promises, did transmit
and cause to be transmitted by means of wire communications in-interstate
commerce, writings, signs, signals, pictures, and sounds for the purpose of
executing such scheme and artifice, as set forth below:
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Count Approximate Description
Date )
1 May 5, 2020 Wire transfer of $2,000 that the SBA, 1n
Colorado, caused to be routed in interstate
commerce to the Wilder Effects account at
Financial Institution 3 in North Carolina.
2 June 2, 2020 Wire transfer of $410,322 that Financial
Institution 1, in Utah, caused to be routed in
interstate commerce to the Wilder Effects
account at Financial Institution 3 in North
Carolina.
3 June 18, 2020 Wire transfer of $2,000 that the SBA, in
Colorado, caused to be routed in interstate
commerce to the Wilder Effects account at
Financial Institution 4 in North Carolina.
All in violation of Title 18, United States Code, Sections 1343 and 2.
COUNT FOUR
(Bank Fraud)
31. Paragraphs 1 through 28 of the Indictment are incorporated by
reference as if fully set forth herein.
32. From in or around April 2020, continuing up to and including in or
around June 2020, the exact dates to the Grand Jurors unknown, in the Middle
District of North Carolina, and elsewhere, DAVID CHRISTOPHER REDFERN
knowingly executed and attempted to execute a scheme and artifice to obtain
moneys, funds, credits, assets, securities, or other property owned by, or under
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the custody or control of, a financial institution, by means of false and
fraudulent pretenses, representations, and promises.
All in violation of Title 18, United States Code, Sections 1344(2) and 2.
FORFEITURE ALLEGATION
33. The allegations contained in this Indictment are hereby realleged
and incorporated by reference for the purpose of alleging forfeiture pursuant
to Title 18, United States Code, Section 982(a)(2).
34. Upon conviction of one or more of the offenses set forth in Counts
One, Two, Three, and Four of this Indictment, the defendant, DAVID
CHRISTOPHER REDFERN, shall forfeit to the United States of America,
pursuant to Title 18, United States Code, Section 982(a)(2), any property
constituting, or derived from, proceeds the defendant obtained directly or
indirectly, as the result of such violation. Such forfeitable property may
include a money judgment in an amount equal to the amount of proceeds
obtained as a result of the offenses.
35. If any of the property described above, as a result of any act or
omission of the defendant:
a. cannot be located upon the exercise of due diligence;
b. has been transferred or sold to, or deposited with, a third
party;
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c. has been placed beyond the jurisdiction of the Court;
d. has been substantially diminished in value; or
e. has ·been commingled with other property which cannot be
divided without difficulty;
it is the intent of the United States of America, pursuant to Title 21, United
States Code, Section 853(p), -as incorporated by Title 18, United States Code,
Section 982(b)(l), to seek forfeiture of any other property of the defendant up
to the value of the property described above as being subject to forfeiture.
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All pursuant to Title 18, United States Code, Section 982, a nd Rule
32.2(a), Federal Rules of Criminal Procedure.
DATED: August 31, 2020
MATTHEW G. T. MARTIN
United States Attorney
B ~ f u G ~c.~
Assistant United States Attorney
ROBERT ZINK
Chief, Fraud Section
United States Department of Justice
Criminal Division
""h=v"
B~s~£ttXA~DE~~i~R '1 NT
Trial Attorney, Fraud Section
A TRUE BILL:
OEPERSoN
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