Superseding Indictment — U.S. v. Dale Vernon Thrush (E.D. Mich.)

Summary

A superseding indictment in United States v. Dale Vernon Thrush, Case No. 1:20-cr-20365, in the U.S. District Court for the Eastern District of Michigan, Northern Division, filed July 26, 2023 as ECF No. 118 before Hon. Thomas L. Ludington. Counts 1-10 charge failure to pay over payroll taxes under 26 U.S.C. § 7202, Counts 11-14 charge failure to file a tax return under 26 U.S.C. § 7203, and Counts 15-17 charge wire fraud under 18 U.S.C. §§ 1343, 3147(1). The indictment alleges that the defendant, sole owner of 402 N Mission, Xtreme, Verno and USAuto, failed to pay over approximately $238,223 in payroll taxes from in or about June 2014 through December 2016. It sets out PPP loan application and forgiveness rules as background to the wire fraud counts, and a criminal case cover sheet notes that the superseding indictment adds the wire fraud charges.

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Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2127 Filed 07/26/23 Page 1 of 17

UNITED STATES DISTRICT COURT Ny
EASTERN DISTRICT OF MICHIGAN £8, ‘on & ~~

NORTHERN DIVISION em lay
UNITED STATES OF AMERICA,
Case No. 1:20-cr-20365
Plaintiff,
Hon. Thomas L. Ludington
Offenses:
DALE VERNON THRUSH, Cts. 1-10: 26 U.S.C. § 7202-
Failure to Pay Over Payroll Taxes
Defendant.

Cts. 11-14: 26 U.S.C. § 7203-
Failure to File a Tax Return

Cts. 15-17: 18 U.S.C. §§ 1343,
3147(1) - Wire Fraud

SUPERSEDING INDICTMENT

The Grand Jury in and for the Eastern District of Michigan, sitting in Bay
City, charges:

INTRODUCTION

At all times relevant to this Indictment:
The Defendant and Relevant Entities

At all times relevant to this Indictment:
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2128 Filed 07/26/23 Page 2 of 17

1. 402 N Mission St, LLC (“402 N Mission") was a limited liability
company operating in Mount Pleasant, Michigan using the business names Ninety-
One, LLC and Oakridge DVD Rental. 402 N Mission provided employer-related
services, such as managing payroll and payroll-related taxes, and other employer-
related administrative functions necessary to operate a business.

2. Xtreme Enterprises, Inc. (“Xtreme”) was a corporation operating in
Mount Pleasant, Michigan and Lansing, Michigan that provided automotive repair
services to customers at two different locations using the business names Auto-Lab
Lansing, Adam’s Auto Repair Mt. Pleasant, and Four O Two N Mission.

3. Verno All Tune, Inc. (“Verno”), was a corporation operating in Mount
Pleasant, Michigan using the business names Xtreme Race Cars, Racer’s Speed
Shop (“Racer’s”) and All Tune and Lube (“All Tune”). Verno sold motorsport
vehicles repair parts and equipment to customers.

4. USAuto Repair, Inc. (“USAuto”) was a corporation operating in
Mount Pleasant, Michigan using the business name Mount Pleasant Auto-Lab.
USAuto provided automotive repair services to customers.

5. Bank A was a financial institution based in Pittsburgh, Pennsylvania,
that was insured by the FDIC. It has branches throughout the United States,

including in the Eastern District of Michigan.

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6. The defendant DALE VERNON THRUSH (“Defendant”) was the
sole owner and operator of 402 N Mission, Xtreme, Verno, and USAuto.
Defendant exercised control over 402 N Mission’s finances, possessed signatory
authority over its operating account, and controlled its expenditure of funds to pay
expenses.

7. The Internal Revenue Service (“IRS”) was an agency of the United
States Department of the Treasury, responsible for administering and enforcing the
tax laws of the United States.

