Factual Proffer — United States v. Daniel Hernandez (S.D. Fla., Dkt. 29)

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Factual Proffer entered on the docket December 20, 2022 as Document 29 in United States of America v. Daniel Hernandez, Case No. 22-20529-CR-KMM (1:22-cr-20529-KMM), U.S. District Court for the Southern District of Florida. The United States and the defendant agree that, were the case to proceed to trial, the United States would prove the stated facts beyond a reasonable doubt. The proffer states that between approximately April 2020 and at least July 2021 the defendant, a Regional Manager at Bank 1, agreed with Erich Javier Alfonso Barata and Armando De Leon to submit false PPP and EIDL applications and share in the resulting loans. It states that over 80 false PPP applications were submitted at Bank 1 and Bank 2, more than 50 were approved, and over $17 million was received.

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“Factual Proffer — United States v. Daniel Hernandez (S.D. Fla., Dkt. 29).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-1-22-cr-20529-dkt-29-s-d-fla-72c8f3bdf7/, SHA-256 cca24926e84152c7d241f617d87c80a33332eaa3b52794eaa6736b8ad1be63f3.

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Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 1 of 7

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. 22-20529-CR-KMM

UNITED STATES OF AMERICA

DANIEL HERNANDEZ,

Defendant.
- - - - - - - - - - - - - -I
FACTUAL PROFFER

The United States of America (the "United States") and defendant Daniel Hernandez (the

"defendant") agree that, were this case to proceed to trial, the United States would prove beyond

a reasonable doubt the following facts, among others, which occurred in the Southern District of

Florida and elsewhere.:

The Paycb.eck Protection Program

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was a federal law

enacted in or around March 2020 and designed to provide emergency financial assistance to the

millions of Americans who were suffering from the economic effects caused by the COVID-19

pandemic. One source of relief provided by the CARES Act was the authorization of forgivable

loans to small businesses forjob retention and certain other expenses, through a.program referred

to as the Paycheck Protection Program ("PPP").

To obtain a PPP. loan, a qualifying business submitted 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
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 2 of 7

application, the small business (through its authorized representative) was required to provide,

among other things, its: (a) average monthly payroll expenses; and (b) number of employees.

These figures were used to calc~late the amount of money the small business wa~ eligible to

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

documentation confirming their payroll expenses.

A PPP loan application was processed by a participating lender. If a PPP loan application

was approved, the participating lender funded the PPP loan using its own monies. While it was

the participating lender that issued the PPP loan, the loap, under nearly all circumsta11.ces, was

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.

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 and used a defined portion of the PPP loan

proceeds on payroll expenses.

The Economic Injury Disaster Loan Program

Another related response to the COVID-19 outbreak was an expansion of an existing

disaster-related program - the Economic Injury Disaster Loan ("EIDL") - to provide for loan

assistance (including $10,000 advances) for small businesses and other eligible entities for loans

up to $2 million. The EIDL proceeds could have been used to pay fixed debts, payroll, accounts

payable, and other bills that could have been paid had the disaster JJ.Ot occurred; however, such

loan proceeds were not intended to replace lost sales or profits, or for the expansion of a business.

2
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 3 of 7

Unlike certain other types of SBA-guaranteed loans, EIDL funds were issued directly from

the United States Treasury, and applicants applied for EIDL funds directly through the SBA via

an online portal and application. The EIDL application process, which also used certain outside

contractors for system support, collected information concerning the business and the business

owner, including: information about the gross revenues for the business prior to January 31, 2020;

and the cost of goods sold. Applicants electronically certified that the information provided was

true and accurate and were warned that any false statement or misrepresentation to the SBA, or

any misapplication of loan proceeds, may result in sanctions, including criminal penalties.

EIDL applications were received in and processed using computer servers located in the

states oflowa, Virginia, and Washington. EIDL disbursementpay~ents were initiated by the SBA

using computer servers located in the state of Colorado, which transmitted the payment

information to the Treasury using computer servers located in the state of Virginia.

Overview of the Defendant's Conspiracy

Between approximately April 2020 and at least July 2021,the defendant agreed with Erich

Javier Alfonso Barata ("Alfonso"), Armando De Leon ("De Leon"), and others to submit false and

fraudulent PPP and EIDL applications and share in a percentage of the resulting fraudulent loans.

Throughout the course of the conspiracy, the defendant was a Regional Manager at Bank 1, one of

the country's ten largest banks. Bank 1 was headquartered in New Jersey with br~ches in the

Southern District of Florida. Bank 1 was an approved SBA lender of PPP loans and insured by

the Federal Deposit Insurance Corporation ("FDIC").

Pursuant to the conspiracy, the defendant and his conspirators submitted over 80 false and

fraudulent PPP Joan applications at Bank 1 and Bank 2, another FDIC-insured bank and approved

3
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 4 of 7

SBA lender of PPP loans. Bank 2 was also the defendant's previous employer. More than 50 of

the applications were approved, and the defendant and his conspirators received over $17 million.

