Sealed Complaint — United States v. Rafael Martinez (22 Mag. 1988, S.D.N.Y.)

Summary

A Sealed Complaint in United States of America v. Rafael Martinez, 22 MAG 1988, in the Southern District of New York, sworn on the 28th day of February, 2022 before Magistrate Judge Katharine H. Parker by IRS-CI Special Agent Sandip Singh. It charges wire fraud (Counts One and Two), bank fraud (Count Three), making false statements to a bank (Count Four), making false statements (Count Five), making false statements to the SBA (Count Six) and aggravated identity theft (Count Seven). Count One alleges that Martinez used false pretenses to obtain SBA approval for MBE Capital Partners, LLC to be a non-bank lender through the Paycheck Protection Program, then used that approval to obtain approximately $932 million in capital and earn over approximately $71 million in lender fees. It states that it is submitted for the limited purpose of establishing probable cause.

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Full text

Approved: ______________________________ ___
SAGAR K. RAVI
Assistant United States Attorney
Before:
THE HONORABLE KATHARINE H. PARKER
United States Magistrate Judge
Southern District of New York
- - - - - - - - - - - - - - - X
SEALED COMPLAINT
:
UNITED STATES OF AMERICA
:
Violations of 15 U.S.C.
:
§ 645(a) and 18 §§ 1001,
- v. -
:
1014, 1343, 1344, and
:
1028A
RAFAEL MARTINEZ,
:
:
COUNTY OF OFFENSE:
   Defendant.
:
NEW YORK
:
- - - - - - - - - - - - - - - X
SOUTHERN DISTRICT OF NEW YORK, ss.:
SANDIP SINGH, being duly sworn, deposes and says that he is
a Special Agent with the Internal Revenue Service, Criminal
Investigation (“IRS-CI”), and charges as follows:
COUNT ONE
(Wire Fraud)
1.
From in or about April 2020 through at least in or
about June 2021, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, having devised and
intending to devise a scheme and artifice to defraud, and for
obtaining money and property by means of false and fraudulent
pretenses, representations, and promises, knowingly transmitted
and caused to be transmitted by means of wire, radio, and
television communication in interstate and foreign commerce,
writings, signs, signals, pictures, and sounds, for the purpose
of executing such scheme and artifice, which affected a
financial institution, to wit, MARTINEZ used false and
fraudulent pretenses, representations, and documents to
fraudulently obtain the approval of the United States Small
Business Administration (the “SBA”) for his company, MBE Capital
Partners, LLC (“MBE”), to be a non-bank lender through the
Paycheck Protection Program (the “PPP”), and then MARTINEZ used
that approval to obtain approximately $932 million in capital to
Original
22 MAG 1988

2
issue PPP loans and earn over approximately $71 million in
lender fees.
(Title 18, United States Code, Sections 1343 and 2.)
COUNT TWO
(Wire Fraud)
2.
From in or about April 2020 through at least in or
about May 2020, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, having devised and
intending to devise a scheme and artifice to defraud, and for
obtaining money and property by means of false and fraudulent
pretenses, representations, and promises, knowingly transmitted
and caused to be transmitted by means of wire, radio, and
television communication in interstate and foreign commerce,
writings, signs, signals, pictures, and sounds, for the purpose
of executing such scheme and artifice, which affected a
financial institution, to wit, MARTINEZ engaged in a scheme to
obtain a Government-guaranteed loan for MBE through the PPP by
means of false and fraudulent pretenses, representations, and
documents submitted to a financial institution.
(Title 18, United States Code, Sections 1343 and 2.)
COUNT THREE
 (Bank Fraud)
3.
From in or about April 2020 through at least in or
about May 2020, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, willfully and
knowingly executed, and attempted to execute, a scheme and
artifice to defraud financial institutions, the deposits of
which were insured by the Federal Deposit Insurance Corporation
(“FDIC”), and to obtain moneys, funds, credits, assets,
securities, and other property owned by, and under the custody
and control of, such financial institutions, by means of false
and fraudulent pretenses, representations and promises, to wit,
MARTINEZ engaged in a scheme to obtain a Government-guaranteed
loan for MBE through the PPP from an FDIC-insured bank by means
of false and fraudulent pretenses, representations, and
documents.
(Title 18, United States Code, Sections 1344 and 2.)

