Indictment — United States v. Joseph M. Cherry, II, Eastern District of Virginia (Document 1)

Summary

A grand jury indictment in United States v. Joseph M. Cherry, II, Case 4:20-cr-00027-RBS-LRL, in the United States District Court for the Eastern District of Virginia, Newport News Division, filed May 29, 2020 as Document 1. It charges wire fraud (Counts 1-4), theft of government property (Count 5), false statements to the Small Business Administration (Counts 6-8) and monetary transactions in criminally derived property (Counts 9-10). The indictment alleges that Cherry submitted two Economic Injury Disaster Loan applications and a PPP application with false revenue, employee and criminal-history answers, and received $196,900 in EIDL proceeds on April 24, 2020. It alleges that Cherry withdrew cash and obtained a cashier's check for $70,000 within days. The forfeiture notice seeks a sum of at least $196,900.

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“Indictment — United States v. Joseph M. Cherry, II, Eastern District of Virginia (Document 1).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/indictment-no-4-20-cr-00027-dkt-1-e-d-va-457f65d8fe/, SHA-256 41340b8e1edc625c33c0e6615b74c746d9449aa3f27b109286ea4d4a46eba296.

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Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 1 of 16 PageID# 1
FILED
IN OPEN CO!IRT

MAY 2 9 2020
IN THE UNITED STATES DISTRICT COURT FOR TflE
EASTERN DISTRICT OF VIRGINIA f CLEhk,U.S. DISTRICT COURT
NORFOI K \/A

Newport News Division

UNITED STATES OF AMERICA CRIMINAL NO.4:20CR

V. 18U.S.C. §§ 1343 and 2
Wire Fraud
JOSEPH M.CHERRY,II, (Counts 1-4)

Defendant. 18U.S.C. §§641and2
Theft of Government Property
(Count 5)

18U.S.C. §§ 1014 and 2
False Statements to Small Business
Administration
(Counts 6-8)

18U.S.C. §§ 1957 and 2
Engaging in Monetary Transactions in Property
Derived from Specified Unlawful Activity
(Counts 9-10)

18 U.S.C. §§ 981(a)(1)(C)& 982(a)(1)
Asset Forfeiture

INDICTMENT

May 2020 Term - At Norfolk, Virginia

GENERAL ALLEGATIONS

1. 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 of communities after disasters.
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 2 of 16 PageID# 2

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

unions and other lenders. These loans have government-backed guarantees. In addition to

traditional SBA funding programs. The CARES Act, which was signed into law in March 2020,

established several new temporary programs and provided for the expansion of others to address

the COVID-19 outbreak.

3. One ofthese new programs is the SBA Paycheck Protection Program(PPP), which

is a loan designed to provide a direct incentive for small businesses to keep their workers on the

payroll. Under this program, the SBA will forgive all or part of loans if all employees were kept

on the payroll for eight weeks and borrowers submit documentation confirming that the loan

proceeds were used for pajToll, rent, mortgage interest, or utilities. Interested applicants apply

through an existing SBA lender or any other participating federally insured financial institution.

4. The PPP application process requires applicants to submit a Borrower Application

Form through an SBA-approved financial entity. The application contains information as to the

purpose of the loan, average monthly payroll, number of employees and background of the

business and its owner, including questions relating to criminal history. Applicants are also

required to make good faith certifications, including that economic uncertainties have necessitated

their loan requests for continued business operations and that they intend to use loan proceeds only

for the authorized and not any duplicative purposes.

5. Another related response to the COVID-19 outbreak is an expansion ofan 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 can be used to pay fixed debts, payroll, accounts payable
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 3 of 16 PageID# 3

and other bills that could have been paid had the disaster not occurred; hov^ever, such loan

proceeds are not intended to replace lost sales or profits or for expansion ofa business.

6. Unlike certain other types ofSBA-guaranteed loans,EIDL funds are issued directly

from the United States Treasury and applicants apply through the SBA via an online portal and

application. The EIDL application process, which also uses certain outside contractors for system

support, collects information concerning the business and the business owner, including:

information as to the gross revenues for the business prior to January 31, 2020; the cost of goods

sold; and information as to any criminal history ofthe business owner. Applicants electronically

certify that the information provided is accurate and are warned that any false statement or

misrepresentation to the SBA or any misapplication of loan proceeds may result in sanctions,

including criminal penalties.

