Sealed Complaint — United States v. Karen Chapon, No. 2:20-mj-664-BNW (District of Nevada)

Summary

A Sealed Complaint, stamped FILED 1:51 pm, August 10, 2020, in the U.S. District Court District of Nevada, Case No. 2:20-mj-664-BNW, against Karen Chapon, aka "Karen Hannafious." Count One charges bank fraud (18 U.S.C. § 1344(2)) from at least in or around April 2020 through at least in or around July 2020 with respect to Bank 2, and Count Two charges false statements to a financial institution (18 U.S.C. § 1014) on or around May 19, 2020. The probable cause section is sworn by the complainant, Tom Lydiksen, a Special Agent of the Federal Bureau of Investigation assigned to the white-collar crime squad in the Las Vegas Field Division. It begins with the agent's background and training. It states that the information is based on review of records and documents obtained during the investigation.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

                                                                 FILED.
                                                                 DATED: 1:51 pm, August 10, 2020
1    ROBERT ZINK                                                 U.S. MAGISTRATE JUDGE
     Chief, Fraud Section
2    BLAKE GOEBEL
     Trial Attorney
3    U.S. Department of Justice
     Criminal Division, Fraud Section
4    1400 New York Ave. NW
     Washington, D.C., 20005
5    Tel: 202.616.5010
     Blake.Goebel@usdoj.gov
6
     NICHOLAS A. TRUTANICH
7    United States Attorney
     District of Nevada
8    Nevada Bar Number 13644
     JESSICA OLIVA
9    Assistant United States Attorney
     501 Las Vegas Blvd. South, Suite 1100
10   Las Vegas, Nevada 89101
     (702) 388-6268
11   Jessica.Oliva@.usdoj.gov

12   Attorneys for the United States

13                                UNITED STATES DISTRICT COURT
                                       DISTRICT OF NEVADA
14
     UNITED STATES OF AMERICA,                           Case No. 2:20-mj-
                                                                  2:20-mj-664-BNW
15
                     Plaintiff,                          SEALED COMPLAINT for violations of:
16
            v.                                           Bank Fraud
17                                                       (18 U.S.C. § 1344(2));
     KAREN CHAPON,
18       aka “Karen Hannafious,”                         False Statements to a Financial Institution
                                                         (18 U.S.C. § 1014)
19                   Defendant.

20

21          BEFORE the United States Magistrate Judge, Las Vegas, Nevada, the undersigned

22   complainant, being first duly sworn, states that:

23

24
1                                            COUNT ONE
                                               Bank Fraud
2                                         (18 U.S.C. § 1344(2))

3           From at least in or around April 2020 through at least in or around July 2020, in the

4    District of Nevada, and elsewhere, defendant

5                                         KAREN CHAPON,

6                                      aka “Karen Hannafious,”

7    did knowingly and intentionally execute and attempt to execute a scheme and artifice to

8    obtain any of the moneys, funds, credits, assets, securities, and other property owned by,

9    and under the custody or control of, a financial institution, to wit, Bank 2, by means of false

10   and fraudulent pretenses, representations, and promises.

11                                            COUNT TWO
                                 False Statements to a Financial Institution
12                                          (18 U.S.C. § 1014)

13          On or around May 19, 2020 in the District of Nevada, and elsewhere, defendant

14                                        KAREN CHAPON,

15                                     aka “Karen Hannafious,”

16   knowingly made a false statement with the intent to influence the actions of a financial

17   institution, the accounts of which are insured by the Federal Deposit Insurance Corporation

18   (“FDIC”), to wit, Bank 2.

