Indictment — United States v. Stephen Lawrence Murphy and Stephanie Brock Murphy, E.D. Wash.

Summary

An indictment filed July 19, 2022 as ECF No. 1 in United States v. Stephen Lawrence Murphy and Stephanie Brock Murphy, Case 2:22-cr-00084-TOR, in the U.S. District Court for the Eastern District of Washington, charging wire fraud (Counts 1-6) and false, fictitious, or fraudulent claims under 18 U.S.C. § 287 (Counts 7-9). The grand jury charges that from about September 11, 2020 through at least September 8, 2021 the defendants obtained PPP loans for purported businesses in their own names, a wood products manufacturer and a landscaping business, that had no record of operating as of February 15, 2020. It states each first-draw loan was for $20,833, disbursed by Fountainhead SBF LLC and Harvest Small Business Finance, LLC, and that forgiveness was later requested. The forfeiture allegation seeks a money judgment of $62,499.00.

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tv; Case 2:22-cr-00084-TOR

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ECF No. 1

Vanessa R. Waldref
United States Attorney

filed 07/19/22

PagelD.1 Page1of13

FILED IN THE
U.S. DISTRICT COURT
EASTERN DISTRICT OF WASHINGTON

Jul 19, 2022

SEAN F. MCAVOY, CLERK

Eastern District of Washington
Dan Fruchter
Tyler H.L. Tornabene
Assistant United States Attorneys
Post Office Box 1494
Spokane, WA 99210-1494
Telephone: (509) 353-2767
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF WASHINGTON
UNITED STATES OF AMERICA, 2:22-CR-84-TOR
Plaintiff, INDICTMENT
V. Vio: 18U.S.C. § 1343
. Wire Fraud
STEPHEN LAWRENCE MURPHY, (Counts 1-6)
‘STEPHANIE BROCK MURPHY ,
(a/k/a “Stephanie Diane Brock”), 18 U.S.C. § 287
False, Fictitious, or Fraudulent
Defendants. Claims
1 (Counts 7-9)
| 18 U.S.C. § 981
28 U.S.C. § 2461
Forfeiture Allegations
The Grand Jury charges:
GENERAL ALLEGATIONS
1. At all times relevant to this Indictment, the Defendants, STEPHEN
LAWRENCE MURPHY and STEPHANIE BROCK MURPHY (a/k/a “Stephanie

Diane Brock”), were residents of Davenport, Washington, within the Eastern

INDICTMENT - 1
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District of Washington.

2. The Coronavirus Aid, Relief, and Economic Security Act (““CARES”
Act) was a federal law enacted on March 27, 2020, designed to provide emergency
financial assistance to the millions of Americans who were suffering the economic
effects caused by the COVID-19 pandemic. One source of relief provided by the
CARES Act was the authorization of forgivable loans to small businesses for job
retention and other certain expenses, through a program referred to as the Paycheck
Protection Program (“PPP”).

3. In order to obtain a PPP loan, a qualifying business was required to
submit a PPP loan application signed by an authorized representative of the
business. The PPP loan application required 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 applicant (through its authorized representative) was required to
state, among other things: (a) its average monthly payroll expenses; and (b) its
number of employees. If the applicant had no employees other than the owner, the
applicant was required to provide the gross income amount from a 2019 or 2020
IRS Form 1040, Schedule C. These figures were used to calculate the amount of
money the small business was eligible to receive under the PPP. Additionally, the
applicant was required to certify that they were in operation as of February 15,
2020. The applicant was also required to certify that the information in the
application was true and correct to the best of the applicant’s knowledge.

4. A business’s PPP loan application was received and processed, in the
first instance, by a participating lender. If a PPP loan application was approved,
the participating lender funded the PPP loan using its own monies. Data from the
application, including information about the borrower, the total amount of the loan,
the listed number of employees, and the gross income ‘amount, was transmitted by

the lender to the Smal] Business Administration (“SBA”), an agency of the United

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States, in the course of processing the loan.

