Information — United States v. Luquay Zahir, District of New Jersey

Summary

An Information in United States v. Luquay Zahir in the United States District Court, District of New Jersey, stating that the defendant waived in open court prosecution by indictment. Count 1 (False Statements to Influence the Small Business Administration) cites 15 U.S.C. § 645(a), and Count 2 (Wire Fraud) cites 18 U.S.C. § 1343. Count 1 alleges that on or about July 9, 2020, Zahir submitted an Economic Injury Disaster Loan application for a business described only as “Advertising Sales,” representing ten employees and $100,000 in gross revenue. Count 2 alleges that on or about March 20, 2021, Zahir submitted a PPP loan application requesting a $20,400 loan, and that on or about August 12, 2021 the SBA sent a letter authorizing complete loan forgiveness.

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“Information — United States v. Luquay Zahir, District of New Jersey.” Original at www.justice.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/information-united-states-v-luquay-zahir-d-n-j-ad507580cd/, SHA-256 8c56ba62a695d45d70438bae53ec52b6a58f15d012ab9985f0517968d1748281.

Full text

2021R00932/EAB

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA : Hon.
:
: Criminal No. 24-
v. :
: 15 U.S.C. § 645(a)
: 18 U.S.C. § 1343
LUQUAY ZAHIR :

INFORMATION

The defendant having waived in open court prosecution by indictment, the

United States Attorney for the District of New Jersey charges:

Count 1
(False Statements to Influence the Small Business Administration)

1. At all times relevant to this Information:

The Paycheck Protection Program and Economic Injury Disaster Loans

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

Act was a federal law enacted in or about March 2020 and 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 about April 2020,

Congress authorized over $300 billion in additional PPP funding. The PPP ended on

or about May 31, 2021.
b. 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 loan application,

the small business was required to state, among other things, its: (a) average

monthly payroll expenses; and (b) number of employees. These figures were used to

calculate the amount of money the small business was eligible to receive under the

PPP. In addition, businesses applying for a PPP loan had to provide documentation

showing their payroll expenses.

c. A PPP loan application had to be processed by a participating

lender. If the PPP loan application was approved, the participating lender funded

the PPP loan using its own money, which was 100% guaranteed by the U.S. Small

Business Administration (“SBA”). Data from the application, including information

about the borrower, the total amount of the loan, and the listed number of

employees, was transmitted by the lender to the SBA while processing the loan.

d. PPP loan proceeds could only be used by the business on certain

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

PPP allowed the interest and principal on the PPP loan to be forgiven if the

business spent the loan proceeds on these eligible expense items within a

designated period of time after receiving the proceeds and used a certain amount of

the PPP loan proceeds on payroll expenses.

2
e. The CARES Act also authorized the SBA to provide Economic

Injury Disaster Loans (“EIDL”) in the form of low-interest financing to help small

businesses recover from the economic impacts of the COVID-19 pandemic. There

were two types of COVID-19 EIDL funding: (i) COVID-19 EIDL loans which could

be used for working capital and other normal operating expenses; and (ii) EIDL

advance funds. The EIDL loans were not forgivable and borrowers were required to

repay the principal and interest on the loans. The EIDL advances, on the other

hand, were for a fixed amount and were not required to be repaid. The EIDL

program ended on or about December 31, 2021.

f. In order to obtain an EIDL loan or advance, a qualifying

business was required to submit an application to the SBA and provide information

about its operations, such as the number of employees, gross revenues, and cost of

goods sold in the 12-month period preceding the disaster. In addition, the business

entity must have been in operation on February 1, 2020. The amount of the EIDL

awarded to a small business was determined, in part, on the information provided

by the applicant about employment, revenue, and cost of goods of the company. The

SBA directly issued any funds disbursed under an EIDL to the applicant company.

A company could use EIDL funds for payroll expenses, sick leave, production costs,

and business obligations, such as debts, rent, and mortgage payments. If an

applicant also obtained a loan under the PPP, the applicant company was

prohibited from using EIDL funds for the same purpose as the PPP funds.

