Affidavit in Support of Criminal Complaint — United States v. Shashank Shekhar Rai (E.D. Tex., Dkt. 2-1)
Summary
An Affidavit in Support of Criminal Complaint, Docket 2-1, sworn by Michael Gross, a Special Agent with the Federal Housing Finance Agency, in United States of America v. Shashank Shekhar Rai. It supports a complaint charging wire fraud, bank fraud, false statements to a financial institution and false statements to the SBA. The affidavit states that on or about April 8, 2020 Allegiance Bank received a Paycheck Protection Program application in the name of Rai Family LLC seeking $10,000,000, claiming 250 employees and an average monthly payroll of $4,000,000. It states that the bank noticed discrepancies, concluded the application may be fraudulent and denied it, and that Rai worked as a salaried engineer for a large energy company.
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Cite this document
“Affidavit in Support of Criminal Complaint — United States v. Shashank Shekhar Rai (E.D. Tex., Dkt. 2-1).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-1-20-mj-00095-dkt-2-1-e-d-tex-26ffff1cd1/
, SHA-256 7f3326bc41085a0fdb3c97010cc3fe9a4e0bfe243ed75767d8ffa82b89e0f7f0.Full text
UNITED STA'TES DISTRICT COURT
EASTHRN DISTRICl' OIT TEXAS
BI1AUMON'I' DIVISION
UNITED STAI'ES OF AMEITICA )
) ilfll,lln tJNIx]tt sriAL
)
) Case No. l:20-MJ- 95
SHASI.IANK SHEKHAR RA I. )
)
Defendant. )
AFFIDAVIT IN SUPPOqT OF CRIMINAL COMPLAINT
I, Michael Gross, being duly sworn, hereby depose and state as follorvs:
Introduction
L I am a Spccial Agcnt lbr thc Fcderal l"lousing Financc Agency, OfTice of Inspector
Ceneral, where I have been employed since 2013. la,n currenlly assigncd to thc Dallas,'l-exas
ofiice. My cunent duties include the investigation of financial crimes including rvire and bank
fraud. as rvell as other white-collar crimes. For approximately eighteen years. I havc scrvcd as a
law enforcement OfYicer. first as a Police Offieer in the Nerv York City l'}olice Department. and
then as a Special Agent lbr Housing and Urban Devclopment. Officc ol'lnspector Gencral and
Department of Labor, OfTice of lnspector Ceneral.
2. Throughout the course of my career. I have conducted an array of criminal
investigations involving moncy laundcring, bank fiaud. public corruptiott. organizcd crimc. and
many other illegal schemes impacting financial institutions. I have experiencc ctuducting suarch,
seizure and arrest rvanant operations. Recently. I have been assigned to rvork rvith the LJ.S.
Depaftment of Justice and other law enforcement partners to investigate possible fraud associated
rvith the stimulus and economic assistance programs created by the federal govemment in responsc
to the COVID- 19 prograrn.
I
3. This affidavit is made in support of a criminal complaint charging Shashank Rai with
18 U.S.C. $ 1343 (Wire Fraud), 18 U.S.C. $ 1344(2) (Bank Fraud), 18 U.S.C. $ l0l4 (False
Statements to a Financial Institution), and 15 U.S.C. $ 6a5(a) (False Statements to the Small
Busines Adminishation), carried out by Shashank Shekhar Rai.
4. This affidavit is based on my personal investigation and investigation by others,
including federal and local law enforcement officials whom I know to be reliable and tustworthy.
The facts contained herein have been obtained by interviewing witnesses urd examining
documents obtained in the course of the investigation as well as through other means. This
affidavit does not include every fact known to me about this investigation, but rather only those
facts sufficient to establish probable cause.
5. This affidavit does not include each and every fact known to the governmenf but
only those facts necessary to support a finding of probable cause to support the requested arrcst
warrant.
Probable Cause
The Paycheck Protecilon Progrom
6. The Coronavirus Aid, Reliefi, and Economic Security ("CARES') Act is a federal
law enacted in or around March 2020 and designed to provide emergency financial assistance to
the millions of Americans who ate suffering the economic effecs caused by the COVID-I9
pandemic. One soutre of relief provided by the CARES Act w8s the authorization of up to $349
biltion in forgivable loans to smatl businesses forjob retention and certain other expenses, through
a prcgram referred to as the Paycheck Protection Program (*PPP'). ln or around April 2020,
Congress authorized over $300 billion in additional PPP funding.