3
COUNT FOUR
 (Making False Statements to a Bank)
4.
From in or about April 2020 through at least in or
about May 2020, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, knowingly made false
statements and reports and willfully overvalued land, property,
and security, for the purpose of influencing the actions of
financial institutions, the accounts of which were insured by
the FDIC, in connection with an application, advance, discount,
purchase, purchase agreement, repurchase agreement, commitment,
and loan, to wit, MARTINEZ made false statements to an FDIC-
insured bank regarding, among other things, the number of
employees of MBE and the wages paid to MBE employees, for the
purpose of obtaining a Government-guaranteed loan for MBE
through the PPP.
(Title 18, United States Code, Sections 1014 and 2.)
COUNT FIVE
 (Making False Statements)
5.
From in or about April 2020 through at least in or
about June 2021, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, in a matter within
the jurisdiction of the executive branch of the Government of
the United States, knowingly and willfully made a materially
false, fictitious, and fraudulent statement and representation
and made and used a false writing and document knowing the same
to contain a materially false, fictitious, and fraudulent
statement and entry, to wit, MARTINEZ made false statements to
the SBA regarding, among other things, the audited financial
statements of MBE, for the purpose of obtaining the approval of
the SBA for MBE to be a non-bank lender through the PPP.
(Title 18, United States Code, Sections 1001 and 2.)
COUNT SIX
 (Making False Statements to the SBA)
6.
From in or about April 2020 through at least in or
about June 2021, in the Southern District of New York and
elsewhere, RAFAEL MARTINEZ, the defendant, knowingly and
willfully made a false statement for the purpose of obtaining a
loan for an applicant, influencing in any way the action of the
SBA, and obtaining money, property, or anything of value, under
Chapter 14 of Title 15 of the United States Code, to wit,

4
MARTINEZ made false statements to the SBA regarding, among other
things, the audited financial statements of MBE, for the purpose
of obtaining the approval of the SBA for MBE to be a non-bank
lender through the PPP.
(Title 15, United States Code, Sections 645(a), and Title 18,
United States Code, Section 2.)
COUNT SEVEN
(Aggravated Identity Theft)
7.
From in or about April 2020 through at least in or
about May 2020, RAFAEL MARTINEZ, the defendant, knowingly did
transfer, possess, and use, without lawful authority, a means of
identification of another person, during and in relation to a
felony violation enumerated in Title 18, United States Code,
Section 1028A(c), to wit, MARTINEZ used the name and identity of
another person, namely the Tax Preparer defined infra, in
connection with the submission of a fraudulent loan application
and supporting documentation to at least one financial
institution during and in relation to the fraud and false
statement charges in Counts Two, Three, and Four of this
Complaint.
(Title 18, United States Code, Sections 1028A(a)(1), (b) &
(c)(4)-(5), and 2.)
The bases for my knowledge and for the foregoing charges
are, in part, as follows:
8.
I am a Special Agent with IRS-CI and I have been
personally involved in the investigation of this matter.  This
affidavit is based upon my personal participation in the
investigation of this matter, my conversations with law
enforcement agents, witnesses, and others, as well as my
examination of report and records.  Because this affidavit is
being submitted for the limited purpose of establishing probable
cause, it does not include all the facts that I have learned
during the course of my investigation.  Where the contents of
documents and the actions, statements, and conversations of
others are reported herein, they are reported in substance and
in part, except where otherwise indicated.  Where figures,
calculations, and dates are set forth herein, they are
approximate, unless stated otherwise.