19                                        PROBABLE CAUSE

20          Complainant, Tom Lydiksen, states the following as and for probable cause:

21          1.     I am a Special Agent (SA) of the Federal Bureau of Investigation (FBI)

22   currently assigned to the white-collar crime squad in the Las Vegas Field Division. I have

23   been employed as a SA of the FBI since March 2019. To become an FBI SA, I attended

24   twenty (20) weeks of training at the FBI Academy in Quantico, Virginia where I was trained

                                                     2
1    to investigate violations of United States laws, to collect evidence in cases in which the

2    United States is, or may be, a party in interest, and to perform other duties imposed by law

3    as well as other specialized federal law enforcement training. I have investigated violations

4    of federal statutes governing various types of white-collar crime, including wire fraud, bank

5    fraud, money laundering, and theft of government and public money. I am familiar with,

6    and have participated in, the normal methods of investigation, including, but not limited to,

7    visual surveillance, conducting interviews, drafting and executing seizure warrants,

8    executing search and arrest warrants, and conducting consensually monitored audio and

9    video recordings.

10          2.      The following information is based upon, among other things, my review of

11   records and documents obtained during the course of this investigation, information

12   conveyed to me orally or via written communication by other employees or agents of the

13   FBI, agents of the Office of Inspector General of the United States Small Business

14   Administration (SBA), agents of the Department of the United States Treasury Inspector

15   General for Tax Administration (TIGTA), and witnesses, and my experience and

16   background as an FBI SA. Since this Affidavit is being submitted for the limited purpose of

17   securing a criminal complaint, I have not included each and every fact known to me

18   concerning this investigation. I set forth only the facts that are necessary to establish

19   probable cause that violations of 18 U.S.C. § 1344(2) (Bank Fraud) and 18 U.S.C. § 1014

20   (False Statements to a Financial Institution) have occurred.

21   ///

22   ///

23   ///

24   ///


                                                     3
1                                             Introduction

2           3.     The government is investigating fraud committed by KAREN CHAPON,

3    also known as “Karen Hannafious.”1 There is probable cause to believe KAREN

4    CHAPON, through her corporate entities Heavenly Tahoe Properties, Desert Sun Events,

5    and Tahoe Weddings and Events, submitted at least six false and fraudulent applications to

6    three different banks to obtain loans through the Paycheck Protection Program (PPP)

7    guaranteed by the Small Business Administration (SBA). In total, KAREN CHAPON

8    successfully obtained at least four of the loans totaling approximately $596,231.2

9           4.     The loan applications contained a number of false statements. First, evidence

10   obtained in the investigation shows that the monthly payroll figures on which the loan

11   amounts were based were false, and the purported IRS filings supporting the payroll figures

12   were fraudulent. In support of each of the six loan applications, KAREN CHAPON

13   submitted purported IRS filings that she represented had been filed for the 2019 tax year on

14   behalf of the purported companies or herself individually. These filings supported the

15   monthly payroll figures that KAREN CHAPON submitted in the PPP loan applications by

16   documenting that her purported companies were generating significant amounts of revenue,

17   were paying a number of employees, or both. A search of IRS records confirmed that: i) the

18   IRS has no record of any of the three purported entities filing tax returns for 2019, and ii)

19   KAREN CHAPON’s individual 2019 federal tax return does not contain the purported

20

21   1
      Karen Chapon also uses the name Karen Hannafious. “Hannafious” is likely Chapon’s
22   maiden name, subject to confirmation.

23
     2
       As described in more detail below, for one of the four loans Bank 3 issued the $20,000 in
     loan proceeds to an account that KAREN CHAPON controlled at Bank 1 on or about May
24   13, 2020. Bank 1 then closed the account on or about May 28, 2020 with a $19,808.48
     closing balance. It later returned $19,808.48 to Bank 3.

                                                    4
1    schedules she provided to the banks that she claimed were from her individual return.

2    Further, publicly available state incorporation records show that while each of the three

3    entities was legitimately incorporated at one time, none of those corporate registrations are

4    currently valid.

5           5.     Second, as part of the PPP loan applications, KAREN CHAPON had to

6    certify that she had not been convicted of a felony or been placed on parole in the last five

7    (5) years. These certifications were false. KAREN CHAPON pled guilty to several felony

8    fraud offenses in Nevada state court in 2016 and remained on parole until January 2020.