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7. In order to obtain a PPP loan, a qualifying business must submit a PPP loan
application, which is signed by an authorized representative of the business. The PPP loan
application requires the business (through its authorized rcpresentative) 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 smallbusiness (through its authorized rcpresentative) must
state, among other things, its: (a) ayerage monthly payroll expenses; and (b) number of employees.
These figures are used to calculate the amount of money the small business is eligible to receivc
under the PPP. In addition, businesses applying for a PPP loan must provide documenation
showing their payoll expenses.
t. A business's PPP loan application is received and processed, in the first instance, by
a participsting financial institution then transmitted, for further t€view, to the Small Business
Administation ('SBA") to asri€ss the applicant's eligibility. If a PPP loan application is approved
the participating financial institution funds the PPP loan using its own monies.
9, PPP loan proceeds must be used by the business on certain permissible expenses-
payrollcosts, interest on mortgages, rcnt, and utilities. The PPP allows the interest and principal
on the PPP loan to be entircly forgiven if the business spends the loan pruceeds on these expense
items within a designated period of time (usually eight weeks of receiving the proceeds) and uses
at least 75o/oof the PPP loan proceeds on payoll expenses.
Shoshank Ral and Ral Famlly LLC
10. According to public records from the Texas Secretary of State, Rai Family LLC is
an active Texas corporation that was first rcgistered on or about October 30, 2019. The registered
mailing address for Rai Family LLC is 9255 Meadowbend Drive Beaumont Texas 777A6. Public
rccords show that addrcss appears to be a one-story single-family home.
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I l. An internet search for Rai Family LLC in Beaumon! Texas revealed little additional
information about Rai Family LLC that would suggest the company engages in active business.
lnvestigators did not identi$ a public website for Rai Family LLC nor any social media pages
(such as Linkedln accounts) where individuals identified themselvcs as employees of Rai Family
LLC.
12. According to open-source records, Shashank Rai is a thirty-year-old male living in
Beaumonq Texas. A public Linkedln profile in Shashank Rai's name lists Rai as an engineer in
the BeaumontPort Arthur, Texas area who works for a large multinational energy company
(Company l). In or atound May 2020, Company I confirmed that Shashank Rai was a current and
salaried employee.
13. Records obtained from Company I on or about May 8,2020 confirm that Shashank
Rai is an employee of Company I and worls in an engineering capacity there. According to
personnel records, Shashank Rai has worked at Company I since approximately May 2012.
According to Company l, Shashank Rai has not disclosed any outside employment with Rai
Family LLC or any similar company.
14. In personnel records from Company l, Shashank Rai's listed address is 9255
Meadowbend Drive, Beaumont, Texas 77706. ln other records produced by Company l, Shashank
Rai listed his personal email address as Email Account I and his telephone number as Telephone
Number l.
15. As discussed further below, in materials submitted in support of his multiple
applications for loans, Shashank Raistated that he is the "owne/'of "Rai Family LLC,'which he
claimed to be a multi-million dollar operation with hundreds of employees. However, the public
Linkedln profile of Shashank Rai includes detailed references to his job duties at Company l, but
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no refercnce whatsoever to *Rai Family LLC." Based on your affiant's training and experience,
it is highly unusual for an individual owning a legitimate multi-mitlion dollar organization to
exclude any refercnces to that organization on publicly availabte business development websites
such as Linkedln, but to include deailed rcferences to an ordinary salaried engineering job at a
multinational energy company.
Ral Famlly LLC'I PPPAppllcatlon to Alleglance Bank
16. Allegiance Bank is ur FDlC-regulated financial institution and member of the
Federal Home Loan Bank System serving the greater Houston area. Allegiance Bank was an
approved SBA lender and has participated as a lender in the PPP.
17. According to information provided by Allegiance Bank, on or about April 8, 2020,
the bank received a PPP application in the name of Rai Family LLC seeking $10,000,000 in PPP
funds. The application was submitted in the name of Shashank Rai, who represented himself as
the sole owner of Rai Family LLC. The application also listed the business's telephone number
as Telephone Number I and the email address at Email Account l.
18. The PPP application submitted to Allegiance Bank stated that Rai Family LLC's
sverage monthly payroll was $4,000,000 and that the company had 250 employees. Along with
the application, Rai submitted a spreadsheet purporting to show Rai Family LLC's payroll.
