Criminal Complaint and Affidavit — David Christopher Redfern (Middle District of North Carolina)

Summary

Criminal complaint and supporting affidavit in the Middle District of North Carolina, Case 1:20-mj-00256-LPA, filed 08/25/20, charging David Christopher Redfern with wire fraud and bank fraud for conduct alleged in the county of Randolph in April-June 2020. The complaint rests on the affidavit of TIGTA Special Agent Daniel Kwiatkowski. The affidavit states that on or about June 18, 2020, $2,000.00 in EIDL funds were deposited into an account at Financial Institution 4, and that $800.00 was transferred that day to an individual account in Redfern's name. It also describes a recorded call on or about July 31, 2020, from an undercover agent posing as a FinTech customer service representative to Redfern.

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AO 91 (Rev. 11/11) Criminal Complaint

UNITED STATES DISTRICT COURT

for the

Middle District of North Carolina

United States of America
v.

David Christopher Redfern

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No
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q

Defendant(s)

CRIMINAL COMPLAINT
I, the complainant in this case, state that the following is true to the best of my knowledge and belief.
On or about the date(s) of April-June 2020 in the county of Randolph in the
Middle District of North Carolina , the defendant(s) violated:
Code Section Offense Description
18 U.S.C. § 1343 Wire Fraud
18 U.S.C. § 1344(2) Bank Fraud

This criminal complaint is based on these facts:

See attached affidavit of TIGTA Special Agent Daniel Kwiatkowski.

@ Continued on the attached sheet.

/s/ Daniel Kwiatkowski

On this day, the applicant appeared before me via reliable Sea a Sp

electronic means, that is by telephone, was placed under Daniel Kwiatkowski, Special Agent

oath, and attested to the contents of this Criminal
Complaint and attached affidavit in accordance with the
requirements of Fed. R. Crim. P. 4.1.

Printed name and title

Date: orfr4f Co

City and state: Greensboro, North Carolina L. Patrick Auld, U.S Magistrate Judge

Judge’s signature

Printed name and title

Case 1:20-mj-00256-LPA Document1 Filed 08/25/20 Page 1 of 1
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

UNITED STATES OF AMERICA

Case No. _} : 72 (uy 2S¢

Filed Under Seal

V.

DAVID CHRISTOPHER REDFERN

AFFIDAVIT IN SUPPORT OF CRIMINAL COMPLAINT

I, Daniel Kwiatkowski, being duly sworn, hereby depose and state as follows:

INTRODUCTION

1. I am a Special Agent for the Treasury Inspector General for Tax Administration —
(“TIGTA”), where I have been employed since 2011. Iam currently assigned to the Greensbars,
North Carolina office. I have completed the Criminal Investigator Training Program, TIGTA
Special Agent Basic Training Program, and the TIGTA Special Agent Advanced Training Program
at the Federal Law Enforcement Training Center. My current duties include the investigation of
financial crimes including wire and bank fraud, as well as other white-collar crimes.

2. Throughout the course of my career, I have conducted an array of criminal
investigations involving money laundering, bank fraud, public corruption, organized crime, and
many other illegal schemes impacting financial institutions. I have experience conducting search,
seizure, and arrest warrant operations. Recently, I have been assigned to work with the U.S.
Department of Justice and other law enforcement partners to investigate possible fraud associated
with the stimulus and economic assistance programs created by the federal government in response
to the COVID-19 pandemic.

3. This affidavit is made in support of a criminal complaint charging DAVID
CHRISTOPHER REDFERN (“REDFERN”) with violations of 18 U.S.C. § 1343 (Wire Fraud)

and 18 U.S.C. § 1344(2) (Bank Fraud).

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 1 of 11
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 trustworthy.
The facts contained herein have been obtained by interviewing witnesses and 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.

PROBABLE CAUSE

The CARES Act

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 who. are suffering the 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 United States Small Business
Administration (“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.

%s 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

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 2 of 11
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 small business is eligible to receive
‘under the PPP. In addition, businesses applying for a PPP loan must provide documentation
showing their payroll expenses.

8. A PPP loan application must be processed by a participating financial institution
(i.e., the lender). If a PPP loan application is approved, the lender funds the PPP loan using its
own monies, which are 100% 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, is transmitted by the lender to the SBA in the course of processing
the loan.