Individual Income Taxes

8. Pursuant to Title 26 of the United States Code, every citizen and
resident of the United States who received gross income in excess of the minimum
filing amount established by law for a particular calendar year was required to
make and file annually an individual income tax return with the IRS, such as an
U.S. Individual Income Tax Return, Form 1040 (“Form 1040”).

9. 402 N Mission, Xtreme, and Verno were organized as S Corporations.
S Corporations were required to file U.S. Income Tax Returns for an S-
Corporation, Form 1120S (“Forms 11208”), with the IRS each calendar year,
specifically reporting the entity’s gross income, deductions, and distributions.

Defendant as the sole owner and shareholder of 402 N Mission, Xtreme, and Verno
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2130 Filed 07/26/23 Page 4 of 17

was required to file a Form 1040 reporting the net profits and the distributions he
received from 402 N. Mission, Xtreme, and Verno each year.

10. Defendant timely filed his Form 1040 with the IRS for tax years 2011
and 2012, as required by law.

Payroll Taxes

11. Pursuant to Title 26 of the United States Code, employers, including
402 N. Mission, were required to collect, truthfully account for, and pay over to the
IRS a variety of taxes withheld from employee wages, collectively referred to as
“Payroll Taxes.” These taxes were: Federal Income Tax Withholding
(“Withholding Taxes”) and Federal Insurance Contribution Act taxes (“FICA
Taxes”), as more particularly described below:

(a) Withholding Taxes: In general, an employer was required to
deduct and withhold income tax on the amount of wages that actually or
constructively were paid to its employees, and pay over those withholding taxes to
the IRS; and

(b) FICA Taxes: The FICA tax was comprised of two elements:
old-age, survivor and disability insurance, commonly referred to as “Social
Security,” and health insurance, commonly referred to as “Medicare.” Social

Security taxes were used to fund retirement and disability benefits, while Medicare

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taxes were used to provide health and medical benefits for the aged and disabled.
An employer had to deduct FICA taxes on the amount of wages that were actually
or constructively paid to its employees, and pay over those FICA taxes to the IRS.

12. To account for Payroll Taxes that had to be paid to the IRS, the
Internal Revenue Code required employers to prepare tax forms, including Forms
W-2 and W-3, and to file them with the proper government agency. The Internal
Revenue Code required employers to accurately report to the IRS amounts of
employee wages paid, as well as the payroll tax withheld based on those wages.

13. Section 7501 of the Internal Revenue Code provided that whenever
any person was required to withhold or collect any internal revenue tax from any
other person and to pay over such tax to the United States, the amount of tax so
withheld or collected was required to be held in trust on behalf of the United
States.

14. Employers were required to report Payroll Taxes on an Employer’s
Quarterly Federal Tax Return, Form 941 (“Form 941”). The Form 941 was filed
quarterly, and was due one month after the conclusion of each quarter.

The Paycheck Protection Program
15. — The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act

was a federal law enacted in or around March 2020 and designed to provide

5
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emergency financial assistance to the millions of Americans who were suffering
the economic effects of 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.

16. To obtain a PPP loan, a qualifying business was required to submit a
PPP loan application, 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. Specifically, the applicant had to state
whether “...the Applicant (if an individual) or any individual owning 20% or more
of the equity of the Applicant ...[is] for any felony, presently subject to an
indictment...”

17. Inthe PPP loan application, the small business (through its authorized
representative) had to provide, among other things, its: (a) average monthly payroll
expenses; and (b) number of employees. These figures were used to calculate the

amount of money the small business was eligible to receive under the PPP. In
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2133 Filed 07/26/23 Page 7 of 17

addition, businesses applying for a PPP loan had to provide documentation of their
payroll expenses.

18. A PPP loan application had to be processed by a participating lender.
PPP loan applications were electronically submitted or caused to be submitted by
the borrower and received through SBA servers located in Virginia or Oregon. Ifa
PPP loan application was approved, the participating lender funded the PPP loan
using its own monies, which were fully 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 employees,
was transmitted by the lender to the SBA in the course of processing the loan.