9    Finally, the PPP loan applications contained other false statements, including KAREN

10   CHAPON’s certifications that her entities would only use PPP loan proceeds to “retain

11   workers and maintain payroll” or to make other payments “as specified under the Paycheck

12   Protection Program Rule,” and her certification that Desert Sun Events only received one

13   PPP loan— when it received two.

14                                The Paycheck Protection Program

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

16   federal law enacted in or around March 2020 and is designed to provide emergency

17   financial assistance to the millions of Americans who are suffering the economic effects

18   caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was

19   the authorization of up to $349 billion in forgivable loans to small businesses for job

20   retention and certain other expenses, through a program referred to as the PPP. In or

21   around April 2020, Congress authorized over $300 billion in additional PPP funding.

22          7.     In order to obtain a PPP loan, a qualifying business must submit a PPP loan

23   application, which is signed by an authorized representative of the business. The PPP loan

24   application requires the business (through its authorized representative) to acknowledge the


                                                    5
1    program rules and make certain affirmative certifications in order to be eligible to obtain the

2    PPP loan. In the PPP loan application, the small business (through its authorized

3    representative) must state, among other things, its: (a) average monthly payroll expenses;

4    and (b) number of employees. These figures are used to calculate the amount of money the

5    small business is eligible to receive under the PPP. In addition, businesses applying for a

6    PPP loan must provide documentation showing their payroll expenses.

7           8.     A participating financial institution (the lender) must process a PPP loan

8    application. If the lender approves a PPP loan application, it funds the PPP loan using its

9    own monies, which the SBA guarantees 100%. The lender transmits information to the

10   SBA in the course of processing the loan data from the application, including information

11   about the borrower, the total amount of the loan, and the listed number of employees. The

12   SBA oversees the PPP, which has authority over all loans. To date, over 5,000 lending

13   institutions, mostly banks and credit unions, have participated in the PPP.

14          9.     The business receiving the PPP loan proceeds must spend the funds on certain

15   permissible expenses: payroll costs, interest on mortgages, rent, and utilities. The PPP

16   allows the interest and principal on the PPP loan to be entirely forgiven if the business

17   spends the loan proceeds on these expense items within a designated period of time and uses

18   a specified portion of the PPP loan proceeds on payroll expenses.

19                                     Defendant Karen Chapon

20          10.    KAREN CHAPON is a citizen of the United States and has a California

21   Driver License issued in November 2019, with a listed address in San Diego, California.

22   According to information obtained in the investigation, during the relevant conduct in April

23   through July 2020, KAREN CHAPON was living in San Diego, California, and Las Vegas,

24   Nevada.


                                                    6
1           11.    According to records obtained from Douglas County District Court in

2    Nevada and the State of Nevada Division of Parole and Probation, KAREN CHAPON

3    pled guilty to three felony counts in Nevada state court in August 2016: one count each of

4    insurance fraud, mortgage lending fraud, and theft. In January 2017, the court sentenced

5    KAREN CHAPON to concurrent terms of imprisonment on each of the three counts with

6    the longest sentence imposed on the theft count: a minimum of twenty-four (24) months and

7    a maximum of seventy-two (72) months imprisonment. KAREN CHAPON was placed on

8    parole in April 2019 and was honorably discharged from parole in January 2020.

9                                          The Lending Banks

10          12.    Bank 1 is a federally insured financial institution. It is an SBA approved

11   lender and participates as a PPP lender to small businesses.

12          13.    Bank 2 is a federally insured financial institution. It is an SBA approved

13   lender, participates as a PPP lender to small businesses, and accepts loan applications

14   directly, as well as through online portals that allow borrowers to submit a single application

15   to access loans from a variety of different lenders.

16          14.    Bank 3 is a federally insured financial institution. It is an SBA approved

17   lender, participates as a PPP lender to small businesses, and accepts loan applications

18   directly, as well as through online portals that allow borrowers to submit a single application

19   to access loans from a variety of different lenders.