9. PPP loan proceeds must be used by the business 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 after receiving the proceeds and uses a certain amount of
the PPP loan proceeds on payroll expenses.

The Economic Injury Disaster Relief Program

10. The Economie Injury Disaster Loan (“EIDL”) program is an SBA program that
provides low-interest financing to small businesses, renters, and homeowners in regions affected
by declared disasters.

11. | The CARES Act also authorized the SBA to provide EIDLs of up to $2 million 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 of up to $10,000 to

Case 1:20-mj-00256-LPA Document 2. Filed 08/25/20 Page 3 of 11
small businesses within three days of applying for an EIDL. The amount of the advance is
determined by the number of employees the applicant certifies having. The advances do not have
to be repaid.

12. In order to obtain an EIDL and advance, a qualifying business must 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 ease of EIDLs for COVID-19 relief, the 12-
month period was that preceding January 31, 2020. The applicant must also certify that all of the
information in the application is true and correct to the best of the applicant’s knowledge.

13. EIDL applications are 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 is approved, is determined based, in part, on the information provided by the
application about the number of employees, gross revenue, and cost of goods, as described above.
Any funds issued under an EIDL or advance are issued directly by the SBA. EIDL funds can be
used for payroll expenses, sick leave, production costs, and business obligations, such as debts,
rent, and mortgage payments. If the applicant also obtains a loan under the PPP, the EIDL funds
cannot be used for the same purpose as the PPP funds.

Defendant and Related Entities and Tudividuals

14. According to public records, Wilder Effects LLC (“Wilder Effects”) is a North
Carolina company formed on or about January 17, 2020, The registered business address for
Wilder Effects is on Cotton Road in Trinity, North Carolina, which appears to be a one-story
single-family home, and is also the address appearing on REDFERN’s North Carolina

identification card. REDFERN is listed as Wilder Effects’ registered agent and owner.

Case 1:20-mj-00256-LPA Document 2. Filed 08/25/20 Page 4 of 11
15. According to public records, Company | is a North Carolina company formed on
or about January 13, 2020. The registered business address for Company | is on W. Vandalia
Road in Greensboro, North Carolina, which appears to be a one-story single-family home.
Individual | is listed as Company 1’s registered agent and owner. Since on or about September 7,
2018, Individual 1 has been incarcerated at New Hanover Correctional Center in Wilmington,
North Carolina. Individual 1’s projected release date is in or about September 2020.

16. According to public records, Company 2 is a North Carolina company formed on
or about January 21, 2020. The registered business address for Company 2 is the same address
used by Wilder Effects. Individual 2 is listed as Company 2’s registered agent and owner.

Overview of the Fraud

17. As described further below, evidence gathered in the investigation demonstrates
that, from in or around April 2020 through in or around June 2020, REDFERN submitted, or
caused to be submitted, fraudulent loan applications to approved lenders and the SBA in order to
obtain funds through the PPP and EIDL programs, respectively.

18. Shortly after receiving EIDL and PPP loan proceeds, REDFERN made cash
withdrawals and transferred funds to a personal bank account. Attempts were also made to transfer
PPP loan proceeds between accounts in the names of Wilder Effects, Company 1, and Company
2.

Manner and Means

Fraudulent EIDL Applications Submitted to the SBA
19. 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

affirmed, among other information, that Wilder Effects had two employees, had suffered $3,000.00

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 5 of 11
in rental losses due to the disaster, and in the twelve months prior to the disaster, had $21,000.00
in gross revenues and $13,000.00 in cost of goods sold. On or about June 16, 2020, EIDL
Application -4729 was approved for an EIDL (“EIDL Loan -7904”) in the amount of $2,000.00.
REDFERN certified that all of the information in EIDL Application -4729 was true and correct to
the best of his knowledge.

20. Onor about May 17, 2020, REDFERN applied electronically for an EIDL from the
SBA (“EIDL Applinattan -4452”). In connection with EIDL Application -4452, REDFERN
affirmed, among other information, that Wilder Effects had nine employees, and in the twelve
months prior to the disaster, had $30,000.00 in gross revenues and $27,500.00 in cost of goods
sold. EIDL Application -4452 was not approved. Despite the inconsistencies with EIDL
Application -4729, REDFERN certified that all of the information in EIDL Application -4452 was
true and correct to the best of his knowledge.

