Indictment — United States v. Kortney Thomas Kelley, Eastern District of Virginia (Document 1)

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An indictment in United States of America v. Kortney Thomas Kelley, Case 3:22-cr-00035-DJN, in the U.S. District Court for the Eastern District of Virginia, Richmond Division, filed April 5, 2022 as Document 1. The caption lists wire fraud under 18 U.S.C. § 1343 (Counts 1-3) and monetary transactions in criminally derived property under 18 U.S.C. § 1957. The grand jury alleges that Kelley obtained first and second draw PPP loans from Bank of America for Focused Resources LLC and IntelliNest Solutions LLC, which it states had no employees, including $457,082 for IntelliNest on or about June 11, 2020. It alleges that Kelley received and obtained forgiveness of at least $1,143,224 and spent at least $142,711 at casinos and on gaming and transferred at least $834,077 to personal brokerage accounts. The forfeiture allegation seeks a money judgment of at least $1,143,224.

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“Indictment — United States v. Kortney Thomas Kelley, Eastern District of Virginia (Document 1).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/indictment-no-3-22-cr-00035-dkt-1-e-d-va-1649e8b119/, SHA-256 0635f41bacd6cd664340bbc639ac0bdd20809bf6a6a034f0ea2d243dd1abe100.

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Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 1 of 13 PageID# 1

D \L

IN THE UNITED STATES DISTRICT COURT APR -5 \HJ
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division CLERK, U.S. DISTRICT COURT
RICHMOND. VA

UNITED STATES OF AMERICA Criminal Action No.3:22-cr-_Q2>S
Wire Fraud
18U.S.C. § 1343
KORTNEY THOMAS KELLEY (Counts 1-3)

Engaging in Monetary Transactions in
Criminally Derived Property
Defendant. 18U.S.C. § 1957
(Counts 4,5)

Forfeiture Allegation

INDICTMENT

April 2022 Term - At Richmond, Virginia

THE GRAND JURY CHARGES THAT:

INTRODUCTORY ALLEGATIONS

At all times relevant to this Indictment:

Defendant and Claimed Business Entities

1. The defendant, KORTNEY THOMAS KELLEY, resided in Richmond, Virginia,

within the Eastern District of Virginia.

2. Focused Resources LLC ("Focused Resources") is a Virginia Limited Liability

Company that KELLEY formed on or about October 17, 2018. At all times relevant to this

Indictment, Focused Resources had no legitimate business activity and was not a going business

concern. KELLEY was the sole owner of Focused Resources.

3. IntelliNest Solutions LLC ("IntelliNest") is a Virginia Limited Liability Company

that KELLEY formed on or about January 29, 2019. At all times relevant to this Indictment,

1
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 2 of 13 PageID# 2

IntelliNest had no legitimate business activity and was not a going business concern. KELLEY

was the sole owner of IntelliNest.

4. Neither Focused Resources nor IntelliNest had any employees.

The Small Business Administration

5. The United States Small Business Administration("SBA")is an Executive Branch

agency of the United States Government that provides support to entrepreneurs and small

businesses. The mission of the SBA is to maintain and strengthen the nation's economy by

enabling the establishment and viability of small businesses and by assisting in the economic

recovery ofcommunities after disaster.

6. As part ofthis effort, the SBA enables and provides for loans through banks, credit

unions, and other lenders. These loans have government-backed guarantees.

The Paycheck Protection Program

7. 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 suffering the economic consequences ofthe COVID-19

pandemic. The CARES Act established several new temporary programs and provided for the

expansion of other programs to address the COVID-19 pandemic.

8. One source of relief provided by the CARES Act was the authorization of billions

of dollars in forgivable loans to small businesses for job retention and certain other business

expenses, through a program referred to as the Paycheck Protection Program ("PPP").

9. To obtain a PPP loan, a qualifying business was required to submit a PPP loan

application, signed by an authorized representative ofthe business, to a financial institution.

