Federal Judge Sentences Man to Four Years in Prison for $2 Million COVID-Relief Fraud

Summary

James Townsend was sentenced on June 24, 2026 by U.S. District Chief Judge Virginia M. Kendall to four years in federal prison and ordered to pay full restitution after pleading guilty to a federal wire fraud charge, the U.S. Attorney's Office for the Northern District of Illinois announced. In 2021 Townsend submitted and caused to be submitted more than 100 Paycheck Protection Program applications for dozens of sole proprietorships, with false employee, gross revenue and payroll figures, in a scheme to obtain more than $2 million; he and his co-schemers took kickbacks from the applicants for each loan that paid. He recruited co-defendants Sarah Stokes, 37, and Amanda Heller, 40, both of Crestwood, Ill., who each pleaded guilty to wire fraud; Stokes was sentenced in November 2025 to 18 months, and Heller's sentencing is set for Oct. 28, 2026.

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CHICAGO – A man has been sentenced to four years in federal prison for submitting—and teaching others how to submit—false Covid-relief loan applications on behalf of themselves and others who paid kickbacks to him and his co-schemers. Under the leadership of United States Attorney Andrew S. Boutros and consistent with the Administration’s priorities to identify, investigate, and prosecute criminal fraud in the federal government entitlement and benefit programs, the U.S. Attorney’s Office for the Northern District of Illinois has been taking a fresh look at Covid-19 fraud. JAMES TOWNSEND schemed to fraudulently obtain more than $2 million in small business loans under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In 2021, Townsend submitted and caused to be submitted more than 100 applications for loans under the Paycheck Protection Program (PPP) on behalf of dozens of sole proprietorships purportedly operated by Townsend and others. The applications contained numerous false statements and misrepresentations regarding the purported proprietorships’ operations, including the number of employees, gross revenues, and payroll expenses. In reality, the applicants did not operate sole proprietorships, nor did they employ any individuals or incur operational expenses such as payroll. For each successful fraudulent loan, Townsend and his co-schemers received kickback payments from the loan applicants. Townsend pleaded guilty earlier this year to a federal wire fraud charge. On June 24, 2026, U.S. District Chief Judge Virginia M. Kendall sentenced Townsend to four years in federal prison and ordered him to pay full restitution. Townsend also recruited and directed co-defendants SARAH STOKES 37, of Crestwood, Ill., and AMANDA HELLER, 40, of Crestwood, Ill., to find putative borrowers, complete and submit fraudulent applications on their behalf, and then share the proceeds. Stokes and Heller each pleaded guilty to a federal wire fraud charge. Stokes was sentenced in November 2025 to 18 months in federal prison. Heller’s sentencing is set for Oct. 28, 2026. U.S. Attorney Boutros announced Townsend’s sentence along with Lucas Rothaar, Acting Special Agent-in-Charge of the Chicago Field Office of the FBI. Valuable assistance was provided by the Illinois Attorney General’s Office. “Defendant’s crime was serious,” Assistant U.S. Attorney Adam L. Rosenbloom argued in the government’s sentencing memorandum in Townsend’s case. “He defrauded the government of millions of dollars meant to help regular Americans survive a once-in-a-lifetime pandemic.” On April 7, 2026, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.

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