5
Overview of the Fraudulent Conduct
9.
At all relevant times, RAFAEL MARTINEZ, the defendant,
has been the CEO and primary owner of MBE, a New York limited
liability company formed in or about March 2015.  According to
representations made by MARTINEZ, Republic Group, LLC, a/k/a
Republic Group Parts, LLC (“Republic Group”), which is owned and
controlled by MARTINEZ, serves as the holding company for MBE
and conducts business as MBE.  According to MBE’s website, “For
over 20 years, MBE Capital Partners has been a leading provider
of financing solutions for small and diverse businesses . . . .
In 2019, we financed over $1.7 billion in public and private
debt and we funded over 35,000 PPP loans worth $800M.”
10.
On or about April 5, 2020, RAFAEL MARTINEZ, the
defendant, applied to a financial institution for a government-
guaranteed loan for Republic Group, d/b/a MBE through the SBA’s
PPP.  In connection with the loan application, MARTINEZ
represented that MBE had as many as 15 employees and an average
monthly payroll of approximately $119,390 in 2019.  In fact,
however, from in or about April 2018 through in or about April
2020, MBE had at most four employees who had a total average
monthly payroll of no more $25,000.  In order to support the
false representations made by MARTINEZ in the loan application
about the number of employees at and the wages paid by MBE,
MARTINEZ submitted fraudulent and doctored tax records that
contained the forged signature of a tax preparer located in
Manhattan, New York (the “Tax Preparer”).  Based on the false
documentation provided by MARTINEZ, MBE was approved for a PPP
loan in the amount of approximately $283,764, which was
disbursed to a bank account controlled by MARTINEZ.  A majority
of the loan proceeds do not appear to have been used for payroll
for employees of MBE or other business expenses.
11.
On or about April 9, 2020, within five days of
applying for the PPP loan referenced above, RAFAEL MARTINEZ, the
defendant, submitted an application to the SBA for MBE to become
a non-bank PPP lender.  As part of the PPP lender application
process, MARTINEZ represented that MBE had originated and
serviced over $3.8 billion in business loans or other commercial
financial receivables for the three-year period from in or about
2017 through in or about 2019 and submitted fraudulent financial
statements that purported to be audited by the Tax Preparer’s
firm for the years 2018 and 2019.  Based on the false
information provided by MARTINEZ to the SBA, MBE was approved as
a non-bank lender for PPP loans.

6
12.
On or about April 27, 2020, RAFAEL MARTINEZ, the
defendant, submitted various documents, including the same
fraudulent audited financial statements for 2019 provided to the
SBA, to a life insurance company (the “Company”) as part of a
proposed partnership to fund PPP loans for minority and women-
owned small businesses.  On or about May 13, 2020, the Company
provided MBE with $100 million to fund PPP loans, which MBE in
turn used as collateral to borrow additional capital of
approximately $832 million through the Payment Protection
Program Liquidity Facility (“PPPLF”) with the Federal Reserve.
13.
As a result of the above fraudulent
misrepresentations, RAFAEL MARTINEZ, the defendant, through his
company MBE, became an approved PPP lender and issued
approximately $823 million in PPP loans to approximately 36,600
businesses.  These loans earned MARTINEZ a total of
approximately $71.3 million in fees.  MARTINEZ spent the
proceeds from his criminal conduct on, among other things, the
purchase of a villa in the Dominican Republic for over $10
million, a $3.5 mansion located in Franklin Lakes, New Jersey, a
chartered jet service, and several luxury vehicles, including a
2018 Porsche 911 Turbo, a 2017 Ferrari 488 Spider, a 2017
Bentley Continental GT, a BMW 750, and a 1962 Mercedes Benz 190.
Background on SBA Lending in Response to COVID-19
14.
The SBA is a federal agency of the Executive Branch
that administers assistance to American small businesses.  This
assistance includes guaranteeing loans that are issued by
certain lenders to qualifying small businesses.  Under the SBA
loan guarantee programs, the actual loan is issued by a
commercial lender, but the lender receives the full faith and
credit backing of the United States Federal Government on a
percentage of the loan.  Therefore, if a borrower defaults on an
SBA-guaranteed loan, the commercial lender may seek
reimbursement from the SBA, up to the percentage of the
guarantee.  By reducing the risk to commercial lenders, the SBA
loan guarantee programs enable lenders to provide loans to
qualifying small businesses when financing is otherwise
unavailable to them on reasonable terms through normal lending
channels.  When a borrower seeks an SBA-guaranteed loan, the
borrower must meet both the commercial lender’s eligibility
requirements for the loan as well as the SBA’s eligibility
requirements.
15.
The Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act is a federal law enacted on March 29, 2020