19. The business was required to use the PPP loan proceeds only on
certain permissible expenses—qualifying 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 expenses within a
designated period after receiving the proceeds and used a certain amount of the
PPP loan proceeds on payroll expenses.

20. To obtain PPP loan forgiveness, an authorized representative of the
business must submit a PPP loan forgiveness application to the lending institution

certifying, among other things, that the business complied with all requirements of

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the PPP Rules, including rules related to eligible uses of PPP loan proceeds and the
amount of PPP loan proceeds that must be used for payroll costs. PPP loan
forgiveness involves the flow of reimbursement funds from the SBA to the lending
institution.

COUNTS ONE to TEN

26 U.S.C. § 7202
Failure to Pay over Payroll Tax

21. The allegations in Paragraphs 1 through 14 of this Indictment are re-
alleged as if set forth in full herein.
Payment of Payroll Taxes

22. Asthe sole owner of 402 N Mission and as a person who exercised
control over 402 N Mission’s finances, possessed signatory authority over its
operating account, and controlled its expenditure of funds to pay expenses,
Defendant was a “responsible person,” that is, he had the corporate responsibility
to collect, truthfully account for, and pay over 402 N Mission’s Payroll Taxes.

23. From in or about April 2014 to in or about December 2016, 402 N
Mission withheld taxes from its employees’ paychecks. However, beginning in or
about June 2014, Defendant, on behalf of 402 N Mission, failed to timely file
Forms 941 and make payments of the full amount of the 402 N Mission payroll

taxes due to the IRS.
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2135 Filed 07/26/23 Page 9 of 17

24. From in or about June 2014 through December 2016, Defendant on
behalf of 402 N Mission failed to pay over approximately $238,223 in 402 N
Mission payroll taxes due and owing.

25. From in or about April 2014 to in or about December 2016, Defendant
directed over $100,000 from the 402 N Mission payroll bank account to other
entity bank accounts for, among other things, the payment of ordinary business
expenses, while at the same time failing to pay over to the IRS Payroll Taxes
withheld from 402 N Mission employee’s paychecks.

26. From in or about April 2014 to in or about December 2016, Defendant
directed over $396,516 from the 402 N Mission payroll account for, among other
things, the payment of remodeling expenses and construction costs for a business
operated by his wife, while at the same time failing to pay over to the IRS Payroll
Taxes withheld from 402 N Mission employee’s paychecks.

27. Onor about the dates set forth below, in the Eastern District of
Michigan and elsewhere, |

DALE VERNON THRUSH,
the Defendant herein, did willfully fail to truthfully account for and pay over to the

IRS all of the Payroll Taxes due and owing to the United States on behalf of 402 N
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2136 Filed 07/26/23 Page 10 of 17

Mission and their employees, as set forth below, with each of the calendar quarters

constituting a separate count of this Indictment:

“ONE mre 2nd Quarter | July 31, 2014
TWO 2014 3rd Quarter October 31, 2014
THREE 2014 4th Quarter January 31, 2015
FOUR 2015 1st Quarter April 30, 2015
FIVE 2015 2nd Quarter July 31, 2015
SIX 2015 3rd Quarter October 31, 2015
SEVEN 2015 4th Quarter January 31, 2015
EIGHT 2016 1st Quarter April 30, 2016
NINE 2016 3rd Quarter October 31, 2016
TEN 2016 4th Quarter January 31, 2017

All in violation of Title 26, United States Code, Section 7202 and Title 18,

United States Code, Section 2.

COUNTS ELEVEN to FOURTEEN

26 U.S.C. § 7203
Failure to File a Tax Return

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Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2137 Filed 07/26/23 Page 11 of 17

28. The allegations in Paragraphs 1 through 14 of this Indictment are re-
alleged as if set forth in full herein.

29. Defendant filed Applications for Automatic Extension of Time to File
U.S. Individual Income Tax Return, Forms 4868, for calendar years 2013, 2015,
and 2016.

