Criminal Indictment — United States v. Karen Chapon (Dkt. 22, October 21, 2020)

Summary

Indictment filed October 21, 2020 as Document 22 in United States of America v. Karen Chapon, Case No. 2:20-cr-00286-JCM-NJK, U.S. District Court for the District of Nevada. It alleges a scheme from in or around April 2020 until in or around July 2020 in which Chapon, through Heavenly Tahoe Properties, Desert Sun Events and Tahoe Weddings and Events, submitted at least six false and fraudulent PPP loan applications to three financial institutions. It alleges that a May 19, 2020 application for Heavenly Tahoe Properties sought a $537,500 PPP loan and falsely represented average monthly payroll expenses of $215,000 and 18 employees. Counts One through Four are Bank Fraud under 18 U.S.C. § 1344(2), Counts Five through Six are False Statement to a Financial Institution under 18 U.S.C. § 1014, and Count Seven is Unlawful Monetary Transaction under 18 U.S.C. § 1957.

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Case 2:20-cr-00286-JCM-NJK

DANIEL S. KAHN

Acting Chief, Fraud Section
BLAKE GOEBEL

Trial Attorney

U.S. Department of Justice
Criminal Division, Fraud Section
1400 New York Ave. NW
Washington, D.C., 20005

Tel: 202.616.5010
Blake.Goebel@usdoj.gov

NICHOLAS A. TRUTANICH
United States Attorney

District of Nevada

Nevada Bar Number 13644
JESSICA OLIVA

Assistant United States Attorney

501 Las Vegas Blvd. South, Suite 1100

Las Vegas, Nevada 89101
(702) 388-6268

Attorneys for the United States

Document 22 Filed 10/21/20

Page 1 of 14 -

FILED
ENTERED

OCT 21 2020

CLERK US DISTRICT COURT
DISTRICT OF NEVADA
BY:

_____ SERVED ON
COUNSEL/PARTIES OF RECORD

DEPUTY

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA
UNITED STATES OF AMERICA, | CRIMINAL INDICTMENT
—-Plaintifr Case No. 2:20-cr- 2: LY
v. VIOLATIONS:
KAREN CHAPON, Bank Fraud

. aka “Karen Hannafious,”

Defendant. ©

(18 U.S.C. § 1344(2));

False Statements to a Financial
Institution

(18 U.S.C. § 1014); and

Unlawful Monetary Transaction
(18 U.S.C. § 1957)

FORFEITURE ALLEGATION
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’ Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 2 of 14

THE GRAND JURY CHARGES THAT:
Background
At all times relevant to the Indictment, unless otherwise stated:
1. Defendant Karen CHAPON, also known by her maiden name “Karen ~

Hannafious,” was a United States citizen, residing in Las Vegas, Nevada and San Diego,

California. \

2. Automobile Dealership A was an automobile dealership located in Las Vegas,
Nevada.
Paycheck Protection Program

3. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a
federal law enacted in or around March 2020 and is designed to provide emergency
financial assistance to the millions of Americans who are suffering the economic effects
caused by 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.

4, 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 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) must state, among other things, its: (a) average monthly payroll expenses;

and (b) number of employees. These figures are used to calculate the amount of money the

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page3of14

small business is eligible to receive under the PPP. In addition, businesses applying for a
PPP loan must provide documentation showing their payroll expenses.

5... A participating financial institution (the lender) must process a PPP loan
application. If the lender approves a PPP loan application, it funds the PPP loan using its
own monies, which the Small Business Administration (“SBA”) guarantees 100%. The
lender transmits information to the SBA in the course of processing the loan data from the
application, including information about the borrower, the total amount of the loan, and the
listed number of employees.