7
designed to provide emergency financial assistance to the
millions of Americans who are 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 the PPP.  On April 24, 2020, the
Paycheck Protection Program and Health Care Enhancement Act was
signed into law, authorizing over $300 billion in additional PPP
funding.  After additional rounds of funding, the PPP ended on
or about May 31, 2021.
16.
The PPP allowed qualifying small businesses and other
organizations to receive unsecured SBA-guaranteed loans with a
maturity of two years and interest rate of one percent.  PPP
loan proceeds must be used by businesses on payroll costs,
mortgage interest, rent, and/or utilities.  The PPP allowed the
interest and principal to be forgiven if businesses spend the
proceeds on these expenses within eight weeks of receipt and use
at least 75% of the forgiven amount for payroll.  Pursuant to
the CARES Act, the amount of PPP funds a business was eligible
to receive was determined by the number of employees employed by
the business and their average payroll costs.  Businesses
applying for a PPP loan must provide documentation to confirm
that they have in the past paid employees the compensation
represented in the loan application.  The PPP was overseen by
the SBA, which has authority over all PPP loans, but individual
PPP loans were issued by approved commercial lenders who
received and processed PPP applications and supporting
documentation, and then made loans using the lenders’ own funds.
17.
The SBA authorized non-bank lenders to issue PPP
loans.  In order to become approved as a non-bank PPP lender,
the applicant must attest that, among other things, it has been
operating since at least February 15, 2019, has a formal
compliance program relating to auditing and compliance with
applicable laws, and that it has originated, maintained, and
serviced more than $50 million in business loans or other
commercial financial receivables during a consecutive 12-month
period in the past 36 months. In addition, the applicant must
also submit the applicant’s most recent fiscal year-end audited
financial statements.
18.
On April 8, 2020, the Board of Governors of the
Federal Reserve System, with the approval of the Secretary of
the Treasury, authorized each of the regional Federal Reserve
Banks to establish and operate the PPPLF, pursuant to Section
13(3) of the Federal Reserve Act.  Under the PPPLF, Reserve

8
Banks extended non-recourse credit to SBA-approved lenders that
were eligible to originate PPP loans, taking the PPP loans as
collateral.  The purpose of the PPPLF was to bolster the
effectiveness of the PPP, provide liquidity to credit markets,
help stabilize the financial system, and provide relief to small
businesses affected by the COVID-19 crisis.
The Fraudulent PPP Loan Application for MBE
19.
Based on my review of records obtained from an FDIC-
insured financial institution (“Bank-1”) and my conversations
with representatives of Bank-1, I have learned the following, in
substance and in part, regarding a PPP loan application
submitted by RAFAEL MARTINEZ, the defendant:
a.
On or about April 5, 2020, MARTINEZ submitted and
signed an application to Bank-1 for a PPP loan in the amount of
$106,962 for Republic Group d/b/a MBE with a business address at
One Penn Plaza in Manhattan, New York.  In the application,
MARTINEZ certified, in substance and in part, the following:
i.
MARTINEZ owns 78% of the business and is not
an owner of any other business.
ii.
The loan funds will be used to retain
workers and maintain payroll or make mortgage payments, lease
payments, and utility payments, and that if the funds are
knowingly used for unauthorized purposes, the federal government
may hold MARTINEZ legally liable, such as for charges of fraud;
iii.
Current economic uncertainty makes this loan
request necessary to support the ongoing operations of the
business;
iv.
The information provided in the loan
application and in all supporting documents and forms is true
and accurate in all material respects; and
v.
MARTINEZ understood that knowingly making a
false statement to obtain a guaranteed loan from the SBA is
punishable under the law.
b.
On or about April 15, 2020, MARTINEZ submitted
and signed a PPP application addendum in which MARTINEZ
represented, in substance and in part, that MBE had an average
monthly payroll of approximately $119,390 in 2019, which
resulted in a PPP loan calculation of approximately $298,476.

