United States v. Michael Lain — Plea Agreement and Statement of Facts (D. Colo., Dkt. 17)

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A Plea Agreement and Statement of Facts Relevant to Sentencing in United States of America v. Michael Lain in the U.S. District Court for the District of Colorado, between Assistant United States Attorneys Pegeen D. Rhyne and Patricia Davies and the defendant, represented by Sabra Barnett and Joey Hamby. The defendant agrees to waive indictment and plead guilty to a single-count Information charging wire fraud under 18 U.S.C. § 1343, to pay $600,000 toward restitution at or before sentencing and not to contest a money judgment of $4,138,937.59. The stipulated facts state that 70 EIDL applications for LLCs controlled by the defendant were funded, yielding $3,830,400 in EIDL proceeds and $336,000 in grant proceeds. Total agreed restitution is $4,433,837.59, including $294,900 in PPP funds. The government agrees to recommend a low-end sentence at a total offense level of 22.

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO

Criminal Case No. 2\-cv- \15- WJM

UNITED STATES OF AMERICA

Plaintiff,
Vv.
1. MICHAEL LAIN,

Defendant,

PLEA AGREEMENT AND STATEMENT OF FACTS
RELEVANT TO SENTENCING

The United States of America, by and through Pegeen D. Rhyne and Patricia
Davies, Assistant United States Attorneys for the United States Attorney’s Office for the
District of Colorado (the “government”), and the defendant, Michael Lain (“Lain” or the
“defendant’), personally and by counsel, Sabra Barnett and Joey Hamby, submit the
following Plea Agreement pursuant to D.C.COLO.LCrR 11.1. This agreement binds
only the Criminal Division of the United States Attorney's Office for the District of
Colorado and the defendant.

1. AGREEMENT

A. Defendant’s Plea of Guilty:
The defendant agrees:

(1) to waive indictment and plead guilty to a single-count Information,

Court Exhibit

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(6)
(6)

charging a violation of 18 U.S.C. § 1343 (wire fraud);

to waive certain appellate and collateral attack rights, as explained in
detail below;

to be liable for restitution to the SBA and Comerica Bank California in the
amount of $4,433,837.59 with further details regarding the apportionment
of the restitution to be provided at sentencing;

to pay $600,000 toward restitution at or before the time of sentencing.
not to contest forfeiture as more fully described below; and

to pay the $100 special monetary assessment applicable to this count at

or before the time of sentencing.

B. The Government’s Obligations:

This agreement is made pursuant to Fed.R.Crim.P.11(c)(1)(A). The government

agrees not to bring other charges against the defendant based on information currently

known to the United States Attorney’s Office, District of Colorado concerning fraud

against the government programs described below. Should the plea of guilty be

vacated on the motion of the defendant, the government may, in its sole discretion, file

an indictment with additional charges.

The government agrees that the defendant should receive a two-level reduction

for acceptance of responsibility pursuant to USSG § 3E1.1(a). If the defendant does

not engage in prohibited conduct or otherwise implicate USSG § 3C1.1, the government

agrees to file a motion requesting that the defendant receive a one-level reduction for

acceptance of responsibility pursuant to USSG § 3E1.1(b).

The government agrees to recommend a sentence at the low-end of the

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applicable guideline range for the criminal history calculated by the Court at sentencing
and a total offense level of 22.
C. Defendant’s Waiver of Appeal:

The defendant is aware that 18 U.S.C. § 3742 affords the right to appeal the
sentence, including the manner in which that sentence is determined. Understanding
this, and in exchange for the concessions made by the government in this agreement,
the defendant knowingly and voluntarily waives the right to appeal any matter in |
connection with this prosecution, conviction, or sentence (including the restitution
order), unless it meets one of the following criteria:

(1) the sentence exceeds the maximum penalty provided in the statute
of conviction, 18 U.S.C. § 1343;

(2) the sentence exceeds the top end of the advisory guideline range
from the Sentencing Guidelines that applies for the defendant's
criminal history (as determined by the district court) at a total offense
level of 22; or

(3) the government appeals the sentence imposed.

If any of these three criteria apply, the defendant may appeal on any ground that is

properly available.in an appeal that follows a guilty plea.