5. PPP applications are received in cloud-based platforms. The location
of the server through which the PPP application is submitted is based on the date
the application was processed by the SBA and the application number. During the
time period relevant to this Indictment, all PPP applications were received through
the Summit platform, a cloud-based platform utilizing the AWS GOV cloud
servers located in Oregon. PPP lenders submitted disbursement details into the
SBA E-Tran system in Sterling, Virginia. E-Tran transmitted the PPP processing
fee to the lender through the United States Treasury’s Financial Management
System (FMS) to the Treasury. The primary server for FMS is in Sterling,
Virginia.

The Scheme

6. The allegations in paragraphs | through 5 of this Indictment are »
incorporated as though realleged herein.

7. Beginning no later than on or about September 11, 2020, and
continuing through at least September 8, 2021, in the Eastern District of
Washington and elsewhere, Defendants STEPHEN LAWRENCE MURPHY and
STEPHANIE BROCK MURPHY devised and intended to devise a scheme to
defraud the SBA, and to obtain money and property by means of materially false
and fraudulent pretenses, representations, and promises.

8. Specifically, Defendant STEPHANIE BROCK MURPHY applied for
and received two PPP loans, using false and fraudulent information about her
purportedly active company in her own name, that is, “Stephanie Murphy,” a
purported wood products manufacturing company, with the intent to defraud, steal,
and convert the proceeds of the PPP Loans for Defendants’ personal use and
without any intent to use the proceeds thereof for any authorized purpose, or any

intent to repay the PPP Loans.

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9. Defendant STEPHEN LAWRENCE MURPHY applied for and
received one PPP loan, using false and fraudulent information about his
purportedly active business in his own name, that is, “Stephen Murphy,” a
purported landscaping services business, with the intent to defraud, steal, and
convert the proceeds of the PPP Loans for Defendants’ personal use and without
any intent to use the proceeds thereof for any authorized purpose, or any intent to
repay the PPP Loans.

Manner and Means
It was part of this scheme that:
The Joint Capital One Checking and Savings Accounts
10. On or about September 11, 2020, Defendants STEPHANIE BROCK
MURPHY and STEPHEN LAWRENCE MURPHY opened a joint checking

account ending in 9587 at Capital One Bank, National Association, a federally-
insured financial institution (the “Joint Capital One Checking Account”).

11. On or about March 1, 2021, Defendants STEPHANIE BROCK
MURPHY and STEPHEN LAWRENCE MURPHY opened a performance savings
account ending in 6375 at Capital One Bank, National Association, a federally-
insured financial institution (the “Joint Capital One Savings Account”).

12. As part of the scheme, Defendants used the Joint Capital One
Checking Account and the Joint Capital One Savings Account to receive, access,
transfer, and obtain fraudulently-obtained funds received in the Eastern District of
Washington by means of the fraudulent scheme.

Paycheck Protection Program Loan No. 5015588605
13. On or about March 16, 2021, Defendant STEPHANIE BROCK
MURPHY submitted an application for PPP loan number 5015588605 to the SBA

under the name of her purported business in her own name, that is, “Stephanie
Murphy.” Defendant STEPHANIE BROCK MURPHY listed the business address
as 44371 Miles Rd N., Davenport, Washington.

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14. Defendant STEPHANIE BROCK MURPHY falsely and fraudulently
stated in the application for PPP loan number 5015588605 that her purported
business had been established on February 15, 2020, the exact last date by which a
business was required to have been in existence in order to qualify for PPP funds,
that it had one employee as of the date of the application, that its business was
manufacturing of wood products, and that its gross income for calendar year 2020
was $100,000. Defendant STEPHANIE BROCK MURPHY provided her Social
Security Number (“SSN”) as the Employer Identification Number (“EIN”) for the
purported business. Defendant STEPHANIE BROCK MURPHY also submitted
an incomplete and fraudulent IRS Form 1040, Schedule C, in support of her
application, which falsely set forth her purported business’ income to be $100,000.

15. Based on the false information she provided, Defendant STEPHANIE
BROCK MURPHY requested a PPP loan for the business in the amount of
$20,833. Defendant STEPHANIE BROCK MUPRHY provided the Joint Capital
One Checking Account as the business account of her purported company, and the
account into which to deposit the funds.

