Indictment — USA v. Padilla-Reyna (Dkt. 1, E.D. Wash.)

Summary

An indictment filed May 17, 2022 as ECF No. 1 in United States v. Karla Leticia Padilla-Reyna, a.k.a. Karla Padilla, Case 1:22-cr-02059-MKD, in the U.S. District Court for the Eastern District of Washington, charging wire fraud under 18 U.S.C. § 1343 (Counts 1-4) and false, fictitious, or fraudulent claims under 18 U.S.C. § 287 (Counts 5-7). The grand jury charges that from about April 2, 2020 through at least April 22, 2021 the defendant applied for PPP loans and EIDLs for a company, Queen B Collectibles, LLC, that was not active as of January 31, 2020, claiming employees and revenue it did not have. It states the SBA disbursed a $3,000 EIDL advance on April 26, 2020 and later $13,500, and that a PPP application claimed an average monthly payroll of $8,616.00. The forfeiture allegation seeks a money judgment of $59,602.00.

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No _

Case 1:22-cr-02059-MKD ECFNo.1 _— filed05/17/22 PagelD.l1 Page1of15

FILED IN THE
U.S. DISTRICT COURT

EASTERN DISTRICT OF WASHINGTON

Vanessa R. Waldref

United States Attorney MAY 17 2022
Eastern District of Washington SEAN F. McAVOY, CLERK
Tyler H.L. Tornabene ~~ SPOKANE, WASHINGTON ~"Y
Dan Fruchter
Assistant United States Attorneys
Frieda K. Zimmerman
Special Assistant United States Attorney
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, 4-22-CR-2059-MKD
Plaintiff, INDICTMENT
V. Vio: 18 U.S.C. § 1343
Wire Fraud
KARLA LETICIA PADILLA-REYNA, (Counts 1-4)
a.k.a. KARLA PADILLA,
18 U.S.C. § 287
Defendant. False, Fictitious, or Fraudulent

Claims
(Counts 5-7)

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 Defendant, KARLA
LETICIA PADILLA-REYNA, was a resident of Yakima, Washington.

INDICTMENT - 1
Co ON DH HA BP W NHN

on DH MN BPW NYO KH CO OO DBA DA NH fF WO NY | CO

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
application 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

INDICTMENT — 2
Case 1:22-cr-02059-MKD ECFNo.1 filed 05/17/22 PagelD.3 Page3of15

the lender to the Small Business Administration (“SBA”), an agency of the United
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.

6. In addition to the PPP loan program, the CARES act also authorized
the Economic Injury Disaster Loan (“EIDL”) program. EIDL is an SBA program
that provides low-interest funding to small businesses, renters, and homeowners
affected by declared disasters.

7. 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 revenues for the 12-month period
preceding the disaster, and cost of goods sold in the 12-month period preceding the
disaster. In the case of EIDLs for COVID-19 relief, the 12-month period was the
year preceding January 31, 2020. The applicant must also certify that all the
information in the application is true and correct to the best of the applicant’s
knowledge.

8. The amount of an EIDL, if the application is approved, is determined
based, in part, on the information provided in the application about employment,

revenue, and cost of goods, as set forth above. Any funds issued under an EIDL or

INDICTMENT - 3
Oo en KH ON FR W NO —

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
Paycheck Protection Program, the EIDL funds cannot be used for the same purpose
as the Paycheck Protection Program funds.

9. EIDL applications are received in cloud-based platforms. The
location of the server through which the EIDL application is submitted is based on
the date the application was processed by SBA and the application number.
During the time period relevant to this Indictment, all EIDL applications were
either received through the DCMS 2.0 servers located in Quincy, Washington, or
in a Microsoft cloud-based platform using a Rapid Finance application, through
SBA servers located in Des Moines, Iowa.

The Scheme

10. The allegations in paragraphs 1 through 9 of this Indictment are
incorporated as though realleged herein.

11. Beginning no later than on or about April 2, 2020, and continuing
through at least April 22, 2021, in the Eastern District of Washington and
elsewhere, Defendant KARLA LETICIA PADILLA-REYNA 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.