30. During the calendar years set forth below, in the Eastern District of
Michigan and elsewhere,

DALE VERNON THRUSH

the Defendant herein, who was a resident of Farwell, Michigan, had and received
gross income through 402 N Mission, Xtreme, and Verno in excess of $21,000 in
each of the calendar years shown in the chart below. By reason of such gross
income, he was required by law, following the close of the calendar year shown in
the chart below, on or before the filing deadline shown in the chart below, to make
an individual income tax return to the IRS, stating specifically the items of his
gross income and any deductions and credits to which he was entitled. Well
knowing and believing all of the foregoing, Defendant did willfully fail, by on or
about the filing deadline shown in the chart below, in the Eastern District of
Michigan and elsewhere, to make an individual income tax return for the calendar

years shown in the chart below:

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Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2138 Filed 07/26/23 Page 12 of 17

ELEVEN 2013 October 15-2014
TWELVE 2014 April 15, 2015

THIRTEEN [2015 October 15, 2016
FOURTEEN (2016 October 15, 2017

All in violation of Title 26, United States Code, Section 7203, and Title
18, United States Code, Section 2.

COUNTS FIFTEEN to SEVENTEEN

18 U.S.C. § 1343
Wire Fraud

31. The allegations in Paragraphs | through 20 of this Indictment are re-
alleged as if set forth in full herein.

32. Onor about the dates specified as to each count below in the chart
below, in the Eastern District of Michigan, and elsewhere, Defendant DALE
VERNON THRUSH, having knowingly devised a scheme and artifice to defraud,
and to obtain money and property, by means of materially false and fraudulent
pretenses, representations, and material omissions, caused to be transmitted by
means of wire communication in interstate commerce certain writings, signs,

signals, and sounds, for the purpose of executing such scheme and artifice to

defraud.
12
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2139 Filed 07/26/23 Page 13 of 17

Purpose of the Scheme to Defraud

33. The purpose of the scheme to defraud was for DALE VERNON
THRUSH to unjustly enrich himself by fraudulently obtaining PPP loan proceeds
and subsequent loan forgiveness despite diverting those loan proceeds for
impermissible uses. These impermissible uses included personal investment
account expenses, capital expansion projects, and payment of part of the delinquent
payroll tax liability underlying Counts One through Ten alleged above.

The Scheme to Defraud

34. Beginning in or about April 2020 and continuing until at least in or
about September 2021, Defendant DALE VERNON THRUSH devised a scheme
and artifice to defraud, and to obtain money and property, by filing (1) a PPP loan
application with materially false and fraudulent representations; and (2) two PPP
loan forgiveness applications with materially false and fraudulent representations
about the use of the PPP loan funds and 402 N Mission’s entitlement to PPP loan
forgiveness. Defendant DALE VERNON THRUSH and 402 N Mission received
PPP loan assistance funds issued because of the materially false and fraudulent

representations and used those funds for impermissible purposes.

13
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2140 Filed 07/26/23 Page 14 of 17

35. Ineach of the applications for the PPP Loans, Defendant DALE
VERNON THRUSH falsely represented to Bank A the purpose for which he
intended to use the funds provided through the PPP loan.

36. In each of the loan forgiveness applications for the PPP Loans,
Defendant DALE VERNON THRUSH falsely represented to BANK A that he
complied with all requirements of the Paycheck Protection Program, including
using loan proceeds solely towards eligible payroll, mortgage interest, rent, or
utilities expenses.

37. Onthe PPP loan application dated, on or about February 3, 2021,
Defendant DALE VERNON THRUSH made the materially false representation to
BANK A that he, as the owner of 402 N Mission, was not presently subject to an
indictment.

