Letter to Judge Brown Re: United States v. Konstantinos Zarkadas (Dkt. 17, E.D.N.Y.)
Summary
In a letter to Judge Gary R. Brown dated March 11, 2022, federal prosecutors in the Eastern District of New York asked for a sentence within the guidelines range of 63 to 78 months for Konstantinos Zarkadas, a medical doctor, plus a fine of not less than $80,000 and full restitution. The letter says that between March 30 and July 20, 2020, Zarkadas applied for 11 separate PPP and/or EIDL loans on behalf of six entities and was approved for approximately $3,796,849.50. According to the letter, the money paid for Cartier and Rolex watches valued at $140,000, $194,915.42 toward the down payment on a yacht for a brother-in-law, approximately $3 Million toward a civil judgment and $80,000 to settle a government lawsuit. Zarkadas pleaded guilty on November 13, 2021 to disaster relief fraud and wire fraud and forfeited $200,000 and four wristwatches.
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Case 2:21-cr-00363-GRB Document 17 Filed 03/11/22 Page 1 of 7 PageID #: 153
U.S. Department of Justice
United States Attorney
Eastern District of New York
NB:AXB 610 Federal Plaza
F. #2020R01096 Central Islip, New York 11722
March 11, 2022
By ECF
Honorable Gary R. Brown
United States District Judge
Eastern District of New York
100 Federal Plaza
Central Islip, New York 11722
Re: United States v. Konstantinos Zarkadas
Criminal Docket No. 21-363 (GRB)
Dear Judge Brown:
The government respectfully submits this letter in connection with the
sentencing of defendant Konstantinos Zarkadas, which is scheduled for March 18, 2022. As
set forth in the Presentence Investigation Report (“PSR”), the United States Probation Office
(“Probation”) has estimated that the applicable United States Sentencing Guidelines range
for the defendant is 63 to 78 months’ imprisonment. (PSR ¶ 70.) The government
respectfully submits that a sentence within this range, together with a fine of not less than
$80,000 and full restitution to the government, would be sufficient, but not greater than
necessary, to achieve the goals of sentencing in this case.
I. The Offense of Conviction
On March 1, 2020, in reaction to the rapid spread of COVID-19 within the
United States, the President declared a state of national emergency. (PSR ¶ 6.) On March
27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, which was designed to provide financial assistance to the millions of
Americans who were suffering the economic effects of the COVID-19 pandemic. (Id. ¶ 7.)
Through the Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan
(“EIDL”) system, the CARES Act authorized hundreds of billions of dollars’ worth of loans,
many of which were forgivable, to distressed small businesses to use for job retention and
other critical expenses. (Id. ¶¶ 7-9.)
Against that backdrop, the defendant—a medical doctor with a net worth
exceeding $2 Million—set out to fraudulently obtain millions of dollars’ worth of these
Case 2:21-cr-00363-GRB Document 17 Filed 03/11/22 Page 2 of 7 PageID #: 154
disaster relief loans, which he would ultimately use to make extravagant personal purchases
and maintain a lavish lifestyle.
Between March 30, 2020—just three days after the enactment of the CARES
Act—and July 20, 2020, the defendant applied for 11 separate PPP and/or EIDL loans on
behalf of corporate entities he controlled. (PSR ¶¶ 10-11.) The applications contained
materially false information concerning a range of criteria specifically designed to allow the
Small Business Administration and lending institutions administering the programs to
distinguish between qualifying and non-qualifying applicants. These criteria included, but
were not limited to, the entities’ number of employees, payroll costs, and intended use of the
loan proceeds. (Id. ¶ 10.) Based on the false information he provided, the defendant was
approved for approximately $3,796,849.50 worth of disaster relief funds, all of which were
deposited into bank accounts he controlled. (Id.)