12. Specifically, Defendant KARLA LETICIA PADILLA-REYNA,
applied for three PPP loans, receiving two, using false and fraudulent information
about her purportedly active company, Queen B Collectibles, LLC, sometimes held
out as Queen B Enterprises (hereinafter collectively Queen B), with the intent to

defraud, steal, and convert the proceeds of the PPP Loans for Defendant KARLA

INDICTMENT — 4
Case 1:22-cr-02059-MKD ECFNo.1 __ filed 05/17/22 PagelID.55 Page5of15

LETICIA PADILLA-REYNA’s personal use and without any intent to use the
proceeds thereof for any authorized purpose, or any intent to repay the PPP Loans.

13. Additionally, Defendant KARLA LETICIA PADILLA-REYNA,
applied for at least four EIDLs using false and fraudulent information about her
purportedly active company, Queen B, with the intent to defraud, steal, and convert
the proceeds of the EIDLs for Defendant KARLA LETICIA PADILLA-REYNA’s
personal use and without any intent to use the proceeds thereof for any authorized
purpose, or any intent to repay the EIDLs. Of those EIDLs that Defendant
KARLA LETICIA PADILLA-REYNA applied for, she obtained one EIDL with
the intent to defraud, steal, and convert the proceeds of that EIDL for Defendant
KARLA LETICIA PADILLA-REYNA’s personal use and without any intent to
use the proceeds thereof for any authorized purpose, or any intent to repay the
EIDL.

Manner and Means

It was part of this scheme that:
Economic Injury Disaster Loan No. 5405907800
14. Onor about April 2, 2020, Defendant KARLA LETICIA PADILLA-
REYNA, applied for an EIDL by submitting application number 3600537630 to

the SBA under the name of her purported company, Queen B for EIDL Loan No.
5405907800. Defendant KARLA LETICIA PADILLA-REYNA listed Queen B’s
business address as her own personal address as found on her Washington State
Driver’s License.

15. The Defendant KARLA LETICIA PADILLA-REYNA falsely stated,
in the application, that Queen B had 3 employees as of January 31, 2020, that its
gross revenues for the 12-month period prior to January 31, 2020, were

$68,000.00, that its cost of goods sold for the 12-month period prior to January 31,

INDICTMENT — 5
2020, was $35,000.00. Defendant KARLA LETICIA PADILLA-REYNA
indicated that the Employer ID number (“EIN”) for Queen B was 85-0568322.

16. Defendant KARLA LETICIA PADILLA-REYNA 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 and certifications were materially false and
fraudulent. In fact, Queen B was not actively engaged in any business as of
January 31, 2020. On or about April 3, 2020, Defendant KARLA LETICIA
PADILLA-REYNA sought and obtained EIN 85-0568322. Additionally, Queen B
did not have any employees, and was not active, as of January 31, 2020, nor did it
have any receipts in the 12 prior months. Accordingly, Queen B and Defendant
KARLA LETICIA PADILLA-REYNA were not eligible for any EIDL funding.

18. Inher EIDL application, Defendant KARLA LETICIA PADILLA-
REYNA provided a personal bank account in her name for disbursement with
HAPO Community Credit Union (HAPO), account number ending in
XXXXXXXX3010. HAPO is a federally insured financial institution, the deposits of
which are insured by the National Credit Union Administration.

19. Asaresult of the fraud and relying on the materially false and
fraudulent representations and certifications made by Defendant KARLA
LETICIA PADILLA-REYNA, SBA approved the requested EIDL, and, on April
26, 2020, disbursed an advance of $3,000 on EIDL Loan No. 540907800 via the
interstate wires to the HAPO Account ending in 3010 of the Defendant KARLA
LETICIA PADILLA-REYNA located in Richland, Washington in the Eastern
District of Washington.

20. Asaresult of the fraud and relying on the materially false and
fraudulent representations and certifications made by Defendant KARLA
LETICIA PADILLA-REYNA, SBA approved the requested EIDL, and, on May

INDICTMENT — 6
30, 2020, disbursed $13,500 on EIDL Loan No. 540907800 via the interstate wires
to the HAPO Account ending in 3010 of the Defendant KARLA LETICIA
PADILLA-REYNA located in Richland, Washington in the Eastern District of
Washington.