9
c.
In order to support the representations regarding
the number of employees and average monthly payroll for MBE,
MARTINEZ submitted the following documents to Bank-1 on or about
April 15, 2020 (collectively, the “Fraudulent 941 Forms”):
i.
A purported Internal Revenue Service IRS
Form 941 (Employer’s Quarterly Federal Tax Return) for MBE for
the first quarter of 2019, which appeared to be signed by
MARTINEZ and the Tax Preparer on or about April 13, 2019 and
reported that MBE had 12 employees who were paid a total of
approximately $158,660 during the period.1
ii.
A purported IRS Form 941 for MBE for the
second quarter of 2019, which appeared to be signed by MARTINEZ
and the Tax Preparer on or about July 20, 2019 and reported that
MBE had 12 employees who were paid a total of approximately
$157,139 during the period.
iii.
A purported IRS Form 941 for MBE for the
third quarter of 2019, which appeared to be signed by MARTINEZ
and the Tax Preparer on or about October 18, 2019 and reported
that MBE had 11 employees who were paid a total of approximately
$160,945 during the period.
iv.
A purported IRS Form 941 for MBE for the
fourth quarter of 2019, which appeared to be signed by MARTINEZ
and the Tax Preparer on or about January 10, 2020 and reported
that MBE had 11 employees who were paid a total of approximately
$167,735 during the period.
v.
A purported IRS Form 941 for MBE for the
first quarter of 2020, which appeared to be signed only by
MARTINEZ on or about April 6, 2020 and reported that MBE had 15
employees who were paid a total of approximately $159,139 during
the period.
d.
On or about May 5, 2020, Bank-1 approved a
$283,764 PPP loan to Republic Group d/b/a MBE, which was
1  IRS Form 941 is used to report wages a business has paid as
well as employment taxes withheld.  Form 941 is generally due by
the last day of the month following the end of the quarter.  For
example, a business is required to file Form 941 by April 30 for
wages paid during the first quarter, which is January through
March.

10
disbursed to an account at Bank-1 controlled by MARTINEZ and his
daughter.  A majority of the loan proceeds do not appear to have
been used for payroll for employees of MBE or other business
expenses.
20.
Based on my interview of the Tax Preparer, I have
learned the following, in substance an in part:
a.
The Tax Preparer is self-employed and the sole
owner of a company that provides bookkeeping and tax preparation
services located in Manhattan, New York (the “Tax Firm”).
b.
Since in or about 2015, the Tax Preparer has
prepared tax returns for RAFAEL MARTINEZ, the defendant, MBE,
and other companies owned by MARTINEZ, based on information
provided by MARTINEZ and MBE’s accountant.
c.
The Tax Preparer typically does not prepare IRS
Forms 941 for clients.
d.
The Tax Preparer did not prepare, review,
authorize, or sign the Fraudulent 941 Forms for 2019 submitted
by MARTINEZ to Bank-1, which contained a forged signature for
the Tax Preparer.
e.
The Fraudulent 941 Forms for 2019 submitted by
MARTINEZ to Bank-1 contained an incorrect phone number and
address for the Tax Firm and misspelled the name of the Tax
Firm.
21.
Based on my review of email correspondence with RAFAEL
MARTINEZ, the defendant, obtained through a judicially
authorized search warrant of MARTINEZ’s MBE email account, I
have learned the following, in substance in part:
a.
On or about April 9, 2020, MARTINEZ received a
copy of a sample PPP loan package for a sushi restaurant located
in Maryland (the “Restaurant”) which contained, among other
things, IRS Forms 941 for each quarter of 2019.
b.
On or about April 12, 2020, MARTINEZ sent an
email to himself with the subject “to do,” which listed, among
other items, “SBA loan app,” “941 and PPP docs for [Bank-1],”
and “Proposal for [the majority owner of the Company, discussed
infra].”