A. First EIDL Application

7. On or about March 30, 2020, JOSEPH M. CHERRY, II, the defendant herein

(hereinafter "CHERRY"),electronically applied for an EIDL (loan number ending 872-04) using

the company name of Global Concepts (doing business as "Joes Tortured Sol"), described as a

limited liability company (LLC). CHERRY claimed that Global Concepts was located at 7**0

Tidewater Drive in Norfolk, Virginia, which is the address of a strip mall where a UPS Store is

located. The application questions for the EIDL specified that the primary business address could

not be a P.O. Box.

8. CHERRY claimed to have opened this business on July 1,2015, and listed it as a

clothing and apparel retail business with three(3)employees. Although CHERRY represented to

the SBA that his business opened in 2015,CHERRY did not attempt to register this entity with the
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 4 of 16 PageID# 4

Virginia State Corporation Commission (SCC) until January 5, 2020. This attempt was

unsuccessful,and CHERJIY successfully registered this business on April 8,2020. On this second

SCC registration, CHERJR.Y used the address 1**5 Fordham Dr. Virginia Beach, Virginia as the

principal office address. This is a strip mall containing a UPS store.

9. Based on his EIDL application, CHERRY was offered loan proceeds of$197,000,

of which $196,900 were related to claimed economic injury, with a $100.00 Uniform Commercial

Code (UCC) filing fee. CHERRY provided an employer identification number (EIN) on the

application that did not belong to Global Concepts. CHERRY further claimed his business had

received $1,250,000 in gross revenue in the past twelve (12) months prior to the disaster and

incurred cost of goods of $725,000. CHERRY responded in the negative to a question about

whether he had been convicted, plead guilty or placed on any form of parole or probation related

to any criminal offense other than a minor vehicle violation. In fact, CHERRY was currently

serving a term offederal supervised release related to a prior federal conviction. Under the terms

ofthis supervision, CHERRY was not permitted to obtain a loan or credit or open a bank account

without permission.

10. FolloAving the submission of this EIDL application, CHERRY regularly contacted

the SBA for status updates from at least April 17, 2020,through and until the funding of the loan

on April 23,2020. CHERRY electronically signed a Loan Authorization and Agreement and other

associated documentation on or about April 22,2020. This agreement contained certifications that

all representations in the EIDL application were "true, correct and complete and are offered to

induce SBA to make this Loan[,]" and contained warnings of penalties for misapplication of

proceeds and false statements or misrepresentations to the SBA.
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 5 of 16 PageID# 5

11. On April 22, 2020, CHERRY opened a personal checking and savings accounts,

member number (last four digits) 0837, with Langley Federal Credit Union (LFCU)in Norfolk,

Virginia. At the same time, CHERRY also attempted to open a business account, advising an

LFCU employee that he owned a business for several years. Langley Federal Credit Union,

headquartered in Newport News, Virginia, is a financial institution (as defined under 18 U.S.C. §

1956) which operates in and the activities of which affect interstate commerce.

12. On April 24, 2020, CHERRY received a $196,900 Automated Clearing House

(ACH)wire transfer from the United States Treasury for the EIDL (loan number ending 872-04).

The $196,900 proceeds, which were routed electronically in interstate commerce, were deposited

into CHERRY'S LFCU checking account at LFCU in Newport News, Virginia.

13. On the same day, April 24, 2020, CHERRY withdrew $34,500 in cash and made

a $296.77 purchase at an ABC Store. CHERRY conducted one $500 cash withdrawal at a PNC

Bank Automated Teller Machine (ATM)and two $500 cash withdrawals at the LFCU Ward's

Comer Branch ATM location, in Norfolk, Virginia. CHERRY then conducted a $33,000 cash

withdrawal at the LFCU Old Dominion University (ODU)Branch located in Norfolk, Virginia.

CHERRY advised the bank teller he was employed as a general contractor when withdrawing the

$33,000. All ofthese transactions occurred from the LFCU accoimt.

14. Also on April 24,2020, at approximately 9:36 a.m., CHERRY changed the mailing

address on his LFCU account to an address in Virginia Beach, Virginia. At 5:57 p.m. that same

day, CHERRY changed the mailing address back to a Norfolk, Virginia address.