20   ///

21   ///

22   ///

23   ///

24   ///


                                                    7
1                                         The SBA PPP Loans

2             15.    The investigation has revealed evidence that KAREN CHAPON applied for

3    at least six fraudulent loans on behalf of three entities. She successfully obtained loan

4    proceeds for four of the applications totaling approximately $596,9313:

5          Business Name       Lending     Loan Amount       Amount         Approximate Date
                                 Bank       Applied For      Disbursed     of Loan Application
6        Desert Sun Events      Bank 1       $19,715          $19,715         April 22, 2020
         Desert Sun Events      Bank 2       $19,716          $19,716          May 5, 2020
         Tahoe Weddings
7                               Bank 3        $20,000         $20,000           May 6, 2020
         and Events
         Heavenly Tahoe
8                               Bank 3        $500,000           $0            May 15, 2020
         Properties
         Heavenly Tahoe         Bank 2        $537,500        $537,500         May 19, 2020
9        Properties
         Tahoe Weddings         Bank 2          N/A              $0            June 30, 2020
10       and Events

11                                        Bank 1 Account 6121

12            16.    As described in more detail below, the FBI’s investigation has revealed that

13   KAREN CHAPON directed that the proceeds of three of her entities’ four PPP loans be

14   deposited into a Bank 1 account (Bank 1 6121) in the name of Desert Sun Events. This

15   included the proceeds from the two Desert Sun Events loans, as well as the Heavenly Tahoe

16   Properties Bank 2 loan, totaling approximately $576,931. The FBI obtained records from

17   Bank 1 for this account, including account opening documentation and monthly account

18   statements. According to these records, KAREN CHAPON opened Bank 1 6121 on behalf

19   of Desert Sun Events on or about August 14, 2019. In the account opening documentation,

20   she listed herself as the “President” of Desert Sun Events and did not list any other officers

21   or employees. KAREN CHAPON is the only authorized signatory on the account. On

22

23   3
      As described above in note 2 and below in paragraph 39, it appears that Bank 1 returned
24   approximately $19,808 of the $20,000 Tahoe Weddings and Events’ Bank 3 loan proceeds
     to Bank 3.

                                                    8
1    July 13, 2020, the government obtained a civil forfeiture seizure warrant for this account

2    from the Hon. Brenda N. Weksler, United States Magistrate Judge, in this District.

3    Pursuant to the warrant, the government seized the approximately $504,385.19 that

4    remained in the account as of that date.

5                      PPP Loan Applications for Heavenly Tahoe Properties

6                        Heavenly Tahoe Properties Bank 2 Loan Application

7           17.    Starting first with the PPP loan application for Heavenly Tahoe Properties to

8    Bank 2, the FBI obtained documentation from the bank for this loan. According to the

9    records provided by Bank 2, on or about May 19, 2020, KAREN CHAPON submitted an

10   application in support of a $537,500 PPP loan for Heavenly Tahoe Properties. The records

11   indicate KAREN CHAPON made the application through an online portal, and Bank 2

12   issued the loan. On the application, KAREN CHAPON identified herself as Karen

13   “Hannafious,” and stated that “Hannafious” was the 100% owner of Heavenly Tahoe

14   Properties, listing her social security number (x2386).

15          18.    I know KAREN CHAPON and Karen Hannafious are the same person for a

16   number of reasons. First, the social security number she listed for Karen Hannafious,

17   x2386, on the application matches the social security number x2386 listed in other PPP

18   applications and supporting documentation submitted in the name of “Chapon” described

19   below. This social security number is the same listed for “Karen Hannafious” in the IRS

20   records of her 2019 federal tax filing. Further, that tax filing listed the same home address

21   for Hannafious found on KAREN CHAPON’s California Driver License. Finally, Bank 2

22   and Bank 1 6121 records show that KAREN CHAPON directed that the proceeds of this

23   loan be deposited into Bank 1 6121. Since KAREN CHAPON is the sole signatory on that

24   account, that also confirms that “Chapon” and “Hannafious” are the same person.


                                                    9
1           19.    Bank 1 6121 records indicate KAREN CHAPON was in the District of

2    Nevada when she electronically submitted this loan application. The Bank 1 6121 May

3    2020 account statement shows purchases were made in the District of Nevada on the date

4    the loan application was submitted as well as several days before and after.