11
c.
Based on my comparison of the figures on the IRS
Forms 941 for the Restaurant sent to MARTINEZ on or about April
9, 2020 and the Fraudulent 941 Forms submitted by MARTINEZ to
Bank-1 for MBE on or about April 15, 2020, I have determined
that both sets of forms report the exact same wage figures for
the same quarters of 2019 but different figures as to the number
of employees.  For example, for the first quarter of 2019, the
Fraudulent 941 Form submitted by MARTINEZ to Bank-1 for MBE
reported compensation for 12 employees of $158,660.90 with
$7,356.00 in federal income tax withheld, while the IRS Form 941
for the Restaurant reported compensation for 24 employees of
$158,660.90 with $7,356.00 in federal income tax withheld.
Similarly, for the fourth quarter of 2019, the Fraudulent 941
Form submitted by MARTINEZ to Bank-1 for MBE reported
compensation for 14 employees of $167,735.26 with $8,257.00 in
federal income tax withheld, while the IRS Form 941 for the
Restaurant reported compensation for 28 employees of $167,735.26
with $8,257.00 in federal income tax withheld.
d.
Based on the above, I believe that MARTINEZ used
the same figures reported in the Restaurant’s IRS Forms 941 for
the Fraudulent 941 Forms for MBE that he submitted to Bank-1,
except that he halved the number of employees that were reported
in the Fraudulent 941 Forms.
22.
Based on my review of records obtained from the New
York Department of Labor and the New Jersey Department of Labor
and Workforce Development, I have learned that, contrary to the
representations made to Bank-1 that MBE had between 11 and 14
employees and a total payroll of $644,480 in 2019 and 15
employees and a total payroll of $159,139 in the first quarter
of 2020, MBE only reported a total payroll of approximately
$81,200 for no more than four employees in 2019 and no employees
or payroll in the first quarter of 2020.
23.
Based on my review of records obtained from the SBA, I
have learned that on or about September 27, 2021, RAFAEL
MARTINEZ, the defendant, submitted a loan forgiveness
application to Bank-1 regarding the $283,764 PPP loan to
Republic Group d/b/a MBE.  In the loan forgiveness application,
MARTINEZ represented, in substance and in part, that MBE had 10
employees at the time the initial PPP application was submitted
and that at least $142,530, the maximum forgivable loan amount,
was spent on payroll costs.

12
The Fraudulent PPP Lender Application for MBE
24.
On or about April 9, 2020, RAFAEL MARTINEZ, the
defendant, submitted an application to the SBA to become a non-
bank lender to issue PPP loans.   In the application, MARTINEZ
certified, in substance and in part, the following:
a.
MBE is a financing provider that has a formal
compliance program relating to auditing and compliance with
applicable laws;
b.
MBE applies the requirements under the Bank
Secrecy Act (“BSA”) as an equivalent federally regulated
financial institution;
c.
MBE originated and serviced business loans of
approximately $1.732 billion in connection with 253 loans in
2019, approximately $1.314 billion in connection with 214 loans
in 2018, and approximately $801 million in connection with 127
loans in 2017;
d.
MARTINEZ has attached MBE’s most recent fiscal
year-end audited financial statements; and
e.
MARTINEZ certified that all representations made
“are true and correct to the best of my knowledge” and
acknowledged that false statements made to the SBA “can result
in criminal prosecution.”
25.
In connection with the PPP lender application, RAFAEL
MARTINEZ, the defendant, submitted “Reviewed Financial Statements
for the Year Ended December 31, 2018” for “MBE Capital Partners,
Inc., a Division of Republic Companies” (the “2018 Reviewed
Financial Statements”).  The 2018 Reviewed Financial Statements
contained an “Accountant’s compilation report” dated February 10,
2019 purporting to be issued by the Tax Firm as “Certified Public
Accountants,” which stated the following, in substance and in
part: “We have audited the accompanying consolidated financial
statements and, accordingly, express an opinion of assurance on
them.”  The 2018 Reviewed Financial Statements reported total
current assets of approximately $1.314 billion, net income of
approximately $7.055 million, and cash at end of year of
approximately $1.37 million.
26.
On or about April 16, 2020, after the SBA informed
RAFAEL MARTINEZ, the defendant, that an applicant is required to
provide its most recent audited financial statements and not