The defendant also knowingly and voluntarily waives the right to challenge this
prosecution, conviction, or sentence (including the restitution order) in any collateral
attack (including, but not limited to, a motion brought under 28 U.S.C. § 2255. This
waiver provision does not prevent the defendant from seeking relief otherwise available

in a collateral attack on any of the following grounds:

(1) the defendant should receive the benefit of an explicitly retroactive change
in the sentencing guidelines or sentencing statute;

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(2) the defendant was deprived of the effective assistance of counsel; or

(3) the defendant was prejudiced by prosecutorial misconduct.

D: Forfeiture of Assets:

The defendant admits the forfeiture allegations. The defendant further agrees to
forfeit to the United States immediately and voluntarily any and all assets and property,
or portions thereof, subject to forfeiture, pursuant to Title 18, United States Code,
Sections 981(a)(1)(C) and Title 28, United States Code, Section 2461(c), whether in the
possession or control of the United States, the defendant, the defendant's nominees, or
elsewhere. The assets to be forfeited specifically include, but are not limited to: a
money judgment in the amount of $4,138,937.59. The defendant agrees and consents
to the forfeiture of these assets pursuant to any federal criminal, civil, and/or
administrative forfeiture action. The defendant further agrees to the forfeiture of any
substitute assets up to the value of any property described above pursuant to 21 U.S.C.
§ 853(p) and Federal Rules of Criminal Procedure 32.2(e).

Forfeiture of the defendant's assets shall not be treated as satisfaction of any
fine, restitution, cost of imprisonment, or any other penalty this Court may impose upon
the defendant in addition to forfeiture.

The United States Attorney's Office for the District of Colorado will recommend to
the Attorney General that any net proceeds derived from the sale of the judicially
forfeited assets be remitted or restored to eligible victims of the offense, for which the
defendant has pleaded guilty, pursuant to 18 U.S.C. § 981(e), 28 C.F.R. pt. 9, and any

other applicable laws, if the legal requirements for recommendation are met. The

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defendant understands that the United States Attorney’s Office only has authority to i.
recommend such relief and that the final decision of whether to grant relief rests solely
with the Department of Justice, which will make its decision in accordance with
applicable law.
ll. ELEMENTS OF THE OFFENSE
The parties agree that the elements of the wire fraud offense charged in the

single-count Information are as follows:

A. The defendant devised a scheme to defraud;
B. The defendant acted with specific intent to defraud;
C. The defendant used, or caused another person to use, interstate or

foreign wire communications facilities for the purpose of carrying
out the scheme; and

D. The scheme employed false or fraudulent pretenses,
representations, or promises that were material. '

lil. STATUTORY PENALTIES

The maximum statutory penalty for a violation of 18 U.S.C. § 1343 is: not more
than 20 years of imprisonment, a fine of not more than the greater of $250,000 or twice
the gain or loss from the offense, or both; not more than 3 years of supervised release;
a $100 special assessment fee; plus $4,433,837.59 in restitution.

IV. COLLATERAL CONSEQUENCES

The conviction may cause the loss of civil rights, including, but not limited to, the

' Tenth Circuit Pattern Jury Instructions (Criminal Cases), 2011, § 2.57 (updated 2018).
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rights to possess firearms, vote, hold elected office, and sit on a jury.

V._ STIPULATION OF FACTS

The factual basis for this plea is set forth below. Because the Court must, as
part of its sentencing methodology, compute the advisory guideline range for the
offense of conviction, consider relevant conduct, and consider the other factors set forth
in 18 U.S.C. § 3553, additional facts that may be included below which are pertinent to
those considerations and computations. To the extent the parties disagree about the
facts set forth below, the stipulation of facts identifies which facts are known to be in
dispute at the time of the execution of the plea agreement.

This stipulation of facts does not preclude either party from presenting non-
contradictory additional facts which are relevant to the Court’s guideline computation, to
other 18 U.S.C. § 3553 factors, or to the Court's overall sentencing decision.

The parties stipulate that the following facts are true and correct.

