Information, United States of America against Konstantino Zarkadas, Case 2:21-cr-00363, Eastern District of New York

Summary

Information filed by the United States Attorney in the United States District Court for the Eastern District of New York, United States of America against Konstantino Zarkadas, Case 2:21-cr-00363-GRB, Document 4, filed 11/12/21. It charges that between March 30, 2020 and September 1, 2020 Zarkadas, of Glen Cove, New York, submitted at least 11 online PPP and EIDL loan applications with false employee, payroll and use-of-proceeds information for the Subject Entities, obtaining approximately $3.7 million. It alleges he used approximately $24,500 in EIDL proceeds to buy a Rolex wristwatch and approximately $194,915.42 in PPP funds to partially finance a yacht, paid by a check marked 'repayment for payroll'. The counts are disaster relief fraud and wire fraud, with a forfeiture allegation.

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Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 1 of 8 PageID #: 6

CMM:AXB
F. #2020R01096

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------X

UNITED STATES OF AMERICA INFORMATION

- against - Cr. No.
(T. 18, U.S.C., §§ 1040(a)(2),
KONSTANTINO ZARKADAS, 1040(b)(1), 1343, 981(a)(1)(C) and
3551 et seq.; T. 21, U.S.C., § 853(p);
Defendant. and T. 28, U.S.C., § 2461(c))

---------------------------X

THE UNITED STATES ATTORNEY CHARGES:

INTRODUCTION

At all times relevant to this Information, unless otherwise indicated:

The COVID-19 Pandemic in the United States

1. In or about December 2019, a novel coronavirus, SARS-CoV-2 (the

“coronavirus”), was first detected in Wuhan, Hubei Province of the People’s Republic of

China, causing outbreaks of the coronavirus disease COVID-19 that have since spread

globally. On or about January 31, 2020, the Secretary of Health and Human Services

declared a national public health emergency under 42 U.S.C. § 247d as a result of the spread

of COVID-19 to and within the United States. On or about March 11, 2020, the Director-

General of the World Health Organization characterized COVID-19 as a pandemic. On or

about March 13, 2020, the President of the United States issued Proclamation 9994 declaring

a national emergency beginning on March 1, 2020, as a result of the rapid spread of COVID-

19 within the United States.
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 2 of 8 PageID #: 7

The Paycheck Protection Program

2. On or about March 27, 2020, the President signed into law the

Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act was a

federal law 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 up to $349 billion in

forgivable loans to small businesses for job retention and certain other expenses, through a

program referred to as the Paycheck Protection Program (“PPP”). In or around April 2020,

Congress authorized over $300 billion in additional PPP funding.

3. To obtain a PPP loan, qualifying businesses were required to submit a

PPP loan application, which was signed by an authorized representative of the business.

The PPP loan application required recipient businesses, through an authorized representative,

to acknowledge the program rules and make certain affirmative certifications to establish

eligibility for the PPP loan. For example, in the PPP loan application, recipient businesses,

through an authorized representative, were required to state, among other things, their

average monthly payroll expenses and number of employees. These figures were used to

calculate the amount of money the businesses were eligible to receive under the PPP. The

recipient businesses were also required to provide documentation supporting the information

contained in the PPP loan application.

4. PPP loan proceeds were required to be used by the recipient businesses

on certain permissible expenses, to wit: payroll costs, interest on mortgages, rent and

utilities. The PPP allowed the interest and principal on a PPP loan to be entirely forgiven if
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 3 of 8 PageID #: 8

the recipient businesses spent the loan proceeds on these expense items within a designated

period of time after receiving the proceeds and used a certain percentage for payroll costs.

5. The PPP was overseen by the Small Business Administration (“SBA”),

which had authority over all PPP loans. Individual PPP loans, however, were issued and

approved by private lenders, who received and processed PPP loan applications and

supporting documentation and, following SBA approval, made loans using the lenders’ own

funds.

The Economic Injury Disaster Loan Program

6. The Economic Injury Disaster Loan (“EIDL”) program was also

overseen by the SBA and was designed to provide long-term, low-interest loans for small

businesses affected by various natural and economic disasters. The CARES Act provided

funding for EIDL loans for businesses affected by the COVID-19 pandemic. In contrast to

the PPP, EIDL loan amounts were determined based on the recipient businesses’ historical

revenue and disbursed directly by the SBA.

The Defendant and His Fraud Scheme

7. The defendant KONSTANTINO ZARKADAS was a resident of Glen

Cove, New York. ZARKADAS was associated with numerous corporate entities (the

“Subject Entities”), through which he committed the fraud described herein.

8. Between March 30, 2020 and September 1, 2020, both dates being

approximate and inclusive, the defendant KONSTANTINO ZARKADAS engaged in a

scheme to defraud the SBA and several financial institutions administering the PPP and

EIDL programs of federal COVID-19 emergency-relief funds meant for distressed small

businesses. It was a part of the scheme to defraud that ZARKADAS submitted, or caused to
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 4 of 8 PageID #: 9

be submitted, at least 11 online loan applications to obtain funds through the PPP and EIDL

programs for the Subject Entities. It was further a part of the scheme to defraud that these

loan applications and certain supporting documentation contained materially false and

fraudulent information, including, but not limited to, the Subject Entities’ number of

employees, payroll costs and intended use of the loan proceeds, all of which was specifically

designed to mislead the SBA and financial institutions administering the PPP and EIDL

programs into disbursing various loans, which they did.