16. Defendant STEPHANIE BROCK MURPHY certified that the
information in the application was true and correct to the best of her knowledge,
under penalty of perjury and of other criminal penalties for false information.

17. These representations were materially false and fraudulent.
Defendant STEPHANIE BROCK MURPHY was not the owner of any active or
registered business as of February 15, 2020. Neither the Washington Department
of Revenue nor the Washington Employment Security Department have any
record, and the State of Washington Department of Revenue had not issued any
business license for, any business owned by Defendant STEPHANIE BROCK
MURPHY as of February 15, 2020. Accordingly, neither the purported wood
products manufacturing business nor Defendant STEPHANIE BROCK MURPHY
were eligible for any PPP funding.

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18. | PPP loan number 5015588605 was handled by Fountainhead SBF
LLC, a lending institution located in Lake Mary, Florida, on a delegated basis from
the SBA. Fountainhead SBF, LLC submitted disbursement details for this loan
into the SBA E-Tran system located in Sterling, Virginia.

19. Onor about March 31, 2021, as a result of the fraudulent scheme
described above, and the materially false and fraudulent information supplied by
Defendant STEPHANIE BROCK MURPHY, Fountainhead SBF, LLC disbursed
$20,833 in SBA PPP funding into the Joint Capital One Checking Account that
Defendants shared.

20. On or about August 26, 2021, Defendant STEPHANIE BROCK
MURPHY falsely and fraudulently requested loan forgiveness of the entire PPP
loan amount by falsely representing that the PPP loan proceeds had been used for
eligible uses and business expenses for the purported business, including the false
representation that $17Aee OE the loan amount had been used for payroll expenses.

Paycheck Protection Program Loan No. 1741018703

21. Onor about March 23, 2021, Defendant STEPHEN LAWRENCE

MURPHY submitted an application for PPP loan number 1741018703 to the SBA

in the name of his purportedly active company in his own name, that is, “Stephen
Murphy.” Defendant STEPHEN LAWRENCE MURPHY listed the business
address as 44371 Miles Rd N, Davenport, Washington.

22. Defendant STEPHEN LAWRENCE MURPHY falsely and
fraudulently stated in the application for PPP loan number 1741018703 that his
business had been established on January 1, 2018, had one employee as of the date
of the application, that it was a landscaping services business, that the business had
earned $100,000 in gross income in 2020, and that its average monthly payroll was
$8,333.33. Defendant STEPHEN LAWRENCE MURPHY provided his SSN as
the EIN for the purported landscaping business, and supplied a blank IRS Form
1040, Schedule C form with his application. Based on that information, Defendant

INDICTMENT — 6
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STEPHEN LAWRENCE MURPHY requested a PPP Joan for the business in the
amount of $20,833.

23. Defendant STEPHEN LAWRENCE MURPHY certified that the
information in the application was true and correct to the best of his knowledge,
under penalty of perjury and of other criminal penalties for false information.

24. These representations were materially false and fraudulent.
Defendant STEPHEN LAWRENCE MURPHY did not have an active or
registered landscaping services business as of February 15, 2020, meaning that
neither the purported business nor Defendant STEPHEN LAWRENCE MURPHY
were eligible for any PPP funding, nor did Defendant STEPHEN LAWRENCE
MURPHY have gross income of $100,000 for his fictitious purported landscaping
business. Additionally, neither the Washington Department of Revenue nor the
Washington Employment Security Department have any record of any business for
Defendant STEPHEN LAWRENCE MURPHY, and the State of Washington
Department of Revenue had not issued any business license for any business
owned by Defendant STEPHEN LAWRENCE MURPHY as of January 1, 2018, or
February 15, 2020. Accordingly, neither the purported landscaping services
business nor Defendant STEPHEN LAWRENCE MURPHY were eligible for any
PPP funding.

25. PPP loan number 1741018703 was handled by Harvest Small
Business Finance, LLC, a lending institution located in Laguna Hills, California,
on a delegated basis from the SBA. Harvest Small Business Finance, LLC,
submitted disbursement details for this loan into the SBA E-Tran system located in
Sterling, Virginia.