15. On April 25, 2020, CHERRY attempted to withdraw $9,700 in cash from at the

Ward's Comer LFCU branch, but was tumed away. CHERRY then retumed to the ODU branch
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 6 of 16 PageID# 6

and obtained a cashier's check for $70,000, made payable to Global Concepts of Virginia, LLC,

and also withdrew $35,000 in cash. These withdrawals all occurred out of the LFCU account

(member number ending in 0837). CHERRY advised a bank teller he was purchasing houses at

auction and would return to the branch the following day to obtain the remaining $56,000.

B. Second EIDL Application

16. On April 3, 2020, CHERRY applied for a second EIDL, this time using the

business name Contra Surplus LLC(hereinafter "Contra Surplus"). CHERRY listed the business

address as 2** West 21st Street,in Norfolk, Virginia, which is a Pak Mail store in which CHERRY

maintained a personal box in his name. CHERRY also indicated he employed five(5)individuals

and received gross revenue of$1,600,000 in the past twelve(12) months prior to the disaster, with

cost ofgoods sold of$1,300,000. CHERRY responded in the negative to a question about whether

he had been convicted, plead guilty or placed on any form of parole or probation related to any

criminal offense other than a minor vehicle violation.

17. CHERRY contacted the SBA on or about April 27, 2020, stating he wanted to

change the bank account information he had provided.

C. PPP Application

18. On April 5, 2020, CHERRY applied for a PPP loan through Readycap Lending,

LLC,for Contra Surplus, and requested $35,000 in loan proceeds. On this application, CHERRY

claimed that the business had ten (10) employees with an average monthly payroll of $10,000.

CHERRY claimed that the purpose ofthe loan was for payroll and lease expenses.

19. Question 5 of the PPP Borrower Application Form asked "Is the Applicant (if an

individual) or anv individual owning 20% or more of the equitv of the Applicant subject to an
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 7 of 16 PageID# 7

indictment, criminal information, arraignment or other means by which formal criminal charges

are brought in any jurisdiction, or presently incarcerated, or on probation or parole?" CHERRY

responded "NO" to this question and electronically signed his initials on this documentation,

verifying the accuracy of his response.

20. Question 6 of the PPP Borrower Application Form asked "Within the last 5 years,

for any felony, has the Applicant (if an individuan or any owner of the Applicant I) been

convicted: 2) pleaded guilty: 3) pleaded nolo contendere: 4^ been placed on pretrial diversion: 5)

been placed on any form of parole or probation Tincluding probation before iudemenf)?"

CHERRY checked "NO" for this question and electronically signed his initials, verifying the

accuracy of his response.

21. CHERRY electronically signed this PPP application on April 5,2020,attesting that

the information provided was true and accurate and that he understood the criminal penalties

associated with providing false statements to the SBA.

22. According to the Virginia State Corporation Commission, CHERRY registered

Contra Surplus on September 26, 2018. As of January 2, 2020, the business was inactive for not

having paid the registration fee.

THE SCHEME AND ARTIFICE

23. From on or about at least March 30, 2020 to at least in or about May 2020, in the

Eastern District of Virginia and elsewhere, JOSEPH M. CHERRY, II, 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, promises and omissions.
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 8 of 16 PageID# 8

24. It was a part of the scheme and artifice that the defendant sought to fraudulently

obtain disaster-related benefits in the form of SBA-sponsored Economic Injury Disaster (EIDL)

loans and an SBA Paycheck Protection Program(PPP)loan.

25. It was further a part of the scheme and artifice that the defendant submitted

applications for loans under the EIDL and PPP programs that contained false statements,

misrepresentations and omissions related to the defendant's income, employment, claimed

business entities and his prior criminal record.

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

the aforementioned loan applications that the information presented was true and accurate.

27. It was a further a part ofthe scheme and artifice that the defendant opened a bank

accoimt at Langley Federal Credit Union(LFCU)for the purposes of receiving EIDL proceeds.

28. It was further a part of the scheme and artifice that the defendant received and

obtained $196,900 in EIDL proceeds into a LFCU account.

29. It was further a part of the scheme and artifice that the defendant misapplied the

EIDL proceeds for purposes unrelated to those authorized by the United States Small Business

Administration.