Execution of the Scheme and Artifice

38. Onor about the dates specified as to each count below in the chart
below, in the Eastern District of Michigan, and elsewhere, Defendant DALE
VERNON THRUSH caused the execution of the aforesaid scheme and artifice to
obtain moneys and funds by means of materially false and fraudulent pretenses,
representations, promises, and omissions, transmit and cause to be transmitted, by

means of wire communication in interstate and foreign commerce, writings, signs,

14
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2141 Filed 07/26/23 Page 15 of 17

pictures, and sounds for the purpose of executing the scheme and artifice to

defraud, as set forth below:

Count | Approximate Date
No.

Description of Wire

Fifteen July 12, 2021

Interstate wire transmission of data from loan
forgiveness application, falsely claiming that
proceeds of loan number ending with 7703 were
used in compliance with the PPP program
requirements, caused by DALE VERNON
THRUSH, in Michigan, to the SBA, outside of
Michigan.

Count | Approximate Date
No.

Description of Wire

Sixteen | February 3, 2021

Interstate wire transmission of data from loan
application, caused by DALE VERNON
THRUSH, in Michigan, to the SBA, outside of
Michigan, falsely representing that he, as the
applicant or individual owning 20% or more of
the equity of the applicant, was not presently
subject to an indictment.

Seventeen | September 21, 2021

Interstate wire transmission of data from loan
forgiveness application, falsely claiming that
proceeds of loan number ending with 8407 were
used in compliance with the PPP program
requirements, caused by DALE VERNON
THRUSH, in Michigan, to the SBA, outside of
Michigan.

All in violation of Title 18, United States Code, Section 1343.

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Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2142 Filed 07/26/23 Page 16 of 17

The offenses alleged in Counts 15-17 are subject to the enhanced penalty
provisions of Title 18, United States Code, Section 3147(1) in that he engaged in
this conduct while he was on pretrial release in the Eastern District of Michigan in
Criminal Case 1:20-CR-20365.

A TRUE BILL

Dated: July 26, 2023 /s| GRAND JURY FOREPERSON
/s/ David A. Hubbert /s/ Mark McDonald

DAVID A. HUBBERT MARK MCDONALD

Deputy Assistant Attorney General GEORGE MEGGALI

U.S. Department of Justice, Tax DOJ Tax Division Trial Attorneys
Division Northern Criminal Enforcement

Section
150 M Street, NE
Washington, DC 20005

16
Case 1:20-cr-20365-TLL-PTM ECF No. 118, PagelD.2143 Filed 07/26/23 Page 17 of 17

United States District Court Criminal Case Cover Sheet | Case Number:
Eastern District of Michigan 20-cr-20365

NOTE: It is the responsibility of the Assistant U.S. Attorney signing this form to complete it accurately in ail respects.

Companion Case Information Companion Case Number:
This may be a companion case based on LCrR 57.10(b)(4)":
OYes MINo AUSA’s Initials: MM IN p
Case Title: USA v. _Dale Vernon Thrush Via L
County where offense occurred: Isabella uU Y 2
Offense Type: Felony Kom op ‘a
Indictment -- based upon LCrR 57.10 (d) [Complete Superseding section below]. Wen Up».
Superseding Case Information
Superseding to Case No: 20-cr-20365 Judge: Thomas L. Ludington
Reason:
Embraces same subject matter but adds the additional defendants or charges below:
Defendant Name Charges Prior Complaint (if applicable

Dale Vernon Thrush 18 U.S.C. §§ 1343, 3147(1)

Please take notice that the below listed Assistant United States Attorney is the attorney of record for
the above captioned case

s/Mark McDonald
July 26, 2023
' Date Mark McDonald
Assistant United States Attorney
600 Church Street
Flint, MI 48502

mark,s.mcdonald@usdoj.gov
(810) 766-5177

1 Companion cases are matters in which it appears that (1) substantially similar evidence will be offered at trial, or (2) the same or related parties are
present, and the cases arise out of the same transaction or occurrence. Cases may be companion cases even though one of them may have already
been terminated.


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