5           20.    In order to obtain the loan from Bank 2, KAREN CHAPON provided the

6    bank with a substantial amount of fraudulent information. First, in order to support the

7    requested loan amount of $537,500, she represented Heavenly Tahoe Properties made over

8    $2.4 million in employee payments in 2019.4 KAREN CHAPON provided this information

9    in a purported IRS Form 940 Federal Unemployment Tax Return (IRS Form 940) for 2019

10   for Heavenly Tahoe Properties that KAREN CHAPON submitted to the bank in support of

11   the application. The purported IRS Form 940 showed that she signed it on January 6, 2020.

12          21.    A search of IRS records confirmed the IRS has no record of Heavenly Tahoe

13   Properties filing any tax returns for 2019, including the purported IRS Form 940. In fact,

14   IRS records show the Heavenly Tahoe Properties’ EIN listed on the purported IRS Form

15   940 was only issued on or about May 11, 2020, more than four months after the date of

16   KAREN CHAPON’s signature on the purported filing and just one week before KAREN

17   CHAPON applied for the PPP loan on behalf of the company. Further, a search of publicly

18   available corporation records in the State of Nevada showed Heavenly Tahoe Properties

19   was incorporated in Nevada in 2011 with KAREN CHAPON as the Director, but its

20   operating status is currently “revoked.”

21          22.    Additionally, at the time of KAREN CHAPON’s PPP loan applications, an

22   applicant had to certify that the applicant, if an individual, or any owner of the applicant

23

24   4
      The maximum allowable PPP loan amount is calculated by taking the company’s average
     monthly payroll and multiplying that figure by 2.5.

                                                   10
1    business had not been convicted of a felony or been placed on parole in the prior 5 years.

2    As part of the Heavenly Tahoe Properties PPP loan application, KAREN CHAPON falsely

3    answered “No” to this question, which read: “Within the last five (5) years, for any felony,

4    has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2)

5    pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been

6    placed on any form of parole or probation (including probation before judgment)?” The

7    application further warned that if that question was answered “Yes,” that “the loan will not

8    be approved.” As described above, KAREN CHAPON knew this answer was false.5 The

9    Nevada state records show KAREN CHAPON pled guilty to several felony fraud offenses

10   in 2016, was sentenced to several years of imprisonment in 2017, and remained on parole

11   until January 2020.

12          23.    According to Bank 2’s records on or about May 19, 2020, it approved the PPP

13   loan for Heavenly Tahoe Properties and issued the loan. Records from Bank 1 show the

14   PPP loan proceeds of $537,500 were received in Bank 1 6121 on or about May 20, 2020.

15                         Heavenly Tahoe Properties Bank 3 Loan Application

16          24.    The FBI obtained records from Bank 3 for an earlier Heavenly Tahoe

17   Properties PPP loan application that Bank 3 denied. The records obtained from Bank 3

18

19   5
       Since the time of KAREN CHAPON’s PPP loan application, the SBA has eased its
20   restrictions for applicants with criminal histories. For most felonies, the relevant look-back
     period for PPP loan disqualification is now 1 year rather than 5 years. The relevant time
21   period remains 5 years, however, for felonies “involving fraud, bribery, embezzlement, or a
     false statement in a loan application or an application for federal financial assistance.”
22   Business Loan Program Temporary Changes; Paycheck Protection Program—Additional
     Revisions to First Interim Final Rule, 85 Fed. Reg. 36,718 (June 18, 2020). Accordingly,
23   even under the SBA’s revised guidance, KAREN CHAPON and the purported entities she
     owned were not eligible for the PPP loans because she was convicted of two felony fraud
24   offenses within the 5-year time period.


                                                   11
1    show KAREN CHAPON submitted two applications for a $500,000 PPP loan on behalf of

2    Heavenly Tahoe Properties on or about May 15, 2020 approximately seven (7) minutes

3    apart. She submitted one application in the name of “Karen Hannafious” and the second

4    application in the name of “Karen Chapon,” and used the same (x2386) social security

5    number for both.