21. Onor about April 6, 2020, Defendant KARLA LETICIA PADILLA
REYNA applied for a second EIDL by submitting application number 3600889558
to the SBA under the name of her purported business, Queen B. Defendant
KARLA LETICIA PADILLA-REYNA listed the “primary business address” of
the purported business as her residential address in Yakima, Washington.

22. The Defendant KARLA LETICIA PADILLA-REYNA falsely and
fraudulently stated, in the application, that Queen B had 3 employees as of January
31, 2020, that its gross revenues for the 12-month period prior to January 31, 2020,
were $69,000.00, that its cost of goods sold for the 12-month period prior to
January 31, 2020, was $35,600.00. Defendant KARLA LETICIA PADILLA-
REYNA indicated that the Employer ID number (“EIN”) for Queen B was 85-
0568322.

23. Onor about April 7, 2020, Defendant KARLA LETICIA PADILLA-
REYNA applied for a third EIDL by submitting application number 3601003312
to the SBA under the name of her purported business, Queen B.

24. The Defendant KARLA LETICIA PADILLA-REYNA falsely and |
fraudulently stated, in the application, that Queen B had 3 employees as of January
31, 2020, that its gross revenues for the 12-month period prior to January 31, 2020,
were $69,750, that its cost of goods sold for the 12-month period prior to January
31, 2020, was $35,000.00. Defendant KARLA LETICIA PADILLA-REYNA
indicated that the Employer ID number (“EIN”) for Queen B was 85-0568322.

25. Onor about April 14, 2020, Defendant KARLA LETICIA PADILLA-
REYNA applied for a fourth EIDL by submitting application number 3601260104

INDICTMENT -— 7
to the SBA under the name of her purported business, Queen B. Defendant
KARLA LETICIA PADILLA-REYNA listed the “primary business address” of
the purported business as her residential address in Yakima, Washington.

26. The Defendant KARLA LETICIA PADILLA-REYNA falsely and
fraudulently stated, in the application, that Queen B had 3 employees as of January
31, 2020, that its gross revenues for the 12-month period prior to January 31, 2020,
were $69,850.00, and that its cost of goods sold for the 12-month period prior to
January 31, 2020, was $35,000.00. Defendant KARLA LETICIA PADILLA-
REYNA indicated that the Employer ID number (“EIN”) for Queen B was 85-
0568322.

Paycheck Protection Program Loan No. 54659282-05

27. Onor about August 7, 2020, Defendant KARLA LETICIA
PADILLA-REYNA submitted an application for PPP loan number 54659282-05 to
the SBA in the name of her purported company, Queen B. Defendant KARLA
LETICIA PADILLA-REYNA listed Queen B’s address has her personal address

on her Washington State Driver’s License.

28. Defendant KARLA LETICIA PADILLA-REYNA falsely and
fraudulently stated in the application for PPP loan number 54659282-05 that
Queen B had been established on October 18, 2018, that it had 4 employees as of
the date of the application, that its average monthly payroll was $8,616.00, and that
its Employer Identification Number (EIN) was 85-0568322. Based on that
information, Defendant KARLA LETICIA PADILLA-REYNA requested a PPP
loan for Queen B in the amount of $21,500.

29. These representations were materially false and fraudulent. Queen B
was not an active business as of February 15, 2020, meaning that Queen B was not
eligible for any PPP funding. The Internal Revenue Service (IRS), which issues
EINs, did not issue EIN 85-0568322 until April 3, 2020. Additionally, records

INDICTMENT — 8
from the Washington Department of Revenue and Washington Employment
Security Department indicate that Queen B did not report any revenue for the year
prior to February 15, 2020, and had no employees or payroll for the year prior to
February 15, 2020, and that a business license in the name of Queen B was issued
by Washington State Department of Revenue on April 3, 2020.

30. PPP loan number 54659282-05 was handled by MBE Capital
Partners, a lending institution located in Fort Lee, New Jersey, on a delegated basis
from the SBA. MBE Capital Partners submitted disbursement details for this loan
into the SBA E-Tran system located in Sterling, Virginia.