On March 27, 2020, the President of the United States signed into law the
Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided
emergency assistance, administered by the United States Small Business
Administration (SBA), to small business owners affected by the Coronavirus (COVID-
19) pandemic. The two sources of funding for small businesses were the Paycheck
Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL) program.
The CARES Act mandated that only businesses in operation before February 1, 2020,
were eligible under the EIDL program. Under the EIDL program, a small business
could receive a loan in an amount of up to six months of working capital with a

maximum of $150,000 during all times relevant to this plea agreement. The SBA
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determined the amount of the loan for which each small business was eligible based, in
part, on the amount of gross revenues and cost of goods sold for the business set forth
in the EIDL application. The CARES Act also allowed eligible businesses submitting
EIDL applications to request in the same application an advance grant of up to $10,000,
which was frequently provided based on a $1,000-per-employee basis up to the
$10,000 maximum.

From March 2020 through in or about the end of June 2020, defendant Michael
Lain knowingly and with the intent to defraud submitted fraudulent EIDL applications to
the SBA on behalf of more than 70 LLCs seeking both loans and grants from the
program. 70 of those EIDL applications were approved and funded by the SBA. Asa
result of those 70 fraudulent EIDL applications, LLCs controlled by Lain received
$3,830,400 in EIDL proceeds and $336,000 in Economic Injury Disaster Grant (EIDG)
proceeds.

In at least 59 of those EIDL applications, Lain knowingly and with the intent to
defraud made false statements about the number of employees each LLC had as of
January 31, 2020. In all of those EIDL applications, Lain knowingly and with the intent
to defraud made false statements about the amount of gross revenues and cost of
goods sold that each LLC had in the 12 months prior to January 31, 2020. In all of the
applications, Lain falsely certified that these statements were true and correct under the
penalties of perjury. In fact, as Lain well knew, none of the 70 LLCs was a company
with any employees or any gross revenue or cost of goods sold in the 12 months prior
to January 31, 2020. Additionally, in connection with each of the 70 loans, Lain signed

a Loan Authorization and Agreement. In all of those documents, Lain falsely agreed to

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“use all proceeds of this Loan solely as working capital to alleviate economic injury
caused by the disaster occurring in the month of January 31, 2020 and continuing
thereafter and to pay Uniform Commercial Code (UCC) lien filing fees and a third-party
UCC handling charge of $100 which will be deducted from the Loan amount.” In fact,
as Lain had intended when he signed and submitted each of the EIDL applications, Lain
used the EIDL proceeds for other purposes, including using the funds toward the
purchase of a new home.

On June 20, 2020, Lain knowingly and with the intent to defraud submitted a
fraudulent EIDL application to the SBA on behalf of Ramnauxtly PMB 304, LLC seeking
a loan and a grant of up to $10,000. On that application, in order to create the false
impression that Ramnauxtly PMB 304, LLC was a company that was active and in
operation in the year prior to January 31, 2020, Lain falsely stated that Ramnauxtly
PMB 304, LLC: (1) had 7 employees as of January 31, 2020; (2) gross revenues of
$325,500 in the 12 months prior to January 31, 2020; and (3) cost of goods sold of
$106,250 in the 12 months prior to January 31, 2020. In fact, and as Lain well knew,
Ramnauxtly PMB 304, LLC had no employees as of January 31, 2020, and had no
gross revenues or cost of goods sold in the 12 months prior to January 31, 2020. In
response to this fraudulent EIDL application, the SBA approved and funded a loan of

$116,200 and a grant of $7,000 to Ramnauxtly PMB 304, LLC. Interstate wire: On

June 26, 2020, the SBA in Denver, Colorado created and certified the payment file for
this loan to Ramnauxtly PMB 304, LLC and transmitted it via interstate wire
communications from Colorado to the U.S. Treasury processing site located in the

Kansas City Regional Operations Center in Kansas City, Missouri. After a computer
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operator at the U.S. Treasury disbursing office in Kansas City, Missouri performed
payment operations to complete the processing of the file, an Automated Clearing
House (ACH) payment file was transmitted to the Federal Reserve Bank ACH
processing site in New Jersey. The Federal Reserve Bank in New Jersey processed
the payment file and sent $116,100 to Comerica Bank California in Michigan with
Ramnauxtly PMB 304, LL designated as the payee.

On March 23, 2021, Lain paid $27,462.41 to the SBA to repay seven of these
fraudulently obtained EIDL loans. At that time, Lain had already been contacted by
investigators regarding his EIDL applications in that United States Secret Service
agents interviewed Lain and his wife about the applications on February 16, 2021.