30. It was further a part of the scheme and artifice that the defendant sought to spend

the majority ofthe EIDL proceeds within days ofreceipt, including withdrawing significant sums

ofcash and obtaining a cashier's check for $70,000.

31. It was further a part of the scheme and artifice that the defendant caused the

transmission of information and funds by wire between the Eastern District of Virginia and

locations outside ofthe Commonwealth of Virginia.
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 9 of 16 PageID# 9

COUNTS ONE THROUGH FOUR
(Wire Fraud)

THE GRAND JURY FURTHER CHARGES THAT:

1. The factual allegations contained in the General Allegations section are

incorporated herein by reference as if set out in full.

2. On or about the dates and in connection with the transactions described below,

JOSEPH M. CHERRY,II, the defendant herein, having devised and intended to devise a scheme

and artifice to defraud and for obtaining money and property by means of materially false,

fraudulent and fictitious pretenses, representations and promises, as described in Paragraphs 23-

31 above and incorporated herein by reference, and, for the purpose of executing the aforesaid

scheme and artifice to defraud and for obtaining money and property by means of materially false

and fraudulent pretenses, representations and promises, in the Eastern District of Virginia and

II
elsewhere, did knowingly and willfully transmit and cause to be transmitted by means of wire

commimication in interstate commerce, the following certain signs, signals, and soxmds: to wit,

the following loan Economic Injury Disaster Loan(EIDL)and SBA Paycheck Protection Program

(PPP) applications and a wire transfer of funds to/from/through a location within the Eastem

District of Virginia to/from/through a location outside ofthe Commonwealth of Virginia.

'' ■ ! '

Defendant submitted an EIDL application to the SEA for Global
Concepts(loan number ending 872-04)that contained false statements
1 3/30/2020
and misrepresentations and omissions related to his business entity,
employment,income and background.
Defendant submitted an EIDL application (application number ending
0346)to the SEA for Contra Surplus that contained false statements
2 4/3/2020
and misrepresentations and omissions related to his business entity,
employment,income and background.
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 10 of 16 PageID# 10

Defendant submitted an SBA PPP loan application (last four digits
5483)through Readycap Lending, LLC for Contra Surplus that
3 4/5/2020
contained false statements and misrepresentations and omissions
related to his business entity, employment,income and background.
Defendant received the proceeds ofEIDL(loan number ending 872-
4
4/24/2020 04)in the amount of$196,900 into a Langley Federal Credit Union
account he had opened(member number ending in 0837).

(In violation of Title 18, United States Code, Sections 1343 and 2.)

10
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 11 of 16 PageID# 11

COUNT FIVE
(Theft of Government Property)

THE GRAND JURY FURTHER CHARGES THAT:

1. The factual allegations contained in the General Allegations section are

incorporated herein by reference as if set out in full.

2. On or about April 24, 2020, in the Eastern District of Virginia and elsewhere,

JOSEPH M.CHERRY,II, the defendant herein, having devised the scheme and artifice described

in Paragraphs 23-31 above and incorporated herein by reference, willfully and knowingly did steal,

purloin, and knowingly convert to his use without authority, money aggregating in excess of

$1,000.00 belonging to the United States of America, to wit, approximately $196,900.00 in

Economic Injury Disaster Loan (EIDL) assistance provided for by the United States Small

Business Administration via the United States Treasury, in response to the COVID-19 outbreak,

which the defendant was not entitled to receive.

(In violation of Title 18, United States Code, Sections 641 and 2.)

11
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 12 of 16 PageID# 12

COUNTS SIX THROUGH EIGHT
(False Statements to the Small Business Administration)

THE GRAND JURY CHARGES THAT:

1. The factual allegations contained in the General Allegations section are

incorporated herein by reference as if set out in full.

2. On or about the dates and in connection with the loan applications set forth below,

in the Eastern District of Virginia and elsewhere, JOSEPH M.CHERRY,II, the defendant herein,

knowingly made false statements and reports for the purpose ofinfluencing the action ofthe Small

Business Administration(SBA)and an SBA-preferred financial entity and lender, in connection

with an application, advance, discount, purchase, purchase agreement, repurchase agreement,

commitment, and loan, as follows:

Count Date(on of about) False Statement

CHERRY claimed he had not been placed on any form of
6 3/30/20 probation related to a criminal offense on an application for an
Economic Injury Disaster Loan(EIDL).
CHERRY claimed he had not been placed on any form of
7 4/3/2020 probation related to a criminal offense for an Economic Injury
Disaster Loan(EIDL).
CHERRY claimed he had not been placed on any form of
8 4/5/2020 probation related to a criminal offense on application for a
Paycheck Protection Program (PPP)loan.