6. The business receiving the PPP loan proceeds must spend the funds on certain|
permissible expenses: payroll costs, interest on mortgages, rent, and utilities. The PPP
allows the interest and principal on the PPP loan to be entirely forgiven if the business
spends the loan proceeds on these expense items within a designated period of time and uses
a specified portion of the PPP loan proceeds on payroll expenses. . |

Relevant Financial Institutions

7. Bank 1 was a federally insured financial institution. It was an SBA approved
lender and participated as a PPP lender to small businesses.

8. Bank 2 was a federally insured financial institution. It was an SBA approved
lender, participated as a PPP lender to small businesses, and accepted loan applications
directly, as well as through online portals that allowed borrowers to submit a single
application to access loans from a variety of different lenders.

9. Bank 3 was a federally insured financial institution. It was an SBA approved
lender, participated as a PPP lender to small businesses, and accepted loan applications
directly, as well as through online portals that allowed borrowers to submit a single

application to access loans from a variety of different lenders. .
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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 4 of 14

. The Scheme to Defraud

10. Beginning in or around April 2020 and continuing until in or around July
2020, CHAPON knowingly devised, intended to devise, and participated in a scheme and
artifice to defraud the SBA, Bank 1, Bank 2, and Bank 3, and to obtain money and property
by means of materially false and fraudulent pretenses, representations, and promises.

11. As further described below, CHAPON, through corporate entities Heavenly
Tahoe Properties, Desert Sun Events, and Tahoe Weddings and Events, submitted at least
six false and fraudulent applications to three different financial institutions to obtain loans
through the Paycheck Protection Program (PPP) guaranteed by the Small Business
Administration (SBA).

| Purpose of the Scheme to Defraud .

12. It was the purpose of the scheme for CHAPON to unjustly enrich herself by

fraudulently obtaining PPP loan proceeds.

Manner and Means of the Scheme to Defrand

Heavenly Tahoe Properties Bank 2 Loan

13. As part of the scheme to defraud, on or about May 19, 2020, CHAPON
submitted a signed PPP Borrower Application Form (SBA Form 2483) in support of a
$537,500 PPP loan for Heavenly Tahoe Properties from Bank 2. CHAPON made the
application in the name of “Karen Hannafious” through an online portal, and Bank 2 issued
the loan. .

14. Onher signed PPP Borrower Application Form, she made the following
misrepresentations, among others: (1) CHAPON falsely represented that Heavenly Tahoe
Properties’ average monthly payroll expenses were $215,000 and that it had 18 employees,

when in fact it had no payroll expenses or employees; (2) CHAPON falsely certified that

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Case 2:20-cr-00286-JCM-NJK Document 22. Filed 10/21/20 Page5of14

Heavenly Tahoe Properties was in operation on February 15, 2020, and had employees for
whom it paid salaries and payroll taxes or paid independent contractors, when in-fact it was
not in operation and did not pay employees or independent contractors; (3) CHAPON
falsely represented that she had not pleaded guilty, been convicted, or been placed on any
form of parole or probation for any felony within the prior five years, when in fact
CHAPON pled guilty to several felony fraud offenses in Nevada state court in 2016 and
remained on parole until January 2020: and (4) CHAPON falsely certified that the loan
funds would be used to retain workers and maintain payroll or make mortgage interest
payments, lease payments, and utility payments, in accordance with PPP rules, when in fact
CHAPON intended to divert the proceeds for her personal benefit.

- 15. | Additionally, to support the requested loan amount, CHAPON submitted a
fraudulent IRS Form 940 Federal Unemployment Tax Return (IRS Form 940) for 2019 for
Heavenly Tahoe Properties, which falsely stated that Heavenly Tahoe Properties made over
$2.4 million in employee payments in 2019.

16. Onor about May 19, 2020, Bank 2 approved the PPP loan for Heavenly
Tahoe Properties and distributed the $537,500 in loan proceeds to a bank account controlled
by CHAPON.