31. Onor about August 11, 2020, as a result of the fraudulent scheme
described above, and the materially false and fraudulent information supplied by
Defendant KARLA LETICIA PADILLA-REYNA, MBE Capital Partners
disbursed $21,500 into Defendant KARLA LETICIA PADILLA-REYNA’s
Banner Bank Account located in Walla Walla, Washington, ending in 4618.

32. Onor about October 20, 2021, Defendant KARLA LETICIA
PADILLA-REYNA 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
$14,565 of the loan amount had been used for payroll expenses.

Paycheck Protection Program Loan No. 17213483-08

33. Onor about January 19, 2021, Defendant KARLA LETICIA

PADILLA-REYNA submitted an application for PPP loan number 17213483-08 to

the SBA in the name of her purportedly active company, Queen B. Defendant
KARLA LETICIA PADILLA-REYNA listed Queen B’s address as her personal
address on her Washington State Driver’s License.

34. Defendant KARLA LETICIA PADILLA-REYNA falsely and
fraudulently stated in the application for PPP loan number 17213483-08 that

INDICTMENT -— 9
|

Queen B had been established in 2018, had 3 employees as of the date of the
application, and that its average monthly payroll was $8,641.00. Based on that
information, Defendant KARLA LETICIA PADILLA-REYNA requested a PPP
loan for Queen B in the amount of $21,602.

35. These representations were materially false and fraudulent. Queen B
was not an active business as of February 15, 2020, meaning that Queen B was not
eligible for any PPP funding. The Internal Revenue Service (IRS), which issues
EINs, did not issue EIN 85-0568322 until April 3, 2020. Additionally, records
from the Washington Department of Revenue and Washington Employment
Security Department indicate that Queen B did not report any revenue for the year
prior to February 15, 2020, and had no employees or payroll for the year prior to
February 15, 2020, and that a business license in the name of Queen B was issued
by Washington State Department of Revenue on April 3, 2020.

36. PPP loan number 17213483-08 was handled by Montana Community
Development Corporation, a lending institution located in Missoula, Montana, on a
delegated basis from the SBA. Montana Community Development Corporation
submitted disbursement details for this loan into the SBA E-Tran system located in
Sterling, Virginia.

37. Onor about January 26, 2021, as a result of the fraudulent scheme
described above, and the materially false and fraudulent information supplied by
Defendant KARLA LETICIA PADILLA-REYNA, Montana Community
Development Corporation disbursed $21,602 into Defendant KARLA LETICIA
PADILLA-REYNA’s HAPO Account located in Richland, Washington, ending in
4030, which was not created until December 11, 2020, as a personal business
account for Queen B.

38. Onor about October 20, 2021, Defendant KARLA LETICIA
PADILLA-REYNA falsely and fraudulently requested loan forgiveness of the

INDICTMENT — 10
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
$13,256 of the loan amount had been used for payroll expenses.
Paycheck Protection Program Loan No. 89259688-00

39. Onor about April 22, 2021, Defendant KARLA LETICIA PADILLA-
REYNA submitted an application for PPP loan number 89259688-00 to the SBA
in the name of her purported company, Queen B. Defendant KARLA LETICIA
PADILLA-REYNA listed Queen B’s address as her personal address on her

Washington State Driver’s License.

40. Defendant KARLA LETICIA PADILLA-REYNA falsely and
fraudulently stated in the application for PPP loan number 89259688-00 that
Queen B had been established on August 15, 2017, that it had 4 employees as of
the date of the application, that its average monthly payroll was $25,707.00, and
that its Employer Identification Number (EIN) was 85-0568322. Based on that
information, Defendant KARLA LETICIA PADILLA-REYNA requested a PPP
loan for Queen B in the amount of $64,266.

41. These representations were materially false and fraudulent. Queen B
was not an active company as of February 15, 2020, meaning that Queen B was not
eligible for any PPP funding. The Internal Revenue Service (IRS), which issues
EINs, did not issue EIN 85-0568322 until April 3, 2020. Additionally, records
from the Washington Department of Revenue and Washington Employment
Security Department indicate that Queen B did not report any revenue for the year
prior to February 15, 2020, and had no employees or payroll for the year prior to
February 15, 2020, and that a business license in the name of Queen B was issued
by Washington State Department of Revenue on April 3, 2020.