3
Luquay Zahir’s EIDL Application

2. Luquay Zahir (“ZAHIR”) was a Ross Family Service Coordinator for

the Atlantic City Housing Authority and Urban Redevelopment Agency. In that

capacity, ZAHIR was required to coordinate available resources to meet the needs of

Atlantic City’s public housing residents.

3. On or about July 9, 2020, ZAHIR submitted an EIDL application to the

SBA on behalf of a business he claimed to own, which he described in the application

only as “Advertising Sales.” In the application, ZAHIR represented that the business

had ten employees and earned $100,000 in gross revenue during the period from

February 1, 2019 through January 31, 2020. ZAHIR further represented that the

business incurred $10,000 in costs of goods sold over that same yearlong period. At

the end of the application, ZAHIR certified under penalty of perjury that the

information he provided in the application was “true and correct,” even though he

knew much of the material information he provided was false.

4. In the application, ZAHIR sought an EIDL loan, and an additional

$10,000 EIDL advance.

5. In the application, ZAHIR provided the address of his residence in

Atlantic City (the “Atlantic City Residence”) as the business address. Surveillance

conducted by law enforcement revealed that the Atlantic City Residence was a

single-family apartment that was not suitable for a ten-employee business.

Additionally, over two days of physical surveillance conducted at the Atlantic City

4
Residence after the period for which ZAHIR sought EIDL funds, law enforcement did

not observe any employees entering or exiting the Atlantic City Residence.

6. Internal Revenue Service (“IRS”) records confirmed that ZAHIR did

not file an IRS Form Schedule C 1 with the IRS in 2019. IRS records further

confirmed that neither ZAHIR nor a business at the Atlantic City Residence

reported income in the amount of $100,000 to the IRS in 2019.

7. Also, a search for business entity records filed with the New Jersey

Department of the Treasury, Division of Revenue and Enterprise Services (“Division

of Revenue and Enterprise Services”) showed that there were no business

registration filings related to ZAHIR’s purported advertising sales business.

8. In reliance on these material misrepresentations, on or about July 14,

2020, the SBA disbursed approximately $10,000—the full amount of the advance

requested by ZAHIR—to a bank account held by ZAHIR (the “bank account”).

Thereafter, ZAHIR caused multiple debits from the bank account, including, among

others, payments to a variety of commercial merchants for what appear to be non-

business related expenses and multiple ATM cash withdrawals. The SBA denied

ZAHIR’s application for the EIDL loan on the ground that ZAHIR had an

unsatisfactory credit history.

1 A Schedule C is a form used to report income or loss from a business that is

attached to a tax filer’s IRS Form 1040 annual income tax return.

5
9. On or about July 9, 2020, in the District of New Jersey and elsewhere,

defendant

LUQUAY ZAHIR

did knowingly make false statements for the purpose of obtaining for himself a loan

and for the purpose of influencing in any way the action of the U.S. Small Business

Administration.

In violation of Title 15, United States Code, Section 645(a).

6
Count 2
(Wire Fraud)

10. The allegations set forth in Paragraphs 1 and 2 of Count 1 of this

Information are realleged here.

ZAHIR’s PPP Loan Application

11. On or about March 20, 2021, ZAHIR submitted a PPP loan application

to a small business lender headquartered in New York, New York that was enrolled

in the PPP and approved by the SBA to loan funds to small businesses through the

PPP (“Lender-1”). In the application, ZAHIR, claimed he was an independent

contractor, and requested a $20,400 PPP loan on behalf of business which ZAHIR

identified in the application only as “Luquay Zahir.” ZAHIR further claimed in the

application that he was the sole owner of the business.