Immediately upon receiving these funds, to conceal their true source and
fraudulent nature, the defendant laundered them through various bank accounts he
controlled. (PSR ¶ 12.) He then used the loan proceeds in a number of patently improper
ways, all of which were meant to enrich himself. (Id.) For example, the defendant bought
himself and his family members Cartier and Rolex wristwatches collectively valued at
$140,000. (Id.; Def. Sent’g Memo 2.) The defendant also used $194,915.42 worth of
disaster relief funds to finance the down payment on a yacht for his brother-in-law. (PSR
¶ 12.) Acutely aware that he was misusing the loan proceeds, the defendant made this
payment via check payable to his sister and wrote “repayment for payroll” in its memo line.
(Id.) Notably, the sister was not involved in the transaction; the check was issued to her
solely for the purpose of further concealing the defendant’s fraud. (Id.) The defendant also
used approximately $3 Million of disaster relief funds to partially discharge a civil judgment
entered in a lawsuit stemming from the defendant’s breach of a commercial real estate lease.
(Id. ¶ 63 n.3.)
Rather shockingly, the defendant even used $80,000 of fraud proceeds to settle
a lawsuit brought by the Civil Division of the United States Attorney’s Office in this district.
(PSR ¶ 15.) As explained in the PSR, in United States v. Zarkadas, 20-CV-3410 (GRB), the
government alleged, inter alia, that the defendant dispensed more than 20,000 doses of
Phentermine, an amphetamine-like weight loss drug, without keeping accurate records of the
transactions and failed to comply with other recordkeeping obligations imposed by the
Controlled Substances Act. (Id.) Shortly before his guilty plea in this case, on October 8,
2020, the defendant used $80,000 in COVID-19 emergency relief funds to settle that lawsuit
without admitting wrongdoing. (Id.)
On November 13, 2021, the defendant appeared before this Court and pleaded
guilty to a two-count Information charging him with disaster relief fraud and wire fraud, in
violation of Title 18, United States Code, Sections 1040 and 1343, respectively. (PSR ¶¶ 1-
3.) Pursuant to the parties’ plea agreement, at the time of his plea, the defendant forfeited the
sum of $200,000 and four wristwatches. (Id. ¶ 14.)
2
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II. Guidelines Calculation
The Guidelines calculation, as set forth in the PSR, is as follows:
Base Offense Level (§ 2B1.1(a)(1)) 7
Plus: Loss Exceeding $3.5 Million (§ 2B1.1(b)(1)(J)) +18
Plus: Fraud in Connection with Major Disaster or
Emergency Relief Benefits (§ 2B1.1(b)(12)) +2
Plus: Derivation of at Least $1 Million from Financial
Institutions (§ 3C1.1) +2
Less: Acceptance of Responsibility (§ 3E1.1(a)-(b)) -3
Total: 26
(PSR ¶¶ 21-32.) Accordingly, based upon a total offense level of 26 and Criminal History
Category I, the applicable Guidelines range for the defendant is 63 to 78 months’
imprisonment.1 (Id. ¶ 70.) Probation has recommended a principal sentence of 63 months’
imprisonment.
III. Argument
As set forth herein, a fair application of the § 3553(a) factors compels the
conclusion that a Guidelines sentence is sufficient, but not greater than necessary, to achieve
the goals of sentencing in this case.
Initially, the Guidelines accurately reflect the seriousness of the defendant’s
crime. See 18 U.S.C. § 3553(a)(2)(A). In a once-in-a-generation public health crisis, the
defendant saw an opportunity to manipulate a government welfare program for his own self-
enrichment. In that regard, it bears emphasizing the deliberate and repeated steps the
defendant took to effectuate his fraud—taking time away from his personal and professional
life amid the COVID-19 pandemic to create and submit 11 separate fraudulent loan
applications, on behalf of six different entities, over the course of several months. Notably,
accompanying each application were fake tax documents purporting to show that a particular
corporate entity was financially distressed when, in actuality, the defendant had no intention
of using any loan proceeds to support those businesses or their employees. That the
defendant began this venture just three days after the enactment of the CARES Act, when
1
Under § 1B1.1.11 of the Guidelines, Count One and Count Two of the Information
are grouped for purposes of determining the applicable offense level. (PSR ¶ 20.)
3
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