19. As additional support to the PPP application, Rai submitted what he claimed to be
an Employer's Annua! Federal Tax Return (lRS Fonn 944) for 2019. On the purported Form 944,
Rai Family LLC claimed that it had paid $23,228,512 in wageq tips, and other compensation. A
total of$23,228,512 equals a monthly average of$ 1,935,709.33, which is less than ofthe purported
$4 million monthly payroll Shashank Rai claimed on the PPP application.
)
20. As additional support to the PPP application, Shashank Rai submitted what he
claimed to be a quarterly Heral tax return for the first quarter of 2020 for Rai Family LLC. On
the form, Rai Family LLC clairned to have paid a total wages, tips, and other compensation of
$8,219,178.08. A three-month toal of $8,219,178.08 equals a monthty average of approximately
$2,?39,726,03, which is less than of the purported $4 million monthly payroll Rai claimed on the
PPP application.
21. As additional support to the PPP application, Shashank Rai also submined an Excel
spreadsheet trat purports to be a list of Rai Family LLC employees, along with ttreir purported
salary and benefits. Although no employee names appear on the spreadsheef the first column
contains a series of ninedigit numbers, which appear to purport to represent social security
numbers of the Rai Family LLC employees. lnvestigators have searched availabte databases for
some of the purported social security numbers and found that the numbcrs on Rai's list march the
social security numbers of four individuals who residc outside the State of Texas, including one
deceased individual who if they were alive today would be 106 years old.
22. A copy of the PPP application submitted to Allegiance Bank in the name of Rai
Family LLC shows the applications lists the business address u 9255 Meadowbend Drive in
Beaumont Texas. The application lists the primary contact as "Shashank Rai" and lists the
busincss phone number as Telephone Number l. Later on, Shashank Rai is listed as the sole owner
of Rai Family LLC. A copy of Rai's Texas driver license was submitted with the application.
23. According to information provided by Allegiance Bank, during a review of the ttai
Family LLC's application for PPP funds, a Senior Vice President in the Regulatory Compliance
Departrnent noticed multiple discrepancies in the information provided about Rai Family LLC's
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employees and concluded that the application may be "fraudulent." Based on these discrepancies,
Allegiance Bank denied the Rai Family LLC application fora ppp loan.
Ral Fomlly LLC'I PPPAppltcatlon to Reody Copllat
24. Ready Capital is a publicly traded company that specializes in non-bank real esrate
and small business lending. Ready Capital is an SBA Prefened Lender and participated as a PPP
lender to small businesses.
25, According to records received from Ready Capital, on or about April 20,2020,
Ready Capital received a PPP application in the name of Rai Family LLC seeking $3,006,200 in
PPP frrnds, a decresse of nearly $7 million from the $10 million application which Allegiance
Bank denied. The application was transmitted to Ready Capita! through its website and was
received by Ready Capital outside the stste of Texas. The application was submined in the name
of Shashank Rai, who represented himself to be the sole owner of Rai Family LLC. The
application listed the business's telephone number as Telephone Number I and the email address
at EmailAccount l.
26. The PPP application submitted to Ready Capital stated that Rai Family LLC's
average monthly payroll was $1,202,480 and that the company had 264 employees. Despite
claiming a similar number of employees, the average payroll cited on this application was now
almost $3 million less than the averagc payroll cited on the previous PPP application to Allegiance
Bank. The PPP application submitted to Ready Capial included the same spreadsheet rcferenced
submitted in the application to Allegiance Bank.
27. According to information provided Ready Capital, based on the information
submitted, Rai Family LLC was approved by the SBA for a loan of approximately $3 million. A
PPP loan was in the process of being funded by Ready Capital at the time that law enforcement
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rcquested rccords rclated to Rai Family LLC. Based on that records request, the loan was placed
under frrrther review, and funding has been postponed.
28. Accoding to records provided by Ready Capital, Shashank Rai has rcpeatedly
contacted Ready Capital about the status of his PPP loan and to demand disbursernent of the funds.
For example, on or about April 20,2020, Shashank Rai sent an email from Email Account I to a
Ready Capital employee located in the g€ater New York area and attached an updated PPP
application form. In another email sent on the same day, Rai asked, '\vhen can I expect the process
complete [srb] and to get the funds?" On or about April 30,2020, Shashank Rai sent an email
saying i, p.tt, "We have not received anything. Today is payday for people within our
company. . . . When can we exp€ct to receive the funds?"