26. On or about April 14, 2021, as a result of the fraudulent scheme
described above, and the materially false and fraudulent information supplied by
Defendant STEPHEN LAWRENCE MURPHY, Harvest Small Business Finance,
LLC, disbursed $20,833 into Defendants’ Joint Capital One Savings Account. At

INDICTMENT — 7
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Case 2:22-cr-00084-TOR ECFNo.1 _ filed 07/19/22 PagelD.8 Page8of13

the time of the disbursement, the Joint Capital One Savings Account had a balance
of $0.00. On or about that same day, April 14, 2020, Defendants transferred
$20,000 of the fraudulently obtained funds to the Joint Capital One Checking
Account.

27. Onor about September 8, 2021, STEPHEN LAWRENCE MURPHY
falsely and fraudulently requested loan forgiveness of the entire PPP loan amount
by falsely representing that the PPP loan proceeds had been used for eligible uses
and expenses, including the false representation that $17,400 of the loan amount
had been used for payroll expenses.

Paycheck Protection Program Loan No. 3419228806

28. Onor about April 12, 2021, Defendant STEPHANIE BROCK
MURPHY submitted an application for a Second Draw PPP under loan number
3419228806 to the SBA in the name of her purported wood products
manufacturing company. Defendant STEPHANIE BROCK MURPHY listed the
business address as 44371 Miles Rd N., Davenport, Washington.

29. Defendant STEPHANIE BROCK MURPHY falsely and fraudulently
stated in the application for PPP loan number 3419228806 that her purported wood

products manufacturing company had been established on February 15, 2020, that
it had one employee as of the date of the application, that its gross income for
calendar year 2020 was $100,000, and that its average monthly payroll was
therefore $8,333.33. Defendant STEPHANIE BROCK MURPHY again provided
her SSN as the EIN for the business, and again also supplied a false, incomplete,
and fraudulent IRS Form 1040, Schedule C with her application stating that her
business’ gross income for calendar year 2020 was $100,000. Based on that
information, Defendant STEPHANIE BROCK MURPHY requested a second draw
PPP loan for the business in the amount of $20,833 into the Joint Capital One
Checking Account, which Defendant STEPHANIE BROCK MURPHY set forth as

the business account. —

INDICTMENT — 8
Case 2:22-cr-00084-TOR ECFNo.1 _— filed 07/19/22 PagelID.9 Page9of13

30. Defendant STEPHANIE BROCK MURPHY certified that the
information in the application was true and correct to the best of her knowledge,
under penalty of perjury and of other criminal penalties for false information.

31. These representations were materially false and fraudulent. As set
forth above, Defendant STEPHANIE BROCK MURPHY did not have was not an
active, registered, or existing wood products manufacturing business as of
February 15, 2020, meaning that neither Defendant STEPHANIE BROCK.
MURPHY nor her purported wood products manufacturing business were eligible
for any PPP funding, nor did Defendant STEPHANIE BROCK MURPHY ’s
fictitious business have gross revenue of $100,000.

32. PPP loan number 3419228806 was handled by Fountainhead SBF,
LLC, a lending institution located in Lake Mary, Florida, on a delegated basis from
the SBA. Fountainhead SBF, LLC, submitted disbursement details for this loan
into the SBA E-Tran system located in Sterling, Virginia.

33. Onor about April 28, 2021, as a result of the fraudulent scheme
described above, and the materially false and fraudulent information supplied by
Defendant STEPHANIE BROCK MURPHY, Fountainhead SBF, LLC, disbursed
$20,833 into the Joint Capital One Checking Account that Defendants shared.

34. Onor about August 26, 2021, STEPHANIE BROCK MURPHY
falsely and fraudulently requested loan forgiveness of the entire PPP loan amount
by falsely representing that the PPP loan proceeds had been used for eligible uses
and expenses, including the false representation that $14,000 of the loan amount
had been used for payroll expenses.

Counts 1-6

35. The allegations in paragraphs 1 through 34 of this Indictment are
incorporated as though realleged herein. ;

36. Onor about each of the dates set forth below, in the Eastern District
of Washington and elsewhere, Defendants STEPHEN LAWRENCE MURPHY

INDICTMENT — 9
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and STEPHANIE BROCK MURPHY, for the purpose of executing the scheme
described above, caused to be transmitted by means of wire communication in
interstate commerce the signals and sounds described below for each count, each

transmission constituting a separate count:

Count Date Description

PPP Loan Application No. 5015588605, electronically
1 March 16, 2021 | submitted from the Eastern District of Washington to
the SBA in Oregon.