9. In total, between March 30, 2020 and September 1, 2020, both dates

being approximate and inclusive, as a result of this fraudulent scheme, the SBA and financial

institutions administering the PPP and EIDL programs wire-transferred sums totaling

approximately $3.7 million in PPP and EIDL loans for the Subject Entities to bank accounts

that the defendant KONSTANTINO ZARKADAS established at bank branches in the

Eastern District of New York and elsewhere.

10. Shortly after receiving these loan proceeds, the defendant

KONSTANTINO ZARKADAS engaged in numerous financial transactions designed to

conceal the true nature and source of the funds, including electronically transferring certain

of the loan proceeds between various bank accounts that ZARKADAS owned and controlled.

ZARKADAS then utilized the laundered loan proceeds to enrich himself, including by

discharging personal debts and making extravagant purchases. For example, on or about

June 29, 2020, ZARKADAS used approximately $24,500 in EIDL loan proceeds to purchase

a Rolex wristwatch. Thereafter, on or about July 16, 2020, ZARKADAS used

approximately $194,915.42 in PPP funds to partially finance a yacht, which sum he paid by

personal check. To conceal the true nature and source of these funds, ZARKADAS made
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 5 of 8 PageID #: 10

the check payable to his sister, who was not the ultimate intended recipient of the funds, and,

in the check’s memo line, wrote “repayment for payroll,” when, as ZARKADAS then and

there well knew and believed, the check would not be used for payroll or any other

permissible purpose under the PPP program.

COUNT ONE
(Disaster Relief Fraud)

11. The allegations contained in paragraphs one through ten are realleged

and incorporated as if fully set forth in this paragraph.

12. In or about and between March 2020 and July 2020, both dates being

approximate and inclusive, within the Eastern District of New York and elsewhere, the

defendant KONSTANTINO ZARKADAS did knowingly and intentionally make one or

more materially false, fictitious, and fraudulent statements and representations, and make and

use one or more false writings and documents knowing the same to contain materially false,

fictitious, and fraudulent statements and representations, in connection with a procurement of

property and services related to an emergency declaration under Section 501 of the Stafford

Act, to wit: Proclamation 9994 of March 13, 2020 by the President of the United States of

America Declaring a National Emergency Concerning a Novel Coronavirus Disease

(COVID-19) Outbreak, which benefits were authorized, transported, transmitted, transferred,

disbursed and paid in and affecting interstate and foreign commerce.

(Title 18, United States Code, Sections 1040(a)(2), 1040(b)(1) and 3551 et

seq.)
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 6 of 8 PageID #: 11

COUNT TWO
(Wire Fraud)

13. The allegations contained in paragraphs one through ten are realleged

and incorporated as if fully set forth in this paragraph.

14. In or about and between March 2020 and July 2020, both dates being

approximate and inclusive, within the Eastern District of New York and elsewhere, the

defendant KONSTANTINO ZARKADAS did knowingly and intentionally devise a scheme

and artifice to defraud the SBA and one or more financial institutions administering the PPP

and EIDL programs, and to obtain money and property from the SBA and said financial

institutions by means of materially false and fraudulent pretenses, representations and

promises, and for the purpose of executing such scheme and artifice did transmit and cause to

be transmitted, by means of wire communication in interstate and foreign commerce, one or

more writings, signs, signals, pictures and sounds, to wit: fraudulent online applications for

one or more PPP and EIDL loans for the Subject Entities.

(Title 18, United States Code, Sections 1343 and 3551 et seq.)

CRIMINAL FORFEITURE ALLEGATION
AS TO COUNT TWO

15. The United States hereby gives notice to the defendant that, upon his

conviction of the offense charged in Count Two, the government will seek forfeiture in

accordance with Title 18, United States Code, Section 981(a)(1)(C) and Title 28, United

States Code, Section 2461(c), which require any person convicted of such offense to forfeit

any property, real or personal, constituting, or derived from, proceeds obtained directly or

indirectly as a result of such offense, including but not limited to:
Case 2:21-cr-00363-GRB Document 4 Filed 11/12/21 Page 8 of 8 PageID #: 13

F.#: 2020R01096
FORM DBD-34 No.
JUN 85

UNITED STATES DISTRICT COURT
EASTERN District of NEW YORK

CRIMINAL DIVISION

THE UNITED STATES OF AMERICA
vs.

KONSTANTINO ZARKADAS,
Defendant.

INFORMATION
(T. 18, U.S.C., §§ 1040(a)(2), 1040(b)(1), 1343, 981(a)(1)(C) and 3551
et seq.; T. 21, U.S.C., § 853(p); and T. 28, U.S.C., § 2461(c))
A true bill.

________________________________________
Foreperson

Filed in open court this _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ day,

of _ _ _ _ _ _ _ _ _ _ _ _ A.D. 20 _ _ _ _ _

_______________________________________
Clerk

Bail, $ _ _ _ _ _ _ _ _ _ _ _
_________________________________

Anthony Bagnuola, Assistant U.S. Attorney (631) 715-7849

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