29. According to records provided by Ready Capital, Shashank Rai dircctod that the PPP
loan proceeds be sent to a Bank of America account ending in x0665, According to records
produced by Bank ofAmerica, the account ending in x0665 was opened on or about April 3, 2020,
in the name of Rai Family LLC. The listed owneron the Bank ofAmerica was Shashank Rai, and
the accounts show that Rai's social security number was provided while opening the account. The
business address provided to Bank of America was 9255 Meadowbend Drive, Beaumont, Texas
77706, the same address used on both PPP applications and the incorporation documents.
30. On May l, 2020, at the rcquest of law enforcement, I representative from Ready
Capital located in the greater New York area recorded a telephone conversation with Shashank
Rai for the purpose of confirming information listed on the PPP loan application for Rai Family
LLC. Rai said that he was the owner ofthe company and acknowledged that it has 264 employees
with an average monthly payroll of $1,202,480 (not $4 million for 250 employees as reprcsented
in the application submitted to Allegiance Bank). Although the Texas Workforce Commission has
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no rccord of Rai Family LLC being rcgistered, or filing any employment or payroll information,
Raisaid that allthe employees werc in the United States and, in general, located in Texas.
Poyroll Recordsfrom the Texas l{orkforce Commlsslon
31. In or around April2020, investigators contactd the Texas Workforce Commission,
which collects payroll and employment reeords for companies operating in Texas.
32. According to the Texas Workforce Commission, Rai Family LLC is not rcgistered
and has never filed papenrork related to its payroll or employment records.
33. The Texas Workhrce Commission also provided wage details for Shashank Rai for
approximately the fourth quarter of 2018 through the present. According to the Texas Workforce
Commission, the only records of wages for Shashank Rai were paid by Company I (the
multinational energy company). The Texas Workforce Commission had no records of wages
being paid to Shashank Raiby Rai Family LLC.
Tqas Cotnptroller's Ofrlce of PublicAccounts
34, In or around April 2020, investigators contacted the Texas Comptroller's Office of
Public Accounts, which collects revenue records from taxable entilies in order to assess franchise
taxes owed.
35. According to the Texas Comproller's Office of Public Accounts, Rai Family LLC
becamc active as a ta:table entity in or around the fourth quarter of 2019.
36. A representative from the Texas Comptroller's Office of Public Accounts checked
their database for records pertaining to Rai Family LLC and informed investigators that Rai Family
LLC reported no tevenues for the fourth quarter of 2019 or the first quarter of 2020.
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Physlcol Suntelllance and Trash Cover ot9255 Meadowbend Drlve
37, In or around May 2020, investigators conducted physical surveiltance of 9255
Meadowbend Drive in Beaumont, Texas 777A6, the registered address of Rai Family LLC.
Physical surveillance confirmed the address is a single-famity residence. During the surveillance,
investigators observed a man at the residence. Investigators observed the individual's physical
appearance generally matched that of a photo on Rai's public Linkedln account (the individual at
9255 Meadowbend had facial hair when observed).
38. At one point during the investigator's physical surveillance of 9255 Meadowbend
Drive, investigators observed the individual matching Rai's description exiting from his vehicle
parked in the driveway. While the individual was outside the residence, an investigator called
telephone number Telephone Number I (the contact number on both Rai Family LLC's PPP loan
applications) from a blocked number. As the call was ringing, investigators observcd the
individual matching Rai's description reuieve a cellulartelephone from his pocket and look at the
scr@n, a movement consistent with checking to see the listed number of an incoming call. The
individual did not answer the telephone, and shortly after placed the phone back into his pocket.
39. On or about May 6, 2020, investigators conducted a trash cover outside 9255
Meadowbend Drive. Among the documents recoyerd from the trash outside the residence were
the following:
a. Portions of a Bank of America document with the account ending in x0665 in the
name of "Rai Family LLC" (the same account that Shashank Rai had directed
Ready Capital as the intended rccipient account for the $3 million in PPP loan
proceeds).
t0
b. Letters from Bank of America related to three new accounts ending in x2488,
x2491,andx2475, all in the name of "Rai Family LLC." According to the Bank of
America documents, the accounts were opened on or about April 14, 2020.
c. A voided chcck from a Bank of America account ending in x7987 in the name of
"Shashank Rai,"
d. Handwrinen notes referring to "$3,000,000" and what appears to be an investment
sbategy for $3,00000Q including the apparent notations "$lM => firtures," "$lM
=> options," and "$lM ) Stocks," (The referenc€ !o "$3,000,000" matches the
approximate amount ofthe PPP loan sought from Ready Capial in the name of Rai
Family LLC).