6           25.    KAREN CHAPON submitted two purported IRS filings to Bank 3 that

7    appear to be fraudulent. The first appears to be the same purported 2019 IRS Form 940 for

8    Heavenly Tahoe Properties that she submitted to Bank 2. As described above, a search of

9    IRS records confirmed the IRS has no record of Heavenly Tahoe Properties filing any tax

10   returns for 2019, including the purported IRS Form 940. Additionally, KAREN CHAPON

11   submitted her purported 2019 IRS Schedule C (Form 1040) Profit or Loss from Business

12   that showed Heavenly Tahoe Properties made over $6 million in revenue in 2019 and over

13   $900,000 in profit. A search of IRS records confirmed that the IRS does not have any

14   record of that filing. The IRS does have a record of KAREN CHAPON filing a 2019 IRS

15   Form 1040 income tax return, but it only listed income of approximately $5,766 from a

16   rental property. That Form 1040 also did not include a Schedule C.

17                         PPP Loan Applications for Desert Sun Events

18                           Desert Sun Events Bank 1 Loan Application

19          26.    As part of its investigation, the FBI obtained loan documentation for the

20   Desert Sun Events PPP loan from Bank 1 that show KAREN CHAPON applied for the

21   loan on behalf of Desert Sun Events using the name “Karen Chapon” on or about April 22,

22   2020. She listed herself as the authorized representative of the company and in the

23   supporting documentation provided the same San Diego, California, address listed on her

24   California Driver License.


                                                  12
1           27.    The investigation shows that KAREN CHAPON submitted a purported IRS

2    filing in support of her application that appears to be fraudulent. The purported filing is a

3    2019 IRS Schedule C (Form 1040) Profit or Loss from Business made by KAREN

4    CHAPON that showed Desert Sun Events made approximately $295,496 in revenue in

5    2019 and approximately $94,638 in profit. As discussed above in paragraph 25, a search of

6    IRS records confirmed that the IRS does not have any record of that filing. The IRS does

7    have a record of KAREN CHAPON filing a 2019 IRS Form 1040 income tax return, but it

8    only listed income of approximately $5,766 from a rental property, and did not include a

9    Schedule C. Further, according to publicly available records obtained from the State of

10   Wyoming, Desert Sun Events was only established as a Profit Corporation in Wyoming on

11   or about August 14, 2019 with KAREN CHAPON listed as the “Incorporator.” It was

12   administratively dissolved on or about November 20, 2019.

13          28.    As part of an addendum to the Desert Sun Events Bank 1 application,

14   KAREN CHAPON also falsely answered “No” to the criminal history question, which

15   read: “Within the last 5 years, for any felony, has the Applicant (if an individual) or any

16   owner of the business; 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4)

17   been placed on pretrial diversion; or 5) been placed on any form of parole or probation

18   (including probation before judgment)?” As described above in paragraph 22, KAREN

19   CHAPON knew that this answer was false.

20          29.    The Bank 1 records show KAREN CHAPON received her PPP loan

21   proceeds for Desert Sun Events on or about May 4, 2020, in Bank 1 6121. The May 2020

22   Account Statement for Bank 1 6121 showed on May 4, 2020, Bank 1 6121 received a

23   $19,715 deposit with the Description: “CARES ACT PAYCHECK PROTECTION

24


                                                   13
1    PROGRAM DEPOSIT.” That amount matched the PPP loan amount for Desert Sun

2    Events in the records obtained from Bank 1.

3                             Desert Sun Events Bank 2 Loan Application

4           30.     The FBI obtained loan documentation for the Desert Sun Events PPP loan

5    from Bank 2. As described above, Bank 2 accepts loan applications directly, as well as

6    through online portals that allow borrowers to submit a single application to access loans

7    from a variety of different lenders.

8           31.     The records show KAREN CHAPON also applied for this second loan on

9    behalf of Desert Sun Events using the name “Karen Chapon.” In the application, KAREN

10   CHAPON listed herself as the “100%” owner of Desert Sun Events and provided the same

11   San Diego, California, address from her California Driver License. KAREN CHAPON

12   applied for the loan through an online portal, and Bank 2 ultimately issued the loan.