Additional PPP Loan Applications

17. As further part of the scheme, CHAPON, including through her maiden
name “Karen Hannafious,” applied for at least five additional PPP loans on behalf of three
different entities from three different lending institutions, as identified below. CHAPON
obtained loan proceeds for three of these PPP loan applications. The remaining two -
applications were denied—one of which was denied before CHAPON requested a specific

loan amount:
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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 6 of 14

Lending | Loan Amount | Amount Approximate Date

Business Name Bank Applied For Disbursed | of Loan Application
Desert Sun Events Bank 1 $19,715 $19,715 April 22, 2020
Desert Sun Events Bank 2 $19,716 $19,716 May 5, 2020
Tahoe Weddings
and Events Bank 3 $20,000 $20,000 May 6, 2020
Heavenly Tahoe
Properties Bank 3 $500,000 $0 May 15, 2020
Tahoe Weddings
and Events Bank 2 - $0 June 30, 2020

18. As further part of the scheme, in support of each of the additional five PPP
loan applications CHAPON made the following material misrepresentations, among others:
(1) CHAPON falsely represented the average monthly payroll expenses for the entity
applying for the loan to justify the loan amounts; and (2) CHAPON submitted fraudulent
2019 IRS Forms for the entity applying for the loan or for herself individually that supported
the false average monthly payroll expenses claimed on each loan application.

19. As further part of the scheme, CHAPON made the following material
misrepresentations, among others, in connection with certain of the additional five PPP
loan applications: (1) CHAPON falsely represented that she had not pleaded guilty, been
convicted, or been placed on parole for any felony in the prior five years; (2) CHAPON .
submitted falsified bank account statements to falsely make it appear that the PPP loan
funds were being disbursed into a bank account controlled by the entity applying for the
loan; (3) CHAPON falsely certified that the entity applying for the PPP loan would only use
the loan proceeds to retain workers and maintain payroll or to make other payments as
specified under the Paycheck Protection Program Rule, when in fact CHAPON intended to
divert the proceeds for personal benefit; (4) CHAPON falsely certified that the entity
applying for the PPP loan was in operation on February 15, 2020 and had employees for
whom it paid salaries and payroll taxes or paid independent contractors, when in fact it was

not in operation and did not make salary or payroll payments; and (5) CHAPON falsely

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page/7 of 14

represented additional information about the entity applying for the loan, including the
number of its employees and its annual revenue.

20. Additionally, as further part of the scheme, CHAPON falsely represented on
the Desert Sun Events Bank 2 application that Desert Sun Events “has not and will not
receive” another PPP loan between February 15, 2020 and December 31, 2020. In fact,
CHAPON received the proceeds of the Desert Sun Events Bank 1 loan in a bank account
she controlled approximately one day before CHAPON submitted the application for the
Desert Sun Events Bank 2 loan. |

21. CHAPON directed that the PPP loan proceeds be disbursed to bank accounts
under her control, and diverted the funds for her personal use.

22. Finally, on or about July 23, 2020, CHAPON made copies of a bank account
statement that was falsified to make it appear that the bank account was held in the name of
CHAPON doing business as (d/b/a) Tahoe Weddings and Events, and not just CHAPON

individually.
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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 8 of 14

COUNTS ONE THROUGH FOUR
(Bank Fraud)
(18 U.S.C. § 1344(2))
23. The allegations in paragraphs 1 through 22 are re-alleged and incorporated as
if fully set forth herein.
24. From in or around April 2020 through in or around July 2020, in the State
and Federal District of Nevada, and elsewhere,

KAREN CHAPON, aka “Karen Hannafious,”
defendant herein, knowingly devised, intended to devise, and participated in the above-
described scheme and attifice to obtain the moneys, funds, credits, assets, securities, and
property owned by and under the custody and control of Bank 1, Bank 2, and Bank 3 by”
means of materially false and fraudulent pretenses, representations, and promises.
25. | Onor about the dates identified below, in the State and Federal District of
Nevada, and elsewhere,
_ KAREN CHAPON, aka “Karen Hannafious,”’
Defendant herein, knowingly executed the above-described scheme as described below,

each execution constituting a separate count.