The PPP loan applicant was required to acknowledge the Program rules and to make certain
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 3 of 13 PageID# 3

affirmative certifications in order to be eligible to obtain the PPP loan. The PPP loan

application required the applicant to state, among other things, the:(a) business's average

monthly payroll expenses, and(b)the number of employees employed by the business. These

figures were used to determine whether the business was eligible for a PPP loan and if so, the

amount offunds the business could receive under the Program. Businesses applying for a PPP

loan were also required to provide documentation oftheir business's payroll expenses.

10. A PPP loan application had to be processed by a participating financial institution

(the lender). Ifthe PPP loan application was approved,the lender funded the PPP loan using its

own monies, which were 100% guaranteed by the SBA. Lenders required that the information

in the PPP loan applications be truthful, including the applicant's representations regarding the

applicant's employees and payroll expenses. Such representations were material to the lender's

decisions on both PPP loan approval and the loan funding amount.

11. The lender transmitted data from the application, including information about the

borrower,the total amount ofthe loan, and the listed number ofthe business's employees, to the

SBA in the course of processing the loan.

12. PPP loan proceeds could only be used by the applicant business for certain

permissible expenses—^payroll costs, interest on mortgages, rent, and utilities.

13. While this "first draw" PPP program ended on May 31, 2021, certain borrowers

were eligible to apply for "second draw" PPP loans. Eligible borrowers included businesses

with no more than 300 employees; which had previously received a PPP loan and used the full

amount of"first draw" PPP loan money only for authorized expenses; and which could

demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and
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2020. "Second draw" PPP loans were approved with the same general loan terms as the "first

draw" PPP loans.

Defendant's PPP "First Draw" Applications

14. On or about April 8, 2020, KELLEY applied for a "first draw"PPP loan through

Bank of America, a financial institution as that term is defined in Title 18 of United States Code,

Section 20,for KELLEY's purported business Focused Resources. KELLEY requested

$36,000 in loan proceeds(SBA loan number ending in 7709), stating that the loan would be used

for payroll expenses. On this loan application, KELLEY further represented that Focused

Resources had three (3)employees and an average monthly payroll of about $12,000.

Thereafter, KELLEY filed an addendum stating that his average monthly payroll expenses were

$45,824, necessitating a $114,560 loan amount under the PPP loan rubric. On or about May 2,

2020, KELLEY further signed a Promissory Note for the PPP loan,"certif[ying] to [the] Bank

that[KELLEY]has not provided false or misleading information or statements to the Bank in its

application for the Loan." As a result, on or about May 4,2020, Bank of America approved the

defendant's loan application and provided the defendant with $114,560 in "first draw"PPP loan

funds, depositing those loan proceeds into the Bank of America checking account of Focused

Resources(account number ending in 6246).

15. On or about June 7, 2020, KELLEY applied for a "first draw" PPP loan through

Bank of America for his purported business IntelliNest. KELLEY requested $457,082 in loan

proceeds(SBA loan number ending in 7803), stating that the loan proceeds would be used for

payroll, lease and mortgage-related expenses, and utilities. On his loan application, KELLEY

further represented that IntelliNest had twenty-one (21)employees with an average monthly

payroll of$172,000. On or about June 11, 2020, KELLEY further signed a Promissory Note
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 5 of 13 PageID# 5

for the PPP loan,"certif[ying] to [the] Bank that[KELLEY]has not provided false or misleading

information or statements to the Bank in its application for the Loan." As a result, on or about

June 11, 2020, Bank of America approved the loan application and provided the defendant with

$457,082 in "first draw" PPP loan funds, depositing those loan proceeds into the Bank of

America checking account of IntelliNest(account number ending in 1795).

16. As part ofthese "first draw"PPP applications for both Focused Resources and

IntelliNest, KELLEY made numerous knowingly false representations that the purposes ofthe

loans were "only for business-related purposes as specified in the loan application ..."

KELLEY also signed numerous certifications, falsely stating that the information submitted as

part ofthe "first draw" PPP loan applications was true and correct, including a "certiflication]

that the information in all supporting documents and forms is true and accurate in all material

respects..." As a further example ofsuch a false representation, KELLEY indicated "No"to

certifications asking: "Is the Applicant or any owner ofthe Applicant an owner of any other

business, or have common management with, any other business?" KELLEY's negative

response was false because, as KELLEY well knew, he was the registered owner of both

Focused Resources and IntelliNest.