In addition to the fraudulent EIDL applications, Lain also submitted to the SBA
several fraudulent PPP applications. For purposes of this plea agreement, this PPP
fraud is viewed as distinct from Lain’s scheme to defraud the United States and the SBA
through the EIDL program. However, Lain voluntarily agrees to repay the $294,900 in |
PPP funds that he fraudulently obtained as part of his court-ordered restitution in this
case,

Lain agrees that his restitution obligation includes $4,166,400 for the EIDL loans
and grants that he fraudulently obtained as part of his scheme and $294,900 in
fraudulently obtained PPP funds with a credit for $27,462.41 in repayments for a total
restitution amount of $4,433,837.59. Further details regarding how this restitution
obligation shall be apportioned between the SBA and Comerica Bank California will be

provided prior to sentencing.
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VI. ADVISORY GUIDELINE COMPUTATION AND 3553 ADVISEMENT

The parties understand that the imposition of a sentence in this matter is
governed by 18 U.S.C. § 3553. In determining the particular sentence to be imposed,
the Court is required to consider seven factors. One of those factors is the sentencing
range computed by the Court under advisory guidelines issued by the United States
Sentencing Commission. In order to aid the Court in this regard, the parties set forth
below their estimate of the advisory guideline range called for by the United States
Sentencing Guidelines. To the extent that the parties disagree about the guideline
computations, the recitation below identifies the matters which are in dispute.

The Guideline calculation below is the good-faith estimate of the parties, but it is only an
estimate. The parties understand that the government also has an independent
obligation to assist the Court in making an accurate determination of the correct
guideline range. To that end, the government may argue that facts identified in the
presentence report, or otherwise identified during the sentencing process, affect the
estimate below.
A. The base guideline is § 2B1.1, with a base offense level of 7.
§ 2B1.1(a)(1).
B. An 18-level enhancement applies because the loss was more than
$3,500,000 but less than $9,500,000. §2B1.1(b)(1)(J).
C. The adjusted offense level is 25.
D. The defendant should receive a 3-level downward adjustment for
timely acceptance of responsibility. The resulting total offense

levelis 22, § 3E1.1(a)-(b).
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The parties understand that the defendant's criminal history
computation is tentative. The criminal history category is
determined by the Court based on the defendant's prior convictions.
Based on information currently available to the parties, it is
estimated that the defendant's criminal history category would be |.
The career offender/criminal livelihood/armed career criminal
adjustments would not apply.

The advisory guideline range resulting from these calculations is
41-51 months. However, in order to be as accurate as possible,
with the criminal history category undetermined at this time, the
offense level(s) estimated above could conceivably result in a
range from 41 months (bottom of Category I) to 105 months (top of
Category VI). The guideline range would not exceed, in any case,
the statutory maximum applicable to the count of conviction.
Pursuant to guideline § 5E1.2, assuming the estimated offense
level above, the fine range for this offense would be $15,000 to
$150,000, plus applicable interest and penalties.

Pursuant to guideline § 5D1.2, if the Court imposes a term of
supervised release, that term is at least 1 year, but not more than 3
years.

Pursuant to guideline §5E1.1(a)(1), the Court shall enter a
restitution order for the full amount of the victims’ losses, which the

parties agree will be an amount of $4,138,937.59. However, the

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defendant voluntarily agrees to pay an additional $294,900 in
restitution for the PPP funds that he fraudulently obtained. Thus,
the total restitution that the defendant agrees to pay in this case is
$4,433,837.59.

The parties understand that the Court is free, upon consideration and proper
application of all 18 U.S.C. § 3553 factors, to impose that reasonable sentence which it
deems appropriate in the exercise of its discretion and that such sentence may be less
than that called for by the advisory guidelines (in length or form), within the advisory
guideline range, or above the advisory guideline range up to and including
imprisonment for the statutory maximum term, regardless of any computation or position

of any party on any 18 U.S.C. § 3553 factor.

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Vil. ENTIRE AGREEMENT

The agreement disclosed to the Court is the entire agreement. There are no
other promises, agreements or “side agreements,” terms, conditions, understandings, or
assurances, express or implied. In entering this agreement, neither the government nor

the defendant has relied, or is relying, on any other terms, promises, conditions or

assurances.

Date So SABRA BARNETT —
JOEY HAMBY oT
rneys f ndan \

Date

GEEN)/D. RHYNE
PATRIGIA DAVIES
Assistant U.S. Attorneys

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