13          32.     The Bank 2 records show KAREN CHAPON signed this loan application on

14   May 5, 2020. Importantly, as part of the SBA PPP loan application process, each applicant

15   must certify that it has not and will not receive another PPP loan during the 2020 calendar

16   year. For example, KAREN CHAPON certified in this application that: “During the

17   period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant

18   has not and will not receive another loan under the Paycheck Protection Program.” Here,

19   the “Applicant” was Desert Sun Events. The evidence shows KAREN CHAPON knew

20   this certification to be false because as described above, on May 4, 2020, just the day before

21   KAREN CHAPON signed this application Desert Sun Events received its disbursement of

22   $19,715 from the Bank 1 PPP loan to Bank 1 6121.

23          33.     Additionally, Bank 2 records show that KAREN CHAPON submitted her

24   same purported 2019 IRS Schedule C (Form 1040) Profit or Loss from Business that she


                                                   14
1    submitted to Bank 1. As discussed above, this filing showed Desert Sun Events made

2    approximately $295,496 in revenue in 2019 and appears to be fraudulent.

3           34.    Finally, as part of the application, KAREN CHAPON again answered “No”

4    to the question: “Within the last 5 years, for any felony, has the Applicant (if an individual)

5    or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo

6    contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or

7    probation (including probation before judgment)?” The application again further warned

8    that if that question was answered “Yes,” that “the loan will not be approved.” As

9    described above, the evidence shows KAREN CHAPON knew that this answer was false.

10          35.    The documentation from Bank 2 showed the bank approved the loan and

11   disbursed the funds to Bank 1 6121. The Bank 1 6121 May 2020 account statement

12   similarly shows Bank 1 6121 received a deposit of $19,716 on May 7, 2020, corresponding

13   with this loan.

14                     PPP Loan Applications for Tahoe Weddings and Events

15                      Tahoe Weddings and Events Bank 3 Loan Application

16          36.    The FBI obtained records for a PPP loan for Tahoe Weddings and Events

17   from Bank 3. The records show KAREN CHAPON applied for this loan on behalf of

18   Tahoe Weddings and Events using the name “Karen Hannafious” on or about May 5, 2020.

19   In the application, KAREN CHAPON listed herself as the “100%” owner of Tahoe

20   Weddings and Events and provided the same San Diego, California, address from her

21   California Driver License.

22          37.    In support of her application, KAREN CHAPON again submitted a

23   purported IRS filing that appears to be fraudulent. The purported filing is her 2019 IRS

24   Schedule C (Form 1040) Profit or Loss from Business that showed Tahoe Weddings and


                                                   15
1    Events made approximately $594,741 in revenue in 2019 and approximately $165,967 in

2    profit. A search of IRS records confirmed that the IRS does not have any record of that

3    filing. As stated above in paragraph 25, the IRS does have a record of KAREN CHAPON

4    filing a 2019 IRS Form 1040 income tax return, but it only listed income of approximately

5    $5,766 from a rental property, and did not include a Schedule C. Further, a search of

6    publicly available corporation records in the State of Nevada showed Tahoe Weddings and

7    Events was incorporated in Nevada in 2014 with KAREN CHAPON as the President, but

8    its operating status is currently “revoked.”

9           38.    Finally, as part of the Tahoe Weddings and Events PPP loan application,

10   KAREN CHAPON again answered “No” to the criminal history question, which read:

11   “Within the last five (5) years, for any felony, has the Applicant (if an individual) or any

12   owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4)

13   been placed on pretrial diversion; or 5) been placed on any form of parole or probation

14   (including probation before judgment)?” The application further warned that if that

15   question was answered “Yes,” that “the loan will not be approved.” As described above in

16   paragraph 22, KAREN CHAPON knew this answer was false.

17          39.    Bank 3 issued the loan in the amount of $20,000 on or about May 13, 2020.