17. In signing the Promissory Notes for the "first draw"PPP loans, KELLEY

represented that he would use all loan proceeds only for business-related purposes. Notably,

KELLEY also signed acknowledgements that if"the funds are knowingly used for unauthorized

purposes, the federal government may hold [KELLEY]legally liable, such as charges offraud."

18. As part of his PPP applications, KELLEY also submitted knowingly false

supporting documentation to bolster his applications, including Internal Revenue Service Forms

940 and 941, that purported to show that KELLEY's companies paid hundreds ofthousands of
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 6 of 13 PageID# 6

dollars to their (purported)employees each year. KELLEY also provided the financial

institution reviewing his PPP loan application with fabricated financial statements that falsely

reflected payroll and other expenses for businesses that in truth and fact had neither.

19. Each time that KELLEY submitted a "first draw" PPP application, he necessarily

caused a wiring from Bank of America servers located in Texas to SBA servers located in

Sterling, Virginia, within the Eastern District of Virginia.

Defendant's PPP "Second Draw" Applications

20. On or about January 23, 2021, KELLEY applied for a "second draw"PPP loan

through Bank of America for his purported business Focused Resources. KELLEY filed an

application seeking approximately $114,500 in loan proceeds(SBA loan number ending in

8301), stating that the loan proceeds would be used for payroll, rent and mortgage interest, and

utilities. On this loan application, KELLEY further represented that Focused Resources had

sixty-two (62)employees and an average monthly payroll of approximately $45,824. As a

result, on or about January 25, 2021, Bank of America approved KELLEY's loan application and

provided the defendant with $114,500 in "second draw" PPP loan funds, depositing those loan

proceeds into the Bank of America checking account of Focused Resources(account number

ending in 6246).

21. On or about January 26, 2021, KELLEY applied for a "second draw"PPP loan

through Bank of America for his purported business IntelliNest. KELLEY requested

approximately $457,000 in loan proceeds(SBA loan number ending in 8401), stating that the

loan proceeds would be used for payroll, lease and mortgage-related expenses, utilities, and

covered operations expenditures. On his loan application, KELLEY further represented that

IntelliNest had eighty-one(81)employees and an average monthly payroll of approximately
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 7 of 13 PageID# 7

$182,833. As a result, on or about February 12, 2021,Bank of America approved KELLEY's

loan application provided the defendant with $457,082 in "second draw"PPP loan funds,

depositing the loan proceeds into the Bank of America checking account ofIntelliNest(account

number ending in 1795).

22. The IntelliNest "second draw" PPP Promissory Note included a representation

that"[a]ll proceeds ofthe Loan will be used to retain workers and maintain payroll or make

mortgage interest payments, lease payments, and utility payments, as specified under the

Paycheck Protection Program Rule and Borrower acknowledges that ifthe funds are knowingly

used for unauthorized purposes,the federal government may hold Borrower and/or Borrower's

authorized representative legally liable, such as for charges offraud." The Focused Resources

"second draw"PPP Promissory note included a similar representation that(1)"[t]he proceeds of

the Loan will be used to retain workers and maintain payroll; or make payments for mortgage

interest, rent, utilities, covered operations expenditures, covered property damage costs, covered

supplier costs, and covered worker protection expenditures as specified under PPP Guidance";

and (2)"[n]ot more than 40% ofloan proceeds may be used for non-payroll costs."

23. In submitting these "second draw"PPP applications for Focused Resources and

IntelliNest, KELLEY signed Promissory Notes for each PPP loan,falsely certifying, among

other things, that KELLEY "has not provided false or misleading information" to the Bank and

the SBA in those loan applications.