Defendant Conspired with Erich Alfonso

Early in the PPP program, the defendant agreed with Alfonso, then a Bank 1 customer;

to prepare and submit false and fraudulent PPP loan applic'ations. The defendant spoke with

Alfonso in the Southern District of Florida and they agreed to split a share of the loan proceeds,

which Alfonso was to collect from the borrowers.

For example, in approximately April 2020, Alfonso submitted online at Bank 1 two false

and fraudulent PPP loan applications on behalf of two entities he controlled, Black Hookah, Inc.

and EJ Networking & Security Service Inc. Both applications misrepresented the number of

employees and average monthly payroll of each entity. Alfonso notified the defendant once the

loans were submitted and, in response; the defendant followed-up on the applications within

Bank 1 to ensure each application was timely reviewed.

Bank 1 in fact approved both applications and deposited,into accounts Alfonso controlled,

approximately $633,500. Alfonso then paid the defendant a cash commission for his assistance.

Another example of Alfonso and the defendant's collaboration:

- On approximately April 10, 2020, Alfonso emailed the defendant, at his Bank 1 email

account, information concerning Florida Entity 1, including a copy of the driver's

license of Florida Entity 1's owner. The defendant forwarded Alfonso's email to a

Bank 1 employee but deleted all references to Alfonso. That Bank 1 employee

subsequently opened an account at Bank 1 in the name of Florida Entity 1 and ending

in 9148 ("Account 9148").

4
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 5 of 7

- Two days later, approximately Sunday, April 12, 2020, Alfonso texted the defendant

that he was planning to submit three PPP loan applications, including one on behalf of

Florida Entity 1.

- That same day, the defendant replied, "Llamame[.]" (English translation: Call me.)

- Approximately that same day, Alfonso· submitted a false and fraudulent PPP loan

application on behalf of Florida Entity 1. Even though the company had not reported

any employment a~tivity with the Florida Department of Revenue, as all Florida-based

employers are required to, nor had it filed a, single tax return with the Internal Reyenue

Service, the PPP loan application stated that the company had 27 employees and had

an average monthly payroll of $210,600.

- Minutes later, at approximately 10:09 p.m., the defendant used his Bank 1 email

account to email Bank 1 employee "N.A." and ask that she complete reviewing Florida

Entity 1's PPP loan application and notify the defendant when complete.

- Approximately the following day, April 13, 2020, N:A. emailed the defendant,

"DONE."

On approximately April 20, 2020, Florida Entity 1 received $526,500 in fraud proceeds

into Account 9148.

- On approximately. April 28; 2020, the proprietor of Florida Entity 1 transferred

$480,000 of the $526,500 loan to a newly opened account in the name of Florida Entity

1 at Bank 3.

The defendant and Alfonso had ·a disagreement in 2020 relating to the borrowers' purported

tax consequences stemming from the fraudulent loans. The defendant returned to Alfonso at least

a portion of the fraudulent loan commissions that Alfonso had paid him. The defendant and

5
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 6 of 7

Alfonso did not work together in 2021 when the SBA launched a second round of the PPP program.

Defendant Conspired with Armando De Leon

In 2021, instead of working with Alfonso, the defendant worked with De Leon. The two

had worked together at Bank 1 until January 2021, when Bank 1 terminated De Leon's

employment based on his submission of two fraudulent PPP loan applications on behalf of entities

he controlled. The defendant and De Leon agreed to work together to prepare and· submit false

and fraudulent loan applications for both the PPP and EIDL programs.

One critical task De Leon executed was_ monitoring the status of conspiracy's fraudulent

applications by maintaining spreadsheets that catalogued the relevant information of each

application. One spreadsheet, titled "PPP," recorded information for over 80 PPP loan applications

filed at Bank 1. The information included each application's loan number, requested amount,

which employee at Bank 1 was reviewing the loan, and what fee the applicant agreed to pay the

conspirators.

De Leon reviewed the spreadsheet with the defendant at least once. On one occasion, De

Leon brought his own laptop to the defendant's home, printed out the· spreadsheets using the

defendant's color printer, and reviewed the document with the defendant.

In addition to monitoring the status of the conspiracy's applications, De Leon received, on

behalf of himself and the defendant, certain ·commissions from co-conspirators who received

fraudulent loans. "For example, on approximately February 25, 2021, De Leon deposited into a

bank account he controlled at Bank 4 and ending in 1225 a cashier's check from Bank 1 for

$29,400. The check had been purchased by the owner of AC Export Express Corp., a company

that had recently received a fraudulent PPP loan from Bank 1 in the amount of $488,320. The

cashier's check for $29,400 constituted De Leon and the defendant's commission for their

6
Case 1:22-cr-20529-KMM Document 29 Entered on FLSD Docket 12/20/2022 Page 7 of 7

assistance with securing the fraudulent loan.

Conclusion

The parties agree that these facts, which do not include all facts mown.to the United States

and the defendant, are sufficient to prove the sole count of the information.

JUAN ANTONIO GONZALEZ
UNITED STATES A O EY

EL . RUBIN
ASSISTANT UNITED STATES ATTORNEY

By:
~~~~~~~~~---

E FENDANT

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