18   As part of its investigation, the FBI obtained records from Bank 1 for an account in the

19   name of Tahoe Weddings and Events (Bank 1 9449). The account opening documentation

20   showed that KAREN CHAPON opened the account just the day before on May 12, 2020

21   and is the sole signatory on the account. The Bank 1 9449 May 2020 account statement

22   shows that after receiving the loan proceeds, KAREN CHAPON made several purchases

23   before Bank 1 closed the account on or about May 28, 2020 with a $19,808.48 closing

24


                                                    16
1    balance. As part of the FBI’s investigation, it spoke with an employee of Bank 3 who

2    confirmed that Bank 1 later returned $19,808.48 to Bank 3.

3                         Tahoe Weddings and Events Bank 2 Loan Application

4             40.    Finally, the FBI obtained records from online portal BV for an additional

5    Tahoe Weddings and Events PPP loan application submitted by KAREN CHAPON, which

6    was denied. The records obtained from online portal BV show KAREN CHAPON

7    submitted an application through BV to Bank 2 on or about June 30, 2020 for a PPP loan on

8    behalf of Tahoe Weddings and Events. She submitted the application in the name of

9    “Karen Hannafious,” and used the same (x2386) social security number she used on other

10   filings described in this affidavit. The BV records obtained by the FBI do not show the

11   specific amount of the PPP loan that KAREN CHAPON requested, but she represented

12   that Tahoe Weddings and Events’ average monthly payroll was approximately $90,000.

13   Using the formula on the standard PPP loan application,6 that monthly payroll figure would

14   entitle Tahoe Weddings and Events to apply for a maximum loan amount of $225,000.

15            41.    In support of the application, KAREN CHAPON again submitted a

16   purported IRS filing that appears to be fraudulent. The purported filing was an IRS Form

17   940 Federal Unemployment Tax Return (IRS Form 940) for 2019 that showed Tahoe

18   Weddings and Events made slightly more than $1 million in employee payments in 2019.

19   Importantly, the information in this filing appears to contradict the information in the

20   purported IRS filing that KAREN CHAPON submitted in support of Tahoe Weddings and

21   Events’ application to Bank 3 described above. That filing listed the total expenses for the

22   company in 2019 as approximately $427,274—significantly less than the more than $1

23

24   6
         This formula is: (Average Monthly Payroll x 2.5).

                                                    17
1    million in employee payments listed on the purported 2019 IRS Form 940 submitted in

2    support of this application to Bank 2. Additionally, a search of IRS records confirmed that

3    the IRS does not have any record of Tahoe Weddings and Events making any tax filings for

4    2019.

5                                      Use of PPP Loan Proceeds

6            42.    As stated above, KAREN CHAPON directed that the proceeds of three of the

7    loans be deposited into Bank 1 6121 in the name of Desert Sun Events, which she

8    controlled. KAREN CHAPON is the only authorized signatory on the account.

9            43.    The Bank 1 6121 May 2020 account statement obtained from Bank 1 showed

10   that as of May 1, 2020, it had a balance of $462.77. Over the course of the month, Bank 1

11   6121 received the $576,931 in total PPP loan proceeds with the third and final PPP loan

12   deposit of $537,500 occurring on May 20, 2020. These were the only deposits into Bank 1

13   6121 that month. During May, approximately $10,133 was withdrawn or spent from the

14   account. Accordingly, all of these withdrawals except the first $462.77 necessarily came

15   from the PPP loan proceeds pursuant to the Lowest Intermediate Balance Rule (LIBR)

16   accounting method.

17           44.    The Bank 1 6121 June 2020 account statement from Bank 1 showed no

18   additional funds were deposited. Over the course of the month, approximately $61,618 was

19   withdrawn or spent from the account. These withdrawals also necessarily came from the

20   PPP loan proceeds pursuant to LIBR. As described above, PPP loan proceeds must be used

21   by the business on certain permissible expenses—payroll costs, interest on mortgages, rent,

22   and utilities. To obtain each of the three PPP loans deposited in Bank 1 6121, KAREN

23   CHAPON certified that the proceeds would only be used for permissible expenses. She

24   stated specifically in two of those certifications that “[t]he funds will be used to retain


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