24. Each time that KELLEY submitted a "second draw"PPP application, he caused a

wiring from SBA servers located in California to SBA servers located in Sterling, Virginia,

within the Eastern District of Virginia.
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 8 of 13 PageID# 8

Defendant's PPP Loan Forgiveness Applications

25. Starting as early as in or about September 2021, KELLEY applied for and

received loan forgiveness for the "first draw" and "second draw" PPP loans on behalfof both

Focused Resources and IntelliNest. KELLEY made knowingly false representations to the SBA

in these loan forgiveness applications, to include KELLEY's claim that his businesses spent

various amounts on payroll costs.

26. In truth and in fact, KELLEY spent none ofthese PPP monies on payroll costs

because he had no employees at either IntelliNest or Focused Resources. Based on his false

certifications and representations to the SBA,KELLEY obtained a total discharge of his PPP

loans in the amount of approximately $914,164 for IntelliNest and $229,060 for Focused

Resources.

Scheme and Artifice to Defraud

27. The factual allegations contained in the preceding paragraphs are incorporated

herein as if set forth in full.

28. From on or about at least April 8, 2020, to at least on or about August 31,2021, in

the Eastern District of Virginia and elsewhere, KORTNEY THOMAS KELLEY,the defendant

herein, devised and intended to devise a scheme and artifice to defraud, and to obtain money by

means of materially false and fraudulent pretenses, representations, and promises.

29. It was a part ofthe scheme and artifice that the defendant sought to fraudulently

obtain disaster-related benefits in the form of SBA PPP loans.

30. It was further a part ofthe scheme and artifice that the defendant submitted

applications for PPP loans that contained knowingly and deliberately false statements.
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 9 of 13 PageID# 9

misrepresentations, and omissions related to the defendant's claimed business entities, number of

employees, and business costs associated with such business entities.

31. It was further a part ofthe scheme and artifice that the defendant falsely attested

on the aforementioned PPP loan applications that the information presented was true and

accurate, despite knowingly including false information about his businesses'(non-existent)

payroll expenses to employees.

32. It was further a part ofthe scheme and artifice that the defendant received and

obtained at least $1,143,224 in PPP loan proceeds in the name of his claimed business entities

Focused Resources and IntelliNest.

33. It was further part ofthe scheme and artifice that the defendant made further

misrepresentations about his business entities and his use ofthe PPP loan proceeds in order to

obtain loan forgiveness of at least $1,143,224 in PPP loan proceeds.

34. It was further a part ofthe scheme and artifice that the defendant expended the

PPP loan proceeds on purposes unrelated to those authorized by the SBA,including (1)spending

at least $142,711 in loan proceeds at various casinos and on gaming;(2) withdrawing at least

$42,221 in loan proceeds in cash withdrawals; and(3)transferring at least $834,077 in loan

proceeds to KELLEY's personal brokerage accounts.

35. Specifically, KELLEY transferred funds into his personally owned cash

management account at Merrill Lynch (account number ending -0168) as well as his personally

owned margin account at Robinhood (account number ending -2322). Both Merrill Lynch and

Robinhood are financial institution as that term is defined in Title 18 of United States Code,

Section 20.
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 10 of 13 PageID# 10

36. It was further a part ofthe scheme and artifice that the defendant caused the

transmission ofinformation and funds by wire between locations within the Eastern District of

Virginia and locations outside ofthe Commonwealth of Virginia.

COUNTS ONE THROUGH THREE
(Wire Fraud)

THE GRAND JURY FURTHER CHARGES THAT:

37. Paragraphs 1 through 36, including all subparagraphs, ofthis Indictment are

realleged and incorporated as if set forth in full here.

38. On or about the date set forth below, in the Eastern District of Virginia and

elsewhere,for the purposes of executing the above-described scheme and artifice to defraud and

for obtaining money and property by means of materially false and fraudulent pretenses,

representations and promises, and attempting to do so, defendant KORTNEY THOMAS

KELLEY knowingly caused to be transmitted by means of wire communication in interstate

commerce,the writings, signs, signals, pictures, and sounds described below:

10
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 11 of 13 PageID# 11

Count On or About Date Description of Wire Transmission

1 June 7, 2020 KELLEY submitted an SBA PPP loan application (last four digits
7803)through Bank of America for IntelliNest that contained
false statements and misrepresentations and omissions related to
his business entity, employees,income,and payroll expenses.
KELLEY'S submittal ofthis application caused an electronic
transmission ofthe PPP loan application from Bank of America
servers located in Texas to SBA servers in Sterling, Virginia,
within the Eastern District of Virginia.