Fraudulent PPP Loan Applications Submitted to Financial Institution 1

21. Financial Institution 1 is a privately owned, Utah-chartered bank insured by the
Federal Deposit Insurance Corporation (“FDIC”). Financial Institution 1 is an SBA Preferred
Lender and participated as a PPP lender to small businesses.

22. FinTech 1 is a financial technology (also known as “FinTech”) company based in
California. FinTech 1 participated in the SBA’s PPP by, among other things, acting as a service
provider between small businesses - certain lenders, including Financial Institution 1. Small
businesses seeking PPP loans could apply through FinTech | for PPP loans. FinTech 1 would
review the loan 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.

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 6 of 11
23. On or about June 1, 2020, a PPP Borrower Application Form, also known as SBA
Form 2483 (a “PPP Application”), in the name of Wilder Effects was electronically submitted to
Financial Institution 1 that requested $410,322 to support payroll. In the Wilder Effects PPP
Application, REDFERN affirmed, among other information, that: (1) he is the sole owner of
Wilder Effects; and (2) Wilder Effects has twenty employees and an average monthly payroll of
$164,129.00.

24. The Wilder Effects PPP Application appended as supporting documentation: (1) a
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 signed by REDFERN; and (2) a
purported bank statement for Wilder Effects dated February 27, 2020 showing a balance of
$290,028.70. The account statement was purportedly from Financial Institution 2, a bank insured
by the FDIC.

25. On or about June 1, 2020, a PPP Application in the name of Company | was
electronically submitted to Financial Institution | that requested $403,120.00 to support payroll.
In the PPP Application, Individual 1 purportedly affirmed, among other information, that: (1) he
is the sole owner of Company 1; and (2) Company 1 has twenty-four employees and an average
monthly payroll of $161,240.00.

26. . The Company | PPP Application appended as supporting documentation: (1) a
purported IRS Form 941 for the first quarter of 2020 showing $483,746.04 paid in wages to twenty-
four employees and purportedly signed by Individual 1; and (2) a purported Financial Institution
2 bank account statement for Company 1 dated February 27, 2020 showing a balance of

$290,028.70.

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 7 of 11
27. According to IRS records, neither Wilder Effects nor Company | filed an IRS Form
941 for the first quarter of 2020.

28. The Financial Institution 2 account statements submitted in support of both PPP
Applications were identical except for the account holder names, addresses, account numbers, and
routing numbers listed on the first page of each eight-page statement. Although both statements
listed the respective addresses of record for the entities, the statements note “Florida account terms
and conditions apply.”

29. In response to a grand jury subpoena for records associated with Wilder Effects,
Financial Institution 2 did not locate any account information for Wilder Effects or REDFERN.

30. In response to a grand jury subpoena for records associated with Company L.
Financial Institution 2 returned records for an account in Company 1’s name. These records show
that Company 1’s account has different account and routing numbers than those that appear on the
fraudulent statement submitted with Company 1’s PPP Application. Moreover, an account
statement dated February 29, 2020 received in response to the subpoena showed a zero balance,
not the balance of more than $290;000 on the statement submitted as part of Company |’s PPP
Application. Likewise, the statement produced by Financial Institution 2 reads in part, “North
Carolina account terms and conditions apply,” rather than Florida terms and conditions.

31. According to records obtained from Financial Institution 1, the first log-ins to the
respective Wilder Effects and Company | accounts came from the same internet protocol address
(“IP Address -.170”). The Wilder Effects Account logged in from IP Address -.170 on May 31,
2020 at 14:29 and on June 2, 2020 at 11:44. The Company | Account logged in from IP Address

-.170 on June 1, 2020 at 06:09, 07:03, and 08:12 and on June 2, 2020 at 11:43.

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 8 of 11
32. IP Address -.170 is also associated with the activities of a confidential human source
(“CHS”). On or about July 23, 2020, investigators interviewed the CHS regarding the CHS’
involvement in the Wilder Effects PPP fraud scheme. During the interview, the CHS told
investigators that the CHS prepared a fraudulent Wilder Effects PPP Application on REDFERN’s
behalf.