42. PPP loan number 89259688-00 was handled by MBE Capital

Partners, a lending institution located in Fort Lee, New Jersey, on a delegated basis

INDICTMENT - 11
G

ase 1:22-cr-02059-MKD ECFNo.1 __ filed05/17/22 PagelD.12 Page12o0f15

from the SBA. MBE Capital Partners submitted disbursement details for this loan
into the SBA E-Tran system located in Sterling, Virginia. However, the loan was
canceled because Defendant KARLA LETICIA PADILLA-REYNA did not
supply the requested Schedule C tax form.

Counts 1-4

43. The allegations in paragraphs 1 through 42 of this Indictment are
incorporated as though realleged herein.

44. Onor about each of the dates set forth below, in the Eastern District
of Washington and elsewhere, Defendant KARLA LETICIA PADILLA-REYNA,
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
1 April 26, EFT payment from FMS servers, in Sterling, Virginia, to
2020 HAPO Account ending in 3010 in Richland,
Washington, in the amount of $3,000.00 for EIDL No.
5405907800.

2 May 30, 2020 | EFT payment from FMS servers, in Sterling, Virginia, to
HAPO Account ending in 3010 in Richland,
Washington, in the amount of $13,500.00 for EIDL No.

5405907800.
3 August 11, EFT payment from MBE Capital Partners, in Fort Lee,
2020 New Jersey to Banner Bank Account located in Walla

Walla, Washington, ending in 4618, in the amount of
$21,500 for PPP Loan No. 54659282-05.

4 January 26, EFT payment from Montana Community Development
2021 Corporation, in Missoula, Montana, to HAPO Account
located in Richland, Washington, ending in 4030, in the
amount of $21,602.00 for PPP Loan No. 17213483-08.

All in violation of 18 U.S.C. § 1343.

INDICTMENT — 12
Counts 5-7

45. The allegations in paragraphs 1 through 44 of this Indictment are
incorporated as though realleged herein.

46. On or about each of the dates set forth below, in the Eastern District of
Washington and elsewhere, Defendant KARLA LETICIA PADILLA-REYNA made
and presented to the United States Small Business Administration claims concerning
PPP and EIDL 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 | Date Description

5 | April 2, 2020 EIDL application number 3600537630 in the name of
Queen B Collectibles LLC for an EIDL in the amount
of $13,500.00, plus an additional $3,000 advance.

6 | August 7,2020 | PPP application for PPP Loan No. 54659282-05 in the
name of Queen B Collectibles LLC for an PPP loan in
the amount of $21,500.00.

7 | January 19, 2021 | PPP application number 17213483-08 in the name of
Queen B Collectibles LLC for an PPP loan in the
amount of $21,602.00.

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, as alleged in Counts 1

through 4 of this Indictment, Defendant KARLA LETICIA PADILLA-REYNA

INDICTMENT - 13
Oo FN ND OH HR W NHN —

Gase 1:22-cr-02059-MKD ECFNo.1 _— filed 05/17/22 PagelD.14 Page14of15

shall forfeit to the United States 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

(a)
(b)
(c)
(d)

A sum of money equal to $59,602.00 in United States currency,
representing the amount of proceeds obtained by Defendant, KARLA
LETICIA PADILLA-REYNA from the wire fraud violations.

If any of the property described above, as the result of any act or omission of

Defendant KARLA LETICIA PADILLA-REYNA:

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 -— 14
the United States shall be entitled to forfeiture of substitute property pursuant to 21
U.S.C. § 853(p), as incorporated by 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C.
§ 2461(c).

DATED this | \ day of May 2022.

A TRIIF RITI

Vanessa R. Waldref
United States Attorney

Tyl er H.L. Tornabene
Assistant United States Attorney

Dan Fruchte
Assistant @nited States Attorney

Frieda K.'Zimfyerman
Special Assistant United States Attorney

INDICTMENT — 15.


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