2 January 23, 2021 KELLEY submitted an SBA PPP loan application (last four digits
8301)through Bank of America for Focused Resources that
contained false statements and misrepresentations and omissions
related to his business entity, employees, income, and payroll
expenses. KELLEY'S submittal of this application caused an
electronic transmission of the PPP loan application from SBA
servers located in California to SBA servers in Sterling, Virginia,
within the Eastern District of Virginia.

3 January 26, 2021 KELLEY submitted an SBA PPP loan application (last four digits
8401)through Bank of America for IntelliNest that contained
false statements and misrepresentations and omissions related to
his business entity, employees,income, and payroll expenses.
KELLEY'S submittal ofthis application caused an electronic
transmission ofthe PPP loan application from SBA servers
located in California to SBA servers in Sterling, Virginia, within
the Eastem District of Virginia.
(All in violation of Title 18, United States Code, Section 1343.)

COUNTS FOUR AND FIVE
(Engaging in Monetary Transactions in Criminally Derived Property)

THE GRAND JURY FURTHER CHARGES THAT:

39. Paragraphs 1 through 38, including all subparagraphs, ofthis Indictment are

realleged and incorporated by reference as if fully set forth here.

40. On or about the following dates and in the manner described below, in the Eastern

District of Virginia and elsewhere, defendant KORTNEY THOMAS KELLEY did knowingly

engage and attempt to engage in the following monetary transactions by,through, and to a

financial institution, affecting interstate commerce,in criminally derived property of a value

11
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 12 of 13 PageID# 12

greater than $10,000,that is, money deposits representing fraudulently obtained disaster-related

loan proceeds, such property having been derived from a specified unlawful activity, that is Wire

Fraud, in violation of Title 18, United States Code, Section 1343.

Count On or About Date Monetary Transaction
KELLEY conducted a $200,000 electronic cash transfer from the
4 August 4,2020
Bank of America account ofIntelliNest(account number ending -
1795)to a cash management account at Merrill Lynch (account
number ending -0168) belonging to KELLEY.
KELLEY conducted a $50,000 electronic cash transfer from the
5 August 13,2020
Bank of America account ofIntelliNest(account number ending -
1795)to a margin account at Robinhood (account number ending
-2322) belonging to KELLEY.
(In violation of Title 18, United States Code, Section 1957.)

FORFEITURE ALLEGATION

Pursuant to 32.2 of the Federal Rules of Criminal Procedure,the defendant is hereby

notified that upon conviction of any ofthe offenses charged in Counts One through Four ofthis

Indictment, the defendant shall forfeit to the United States any property, real or personal, which

constitutes or is derived from any proceeds traceable to the offense.

The defendant is further notified that upon conviction ofany ofthe offenses charged in

Counts Five through Seven ofthis Indictment, the defendant shall forfeit to the United States any

property, real or personal, involved in the offense, or any property traceable to the offense.

Property subject to forfeiture includes, but is not limited to:

A sum of money of at least $1,143,224, which represents the amount of proceeds
the defendant obtained from the offenses of conviction, which sum shall be
reduced to a money judgment against the defendant in favor ofthe United States.

12
Case 3:22-cr-00035-DJN Document 1 Filed 04/05/22 Page 13 of 13 PageID# 13

Ifthe property subject to forfeiture cannot be located, the United States will seek

an order forfeiting substitute assets.

(In accordance with Title 18, United States Code, Sections 982(a)(1) and 981(a)(1)(C), as
incorporated by Title 28, United States Code, Section 2461 and Title 21, United States Code,
Section 853(p).)

A TRUE BILL:

FOREPERSON

JESSICA D. ABER
UNITED STATES ATTORNEY
thePureuanliodict-UovcrnniMu
onginal ofthis page has been ...
fil^
under sealin the Cleric's Office

By:
Avishek Panth
Assistant United States Attorney

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