PPP and EIDL Funds

33. Onor about January 23, 2020, REDFERN opened an account ending in 1411 in
Wilder Effects’ name (“Wilder Effects Account”) at Financial Institution 3, a bank insured by the
FDIC. The account statements for January through May 2020 reflect low or negative balances.

a. On or about May 5, 2020, EIDL funds totaling approximately $2,000.00
were deposited into the Wilder Effects Account. Three separate cash withdrawals totaling
$1,400.00 were made on May 6, and an additional cash withdrawal of $560.00 was made
on May 10. The May 29 statement reflects a negative $61.42 balance.

b. On or about June 2, 2020, $410,322.00 in PPP funds were deposited into
the Wilder Effects Account. That same day, an $8,000.00 counter check written to “cash”
was withdrawn from the Wilder Effects Account.

34. Onor about January 14, 2020, an account ending in 5186 was opened at Financial
Institution 3 in Company 1’s name (“Company | Account”), with Individual | as the authorized
signer. The Company | Account statements dated January 1, February 28, March 31, April 30,
and May 29, 2020 all reflect a $1.00 balance. On or about June 2, 2020, $403,120.00 in PPP loan
funds were deposited into the Company | Account.

35. On or about June 2, 2020, an attempt was made to wire $30,000 from the Wilder

Effects account to an account in the name of Company 2 at an outside bank. On or about June 3,

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 9 of 11
2020, attempts were made to wire from the Company | Account (i) $75,000 to the Company 2
Account; and (ii) $75,000 to the Wilder Effects Account. The attempted wire transfer transactions
were blocked due to potential fraud concerns. |

36. ~ On or about June 15, 2020, $403,120.00 was transferred from the Company |
Account back to Financial Institution 1 as a result of the fraud investigation, leaving a $1.00
balance on the statement dated June 30, 2020.

37. On or about June 16, 2020, $2,000.00 was transferred from the Wilder Effects
Account back to the SBA. On or about June 17, 2020, the remaining account balance of
$400,194.63 was transferred back to Financial Institution 1. The Wilder Effects Account had a
negative $12.00 balance on the statement dated June 30, 2020.

38. On or about June 2, 2020, REDFERN opened a business account in Wilder Effects’
name at Financial Institution 4, a bank insured by the FDIC. On or about June 18, 2020, $2,000.00
in EIDL funds in connection with EIDL Loan -7904 were deposited into that account. That same
day, $800.00 was transferred to an individual account in REDFERN’s name at Financial Institution
4. On or about June 21, 2020, an addition $500.00 was transferred to REDFERN’s individual
account.

Recorded Calls to Defendant

39. On or about July 31, 2020, an undercover agent posing as a FinTech | customer
service representative placed a recorded call to REDFERN at the telephone number listed on the
PPP Application in the name of Wilder Effects (“Phone Number 1”). REDFERN answered the
call but requested that the undercover agent posing as a FinTech | customer service representative

to call back at a later time. Subsequent call attempts were not answered.

10

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 10 of 11
CONCLUSION

40. Based on my training and experience, and the information provided in this affidavit,
I respectfully submit that there is probable cause to believe that beginning on a date unknown, but
from at least in or around April 2020 through in or around June 2020, within the Middle District
of North Carolina, DAVID CHRISTOPHER REDFERN committed violations of 18 U.S.C.
§ 1343 (Wire Fraud) and 18 U.S.C. § 1344(2) (Bank Fraud).
Respectfully submitted,
- /s/ Daniel Kwiatkowski
Daniel Kwiatkowski

Special Agent
Treasury Inspector General for Tax Administration

Dated: AugustZ : , 2020

Pursuant to Rule 4.1 of the Federal Rules of Criminal Procedure, the affiant appeared before me
via reliable electronic means (telephone), was placed under oath, and attested to the contents of
this written affidavit.

L. Patrick Auld
United States Magistrate J udge
Middle District of North Carolina

11

Case 1:20-mj-00256-LPA Document 2 Filed 08/25/20 Page 11 of 11


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