12. In the PPP loan application, Zahir provided the Atlantic City

Residence in the section titled: “Business Address.” Additionally, a purported

Schedule C for 2019 was attached to the PPP loan application, that identified the

business as: “Barber,” and provided the Atlantic City Residence on the Schedule C

in the section titled: “Business address.” Further, the purported Schedule C

indicated that Zahir’s barbershop business earned $97,919 in profit in 2019.

13. The PPP loan application required ZAHIR to provide the “Total

Amount of Gross Income” earned by the applicant’s business in either tax year 2019

or 2020. Further, the SBA required the gross income stated by the applicant on the

form to be reflected in a tax year 2019 or 2020 “IRS Form 1040, Schedule C.” ZAHIR

7
elected to provide purported gross income for tax year 2019 and, as discussed above,

included with the application a document purporting to be a 2019 Schedule C.

14. Further as part of the PPP loan application, ZAHIR claimed that

during tax year 2019, the business earned $97,920 in gross income, approximately

the same amount claimed on the Schedule C as profit. ZAHIR further represented

in the PPP loan application that he would use any funds disbursed by the SBA for

payroll costs, and claimed that his business had one employee, himself. At the end

of the application, ZAHIR certified that “the information in this application and the

information provided in all supporting documents and forms is true and accurate in

all material respects. I understand that knowingly making a false statement to

obtain a guaranteed loan from SBA is punishable under the law . . . .” Based on the

reported gross income of $97,920 from tax year 2019, ZAHIR qualified for a PPP

loan in the amount he had requested, that is $20,400.

15. In reliance on these material misrepresentations, on or about April 8,

2021, Lender-1 disbursed approximately $20,400—the full amount applied for—to

the bank account. Thereafter, ZAHIR caused multiple debits from the bank account,

including, among others, multiple hundred dollar or more ATM cash withdrawals, a

$2,000 online banking transfer, multiple thousand-dollar or more transfers to cash

applications, including Zelle and Cash App, and multiple payments to commercial

merchants for what appear to be non-business related expenses.

8
16. IRS records confirmed that in 2019 neither ZAHIR nor the barbershop

business reported income to the IRS in the amount reflected on the 2019 Schedule C

attached to the PPP loan application.

17. Also, a search for business entity records filed with the Division of

Revenue and Enterprise Services showed that there were no business registration

filings related to ZAHIR’s purported barbershop business or related to his purported

business as an “independent contractor.”

18. On or about August 6, 2021, ZAHIR signed a PPP Loan Forgiveness

Application seeking to have the entire $20,400 loan forgiven. In the Loan

Forgiveness Application, ZAHIR represented that he had spent $18,000 of the loan

on payroll costs. On or about August 12, 2021, the SBA sent ZAHIR a letter

authorizing complete loan forgiveness of his $20,400 PPP loan. Under SBA rules,

ZAHIR was not required to repay the $10,000 EIDL advance.

19. ZAHIR held no licenses in the field of cosmetology and hairstyling.

20. On or about August 13, 2021, the SBA electronically transferred by

Automated Clearing House (“ACH”) $20,471.40 to an account held by Lender-1,

thereby forgiving ZAHIR’s PPP loan, as set forth in paragraph 18, above. That ACH

transaction was initiated by the SBA in Colorado and resulted in funds being wired

from Colorado and received in an account at a financial institution in New York.

Accordingly, that electronic transfer traveled in interstate commerce.

9
21. From in or about March 2021 through in or about August 2021, in the

District of New Jersey and elsewhere, defendant

LUQUAY ZAHIR

did knowingly and intentionally devise and intend to devise a scheme and artifice to

defraud and to obtain money and property by means of materially false and

fraudulent pretenses, representations, and promises, and, for the purpose of

executing and attempting to execute such scheme and artifice to defraud, did

knowingly and intentionally transmit and cause to be transmitted by means of wire

communication in interstate and foreign commerce certain writings, signs, signals,

pictures and sounds.

In violation of Title 18, United States Code, Section 1343.

Vikas Khanna (by RLW)
VIKAS KHANNA
Acting United States Attorney

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