(In violation of Title 18, United States Code, Sections 1014 and 2.)

12
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 13 of 16 PageID# 13

COUNTS NINE AND TEN
(Engaging in Monetary Transactions in Criminally Derived Property)

THE GRAND JURY FURTHER CHARGES THAT:

1. The factual allegations contained in the General Allegations section are

incorporated herein by reference as if set out in full.

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

District of Virginia and elsewhere,JOSEPH M.CHERRY,II, the defendant herein, 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 greater than

$10,000, that is, money deposits which represented fraudulently obtained disaster-related loan

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

Theft of Government Property and False Statements to the Small Business Administration, in

violation of Title 18, United States Code, Sections 1343, 641 and 1014, respectively:

vifiSiOUlIU J|

CHERRY conducted a $33,000 cash withdrawal from account(member
9 4/24/2020 number ending in 0837) at the Langley Federal Credit Union Old
Dominion University branch.
CHERRY obtained a $70,000 cashier's check using funds from account
(member number ending in 0837)and made payable to Global Concepts
10 4/25/2020
of Virginia, LLC at the Langley Federal Credit Union Old Dominion
University branch.

(In violation of Title 18, United States Code, Sections 1957 and 2.)

13
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 14 of 16 PageID# 14

FORFEITURE

THE GRAND JURY FURTHER FINDS PROBABLE CAUSE THAT:

1. The defendant, if convicted of any of the violations alleged in Counts One through Two

and Counts Four through Seven ofthis Indictment, shall forfeit to the United States, as part

of the sentencing pursuant to Federal Rule of Criminal Procedure 32.2, any property, real

or personal, which constitutes or is derived from proceeds traceable to the violation.

2. The defendant, if convicted ofeither ofthe violations alleged in Counts Three and Eight of

this Indictment, shall forfeit to the United States, as part of the sentencing pursuant to

Federal Rule of Criminal Procedure 32.2, any property constituting, or derived from,

proceeds the person obtained directly or indirectly, as the result ofthe violation.

3. The defendant, if convicted of either of the violations alleged in Counts Nine and Ten of

this Indictment, shall forfeit to the United States, as part of the sentencing pursuant to

Federal Rule of Criminal Procedure 32.2, any property, real or personal, involved in the

violation, and any property traceable to such property.

4. If any property that is subject to forfeiture above is not available, it is the intention ofthe

United States to seek an order forfeiting substitute assets pursuant to Title 21,United States

Code, Section 853(p) and Federal Rule of Criminal Procedure 32.2(e).

5. The property subject to forfeiture includes, but is not limited to, the following:

a. A monetary judgment an amount representing the proceeds the defendant

obtained from the scheme alleged in this indictment.

A sum of money of at least $196,900 which represents the proceeds ofthe offenses charged in
Counts one through Eight that the defendant obtained and that, upon entry of an order of
forfeiture, shall be reduced to a monetary judgment.

14
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 15 of 16 PageID# 15

(All in accordance with Title 18, United States Code, Sections 981(a)(1)(C), 982(a)(1),
and 982(a)(2)(A); and Title 28,United States Code, Section 2461(c),)

15
Case 4:20-cr-00027-RBS-LRL Document 1 Filed 05/29/20 Page 16 of 16 PageID# 16

'' '-CovenimcntAct,
• i i.iod
hcuJ in inc ticik's Liiice.
UNITED STATES v. JOSEPH M. CHERRY,II, 4:20CR 27

A TRUE BILL:

FOREPERSON

G,ZACHARY TERWILLIGER
UNITED STATES ATTORNEY

By: C\g
Brian J. Samuels
^
Assistant United States Attorney
Virginia State Bar No. 65898
Fountain Plaza Three, Suite 300
721 Lakefront Commons
Newport News, Virginia 23606
Tel.(757)591-4000
Fax:(757)591-0866

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