EFT payment of $20,833.00 for PPP Loan No.
5015588605 from Fountainhead SBF, LLC, in Lake
Mary, Florida, to the Joint Capital One Checking
Account located in the Eastern District of Washington.
PPP Loan Application No.. 1741018703, electronically
3. | March 23, 2021 | submitted from the Eastern District of Washington to
the SBA in Oregon.

EFT payment of $20,833.00 for PPP Loan No.
17410187003 from Harvest Small Business Finance,

4 | April 14,2021 | LLC, in Laguna Hills, California, to the Joint Capital
One Savings Account located in the Eastern District of
Washington.

PPP Second Draw Loan Application No. 3419228806,
5 | April 12,2021 | electronically submitted from the Eastern District of
Washington to the SBA in Oregon.

EFT payment of $20,833.00 for PPP Loan No.
3419228806 from Fountainhead SBF, LLC, in Lake
Mary, Florida to the Joint Capital One Checking
Account in the Eastern District of Washington.

2 | March 31, 2021

6 | April 28, 2021

All in violation of 18 U.S.C. § 1343.

Count 7-9
37. The allegations in paragraphs 1 through 36 of this Indictment are
incorporated as though realleged herein.
38, On or about each of the dates set forth below, in the Eastern District

of Washington and elsewhere, Defendants made and presented to the United States

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Small Business Administration claims concerning PPP applications, knowing said
claims were false and fraudulent, and knowing the information submitted was
materially false and fraudulent, described below for each count, each transmission

constituting a separate count:

Count| Defendant Date Description

PPP application for PPP Loan No.
5015588605 on behalf of Defendant
, | STEPHANIE STEPHANIE BROCK MUPRHY’s
BROCK March 16, 2021 fictitious wood products manufacturing
MURPHY . .
business for an PPP loan in the amount
of $20,833.00.

PPP application for PPP Loan No.
1741018703 on behalf of Defendant
g | STEPHEN | | STEPHEN LAWRENCE MURPHY’s
LAWRENCE | March 23, 2021 fictitious landscaping services business
MURPHY PINE

-for an PPP loan in the amount of
$20,833.00.

PPP application for PPP Loan No.
3419228806 on behalf of Defendant
9 STEPHANIE . STEPHANIE BROCK MUPRHY’s
BROCK April 12, 202] fictitious wood products manufacturin.
MURPHY P ba
business for a second-draw PPP loan in |.
the amount of $20,833.00.

All in violation of 18 U.S.C. § 287.

NOTICE OF FORFEITURE ALLEGATIONS
The allegations contained in this Indictment are hereby realleged and
incorporated herein by this reference for the purpose of alleging forfeitures.
Pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c), upon
conviction of an offense in violation of 18 U.S.C. §§ 1343 and 1344 as alleged in
Counts 1 through 6 of this Indictment, Defendants STEPHEN LAWRENCE
MURPHY and STEPHANIE BROCK MURPHY shall forfeit to the United States

INDICTMENT — 11
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any property, real or personal, which constitutes or is derived from proceeds

traceable to the offense. The property to be forfeited includes, but is not limited to,

the following:
MONEY JUDGMENT

MURPHY:
(a)
(b)
(c)
(d)

i

ill

A sum of money equal to $62,499.00 in United States currency,
representing the amount of proceeds obtained by Defendants,
STEPHEN LAWRENCE MURPHY and STEPHANIE BROCK
MURPHY from the wire fraud violations.

If any of the property described above, as the result of any act or omission of
Defendants STEPHEN LAWRENCE MURPHY and STEPHANIE BROCK

cannot be located upon the exercise of due diligence;

has been transferred or sold to, or deposited with, a third party;

has been placed beyond the jurisdiction of the court;

has been substantially diminished in value; or

has been commingled with other property which cannot be divided

without difficulty,

INDICTMENT -— 12


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