| COUNT DATE - DESCRIPTION OF EXECUTION

ONE | April 22,2020 | Submission to Bank 1 of PPP loan application in the
name of Desert Sun Events seeking $19,715

TWO May 5, 2020 Submission to Bank 2 of PPP loan application in the
name of Desert Sun Events seeking $19,716

THREE May 6, 2020 Submission to Bank 3 of PPP loan application in the
name of Tahoe Weddings and Events seeking $20,000

FOUR May 19, 2020 Submission to Bank 2 of PPP loan application in the
name of Heavenly Tahoe Properties seeking $537,500

All in violation of Title 18, United States Code, Section 1344(2).
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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 9 of 14

COUNTS FIVE THROUGH SIX
(False Statement to a Financial Institution)
(18 U.S.C. § 1014)

26. The allegations in paragraphs 1 through 22 are re-alleged and incorporated as
if fully set forth herein.

27. Onor about the dates identified below, in the State and Federal District of
Nevada, and elsewhere,

KAREN CHAPON, aka “Karen Hannafious,”

defendant herein, knowingly made the false statements and reports described below for the
purposes of influencing the action of a financial institution, whose accounts were insured by

the Federal Deposit Insurance Corporation, upon an application, agreement, and loan, each

false statement constituting a separate count: ©

COUNT DATE DESCRIPTION OF FALSE STATEMENT

Fraudulent 2019 IRS Form 940 Federal
Unemployment Tax Return (IRS Form 940)

FIVE May 15, 2020 CHAPON submitted in support of her loan application
on behalf of Heavenly Tahoe Properties to Bank 3
containing false statement about total payments made
to employees.

Fraudulent 2019 IRS Form 940 Federal
Unemployment Tax Return (IRS Form 940)
‘SIX June 30, 2020 CHAPON submitted in support of her loan application
; on behalf of Tahoe Weddings and Events to Bank 2
containing false statement about total payments made
to employees.

All in violation of Title 18 United States Code, Section 1014.
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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 10 of 14

COUNT SEVEN
(Unlawful Monetary Transaction)
(18 U.S.C. § 1957)

28. The allegations in paragraphs 1 through 25 are re-alleged and incorporated as
if fully set forth herein.

29. Onor about June 5, 2020, in the State and Federal District of Nevada and
elsewhere,

KAREN CHAPON, aka “Karen Hannafious,”’

defendant herein, knowingly engaged in a monetary transaction in criminally derived
property of a value greater than $10,000 that was in fact derived from specified unlawful
activity, that is, bank fraud, in violation of Title 18, United States Code, Section 1344, as
alleged in Counts One through Four, to wit: CHAPON caused a cashier’s check to be
issued by Bank 1 to Automobile Dealership A in the amount of $49,987.73 for the purchase
of a Mercedes-Benz Sport Utility Vehicle (“SUV”), all in violation of Title 18, United

States Code, Section 1957.

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 11 of 14

FORFEITURE ALLEGATION ONE
(Bank Fraud)

1. The allegations contained in Counts One through Four of this Criminal
Indictment are hereby realleged and incorporated herein by reference for the purpose of
alleging forfeiture pursuant to 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c) and 18
U.S.C. § 982(a)(2)(A).
| 2. Upon conviction of any of the felony offenses charged in Counts One
through Four of this Criminal Indictment,
| KAREN CHAPON, aka “Karen Hannafious,”

defendant herein, shall forfeit to the United States of America, any property, real or

personal, which constitutes or is derived from proceeds traceable to a violation of 18 U.S.C.