13
“reviewed” statements, MARTINEZ submitted “Audited Financial
Statements for the Year Ended December 31, 2019” for “Republic
Group Parts, LLC DBA MBE Capital Partners” (the “2019 Audited
Financial Statements”). The 2019 Audited Financial Statements
contained an “Accountant’s Audit Report” dated April 14, 2020
purporting to be issued by the Tax Firm as “Certified Public
Accountants,” which stated the following, in substance and in
part:
We have audited the accompanying consolidated
annual accounts of [MBE] and its subsidiaries
. . . .  In our opinion, the accompanying
consolidated annual accounts give a true and
fair view, in all material respects, of the
consolidated
equity
and
consolidated
financial performance of [MBE] . . . in
accordance with GAAP and other provisions of
the financial reporting framework applicable
in the US.”
The 2019 Audited Financial Statements reported total current
assets of approximately $1.731 billion, net income of
approximately $7.255 million, and cash at end of year of
approximately $1.8 million.
27.
On or about April 30, 2020, based on the lender
application, purported audited financial statements, and other
representations RAFAEL MARTINEZ, the defendant, submitted to the
SBA, the SBA determined that MBE had the necessary
qualifications to process, close, disburse, and service loans
made with the SBA guarantee and approved MBE as a PPP lender.
28.
Based on my interview of the Tax Preparer and my
review of email correspondence between RAFAEL MARTINEZ, the
defendant, and the Tax Preparer, I have learned the following,
in substance an in part:
a.
The Tax Firm does not and cannot perform audits
or compilation reports of financial statements because it does
not meet New York State’s peer review requirements.
b.
The Tax Firm did not prepare, review, or
authorize the issuance of the 2018 Reviewed Financial Statements
or the 2019 Audited Financial Statements for MBE, which
incorrectly spelled the name of the Tax Firm.

14
c.
In or about November 2019, MARTINEZ contacted the
Tax Preparer to perform an audit and the Tax Preparer informed
MARTINEZ, in substance and in part, that the Tax Firm does not
perform audits.  Specifically, on or about November 13, 2019,
the Tax Preparer sent an email informing MARTINEZ, in substance
and in part, that the Tax Preparer does not do audits anymore
and referred MARTINEZ to a third-party auditor.
29.
Based on my review of the 2019 Audited Financial
Statements for MBE provided to the SBA, I have learned that they
contain an arithmetical error such that, based on the operating
expenses listed, the net income reported should be approximately
$1.884 million, not approximately $7.255 million.
30.
Based on my review of MBE’s filed tax returns for 2018
and 2019 as provided to me by the Tax Preparer, I have learned
the following, in substance and in part:
a.
The net income of approximately $7.055 million
reported in the 2018 Reviewed Financial Statements for MBE
provided to the SBA is inconsistent with MBE’s filed tax return
for 2018, which reported a loss of approximately $78,625.
b.
The net income of approximately $7.255 million
(or $1.884 million accounting for the arithmetical error
described above in paragraph 29) reported in the 2019 Audited
Financial Statements for MBE provided to the SBA is inconsistent
with MBE’s filed tax return for 2019, which reported a loss of
approximately $4.5 million.
31.
Based on my review of bank and internal financial
records for the Republic Group and MBE from in or about 2017
through in or about 2020, I have learned that the financial
activity reflected in such records is not consistent with the
representations RAFAEL MARTINEZ, the defendant, made to the SBA
in the PPP lender application for MBE.  For example:
a.
A monthly budget sheet for 2018 that was
circulated internally at MBE on or about March 8, 2019 to
MARTINEZ reflected actual interest income earned of only
approximately $75,000 in 2018 and a net loss of approximately
$1.305 million in 2018, compared to the representation to the
SBA that MBE earned net income of approximately $7.055 million
in 2018.
b.
Bank records for known MBE accounts reflect that
MBE had total incoming and outgoing funds of no more than