Recordsfrom Google Account Emall Account I
40. On both PPP loan applications submined in the name of Rai Family LLC, the listed
email address was Email Account l. Likewise, records from Ready Capial show that the account
Email Account I was used to contact the lender about the status of the PPP loan application made
in the name of Rai Family LLC.
41. In or around May 2020, investigators obtained records from Google related to the
account Email Account I pursuant to a Court-authorized search ofthe account. Records from the
account show that the account was both used to apply for the PPP loans in the name of Rai Family
LLC as well as for Rai's own personal use.
42. Records from the email account include communications with both Allegiance Bank
and Ready Capital regarding the PPP loan applications of Rai Family LLC. For example, on or
about April 9,2020, Email Account I rcceived an email from Allegiance Bank thanking the sender
"for providing your information for the Allegiance Bank SBA Paycheck Protection Program
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Loan." On or about April 16, 2020, Email Account I received an ernail from Ready Capital stating
that "[ylour loan application has received a loan number from the SBA as part of the Paycheck
Protection Program," and that Ready Capital "looks fonvard to working with you to gather the
remaining documentation needed." Likewise, on or about April 20, 2020, Email Account I was
used to email a copy ofthe PPP application for Rai Family LLC to an employee of Ready Capital.
43, As discussed above, the PPP applications submittcd on behalf of Rai Family LLC
claimed that the business had significant payroll dating back to the beginning of 2019. However,
a preliminary review of the contents of Email Account I has revealed no substantive
communications about Rai Family LLC or iS purported business prior to October 30, 2019 (its
approximate date of formation).
44, The internet search history aftiliated with the account shows various activity
connected to applying for a PPP loan, including such activity around the same time that the PPP
applications were submitted to Allegiance Bank and Ready Capital in the name of Rai Family
LLC.
a. Allegiance Bank records show that it received the Rai Family LLC PPP application
on or about April 8, 2020. On or about the same day, the Google intemet search
history for Email Account I shows the account was used in connection various
searches related to PPP applications, including the searches "apply for a ppp loan,"
"apply for ppp !end€rs," and "beaumont local ppp lenders," and "banks in beaumont
accepting ppp."
b. Ready Capital records show that it received the Rai Family LLC PPP application
on or about April 20,2020. On or about April 21, 2020, the Google internet search
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history for Email Account I shows the account was used to search for "ready
capital."
45. Other internet searches made from the Google sccount Email Account I include the
following: "papoll register template" (on or about April 3,2020), "p and I template" (on or about
April 17, 2020),"excel balance sheet template annual report" (on or about April 17, 2020),"sample
payroll rcport" (on or about April 21,2020), "download paycheck report template" (on or about
April2l, 2020), and "l0 million dollar business for sate" (on or about April 22,2020).
46. The same Google account (Email Account l) contained what appear to be personal
rccords connected to Shanskar Rai. For example, the account contained a scanned copy ofa
Louisiana temporary driving permit from in or around March 2015 in thc name of Shashank Rai;
a receipt for renter's insurance in the name of Shashank Rai from in or around January 2016;
personal photos of Rai dated from in or around December 2019; and multiple versions of resumes
in the name of Shashank Rai (including one that appears to bc last modified in or around September
2019). The resumes in the account identifr Rai as an employee of Company I ; none of the resumes
reviewed to date indicate that Rai had a position or ownership interest in Rai Family LLC or
company similar to that described in the PPP applications.
Conclusion
47, Based on my haining and experiencg and the information provided in this aftidavit,
I respectfully submit that therc is probable cause to believe that beginning on a date unknown, but
from at least in or around April 2020 to May 2020, within the Eastem District of Texas, Shashank
Rai committed violations of lt U.S.C. $ 1343 (Wire Fraud), l8 U.S.C. $ 1344(2) (Bank Fraud),
18 U.S.C. S l0l4 (False Statements to a Financial Institution), and 15 U.S.C. $ 6a5(a) (False
Statements to the Small Business Adminisnation).
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I declare under penalty of perjury that the statements above arc true and conect to ttre best
of my knowledge urd belicf,
Agent Michael Gross
Federal Housing Finance Agency
Office of Inspeotor General
Subscribed and swom to before me on May 12, 2020,by reliable electronic means under
Rule 4.1 ofthe Federal Rules of Criminal Procedure.
The Honorable Zack Hawthom
United States Magistrate Judge
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