| § 1344, or a conspiracy to commit such offense:

defendant herein, shall forfeit to the United States of America, any property, real or
personal, which constitutes or is derived from proceeds traceable to a violation of 18 U.S.C.
§ 1344, a specified unlawful activity as defined in 18 U.S.C §§ 1956(c)(7)(A) and
1961(1)(B), or a conspiracy to commit such offense:
defendant herein, shall forfeit to the United States of America, any property
constituting, or derived from, proceeds obtained directly or indirectly, as the result of
violations of 18 U.S.C. § 1344, or a conspiracy to violate such offense, affecting a financial
institution: |
1. an in personam criminal forfeiture money judgment including, but not
limited to, at least $596,931;
2. $504,385.19; and

3. agray 2018 Mercedes Benz G63 AMG sports utility vehicle with vehicle

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 12 of 14

identification number (VIN) WDCYC7DH6JX291626
(all of which constitutes property).
3. If any property being subject to forfeiture pursuant to 18 U.S.C. §
981(a)(1)(C) with 28 U.S.C. § 2461(©) and 18 U.S.C. § 982(a)(2)(A), 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;
?

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 21 U.S.C. § 853(p), to seek
forfeiture of any other property of the defendant for the property listed above.

All pursuant to 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c); 18 U.S.C. §
982(a)(2)(A); 18 U.S.C. § 1344; and 21 U.S.C. § 853(p).

FORFEITURE ALLEGATION TWO
' (Engaging in Transactions in Unlawful Proceeds)

1. | The allegations contained in Count Seven of this Criminal Indictment are
hereby realleged and incorporated herein by reference for the purpose of alleging forfeiture
pursuant to 18 U.S.C. § 981(a)(1)(A) with 28 U.S.C. § 2461(c); 18 U.S.C. § 981(a)(1)(C)
with 28 U.S.C. § 2461(c); and 18 U.S.C. § 982(a)(1).

2. Upon conviction of the felony offense charged in Count Seven of this
Criminal Indictment,

KAREN CHAPON, aka “Karen Hannafious,”

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed.10/21/20 Page13 of 14

defendant herein, shall forfeit to the United States of America, any property, real or
personal, involved in transactions or attempted transactions in violation of 18 U.S.C. §
1957, or any property traceable to such property:
defendant herein, shall forfeit to the United States of America, any property, real or
personal, which constitutes or is derived from proceeds traceable to a violation of 18 U.S.C.
§ 1957, a specified unlawful activity as defined in 18 U.S.C §§ 1956(c)(7)(A) and
1961(1)(B), or a conspiracy to commit such offense:
. defendant herein, shall forfeit to the United States of America, any property, real or
personal, involved in violations of 18 U.S.C. § 1957, or any property traceable to such
property: .
1. an in personam criminal forfeiture money judgment including, but not
limited to, at least $49,987.73; and
2. agray 2018 Mercedes Benz G63 AMG sports utility vehicle with vehicle
identification number (VIN) WDCYC7DH6JX291626
(all of which constitutes property).
3. If any property being subject to forfeiture pursuant to 18 U.S.C. §
981(a)(1)(A) with 28 U.S.C. § 2461(c); 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(¢);

and 18 U.S.C. § 982(a)(1), 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:
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;

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Case 2:20-cr-00286-JCM-NJK Document 22 Filed 10/21/20 Page 14 of 14

it is the intent of the United States of America, pursuant to 21 U.S.C. § 853(p), to seek
forfeiture of any other property of the defendant for the property listed above.

All pursuant to 18 U.S.C. § 981(a)(1)(A) with 28 U.S.C. § 2461(c); 18 U.S.C. §
981(a)(1)(C) with 28 U.S.C. § 2461(c); 18 U.S.C. § 982(a)(1); 18 U.S.C. § 1957; and 21
U.S.C. § 853(p).

DATED this 21st day of October, 2020.

A TRUE BILL:

/S/
FOREPERSON OF THE GRAND JURY

DANIEL S. KAHN
Acting Chief, Fraud Section

BLAKE C. GOEBEL
Trial Attorney

NICHOLAS A. TRUTANICH
United States Attorney

JESSICA OLIVA:
Assistant United States Attorney

. 414


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