15
approximately $1.8 million in 2018 and $1.1 million in 2019,
which is inconsistent with the representation that MBE
originated and serviced total business loans of approximately $3
billion in 2018 and 2019.
c.
Bank records for known MBE bank accounts reflect
that MBE had a total of approximately $43,330 in cash at the end
of 2018 and approximately $3,524 in cash at the end of 2019,
which is inconsistent with the representations made in the
financial statements submitted to the SBA that MBE had cash of
approximately $1.37 million at the end of 2018 and approximately
$1.8 million at the end of 2019.
The Submission of Fraudulent Documents to Obtain Approximately
$932 Million in PPP Loan Funding
32.
Based on my review of email correspondence with RAFAEL
MARTINEZ, the defendant, obtained through a judicially
authorized search warrant of MARTINEZ’s MBE email account, I
have learned the following, in substance in part:
a.
In or about April 2020, RAFAEL MARTINEZ, the
defendant, engaged in discussions with the Company in connection
with a proposed partnership between the Company and MBE to fund
PPP loans for minority and women-owned small businesses.  As
part of the Company’s due diligence on MBE, the Company
requested certain documents and information from MARTINEZ.  On
or about April 27, 2020, MARTINEZ submitted various documents to
the Company, including the same fraudulent 2019 Audited
Financial Statements for MBE that were submitted to the SBA.
b.
On or about May 13, 2020, RAFAEL MARTINEZ, the
defendant, on behalf of MBE, entered into a participation
purchase and servicing agreement with the Company, pursuant to
which the Company agreed to provide $100 million to MBE to fund
PPP loans that were purchased by the Company and serviced by
MBE.  As part of this agreement, MARTINEZ represented that MBE
was in compliance with applicable laws and regulations and had
complied with all documentation requirements under the PPP
program and SBA regulations.  The same day, on or about May 13,
2020, the Company transferred $100 million to a bank account in
the name of Republic Group controlled by MARTINEZ and his
daughter.
33.
Based on my review of a CNBC interview of RAFAEL
MARTINEZ, the defendant, on or about May 19, 2020, regarding the

16
partnership between the Company and MBE to provide funding for
PPP loans to diverse businesses, MARTINEZ stated, in substance
and in part, the following:  “[W]e have to go by the guidelines
that SBA set . . . . This is a call to action.  What we’re
trying to do is make sure we vet everybody to the standards of
the SBA and assure that this money goes out because the next
step in this procedure is working with a depository bank to
multiply [the Company’s] investment into a billion dollars or
more.”
34.
In or around the same time that RAFAEL MARTINEZ, the
defendant, was engaged in discussions with the Company, MARTINEZ
entered into a PPP Liquidity Facility with a Federal Reserve
Bank (the “FRB Liquidity Facility”) to request advances secured
by pledges of PPP loans issued by MBE.  Pursuant to this FRB
Liquidity Facility, from on or about June 19, 2020 through on or
about July 21, 2021, MBE received 124 advances totaling
approximately $832 million from the Federal Reserve Bank of San
Francisco to an MBE bank account opened and maintained in
Manhattan, New York.
35.
Based on my review of records obtained from the SBA,
through the capital obtained from the agreement with the Company
and the FRB Liquidity Facility, MBE issued a total of
approximately $823 million in PPP loans to approximately 36,600
businesses for the period from May 3, 2020 to June 29, 2021.
From these loans, MBE earned a total of approximately $71.3
million in lender fees that were deposited into an account
solely controlled by RAFAEL MARTINEZ, the defendant, and his
daughter at a bank headquartered in Manhattan, New York.
36.
Based on my review of bank records for accounts
associated with MBE, Republic Group, and RAFAEL MARTINEZ, the
defendant, the PPP lender fees earned by MBE were spent by
MARTINEZ on, among other things, the purchase of a villa in the
Dominican Republic for over $10 million, a $3.5 mansion located
in Franklin Lakes, New Jersey, a chartered jet service, and
several luxury vehicles, including a 2018 Porsche 911 Turbo, a
2017 Ferrari 488 Spider, a 2017 Bentley Continental GT, a BMW
750, and a 1962 Mercedes Benz 190.

17
WHEREFORE, I respectfully request that a warrant be issued
for the arrest of RAFAEL MARTINEZ, the defendant, and that he be
arrested and imprisoned or bailed, as the case may be.
_______________________________
SANDIP SINGH
Special Agent
IRS-CI
Sworn to me through the transmission
of this Affidavit by reliable electronic means,
pursuant to Federal Rules of Criminal Procedure
41(d)(3) and 4.1, this 28th day of February, 2022
__________________________________
THE HONORABLE KATHARINE H. PARKER
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF NEW YORK
/s/ Sandip Singh w/permission

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