United States v. Rocco Malanga — Complaint, District of New Jersey (Case 2:20-mj-08452-JAD)

Summary

A criminal complaint, Document 1, filed November 17, 2020 in Case 2:20-mj-08452-JAD, against Rocco Americo Malanga, with Attachment A listing the counts and Attachment B an affidavit by Vincent Flynn, a Special Agent with the Internal Revenue Service, Criminal Investigation. Count One charges wire fraud involving a wire transfer of approximately $564,632 representing a PPP loan disbursement for Cloud Accounting LLC d/b/a Cedar Grove Transportation on April 28, 2020. Counts Two and Three charge bank fraud for PPP applications for approximately $441,260 on June 3, 2020 and approximately $810,204 on August 3, 2020. Count Four charges money laundering for a transfer of approximately $275,000 on or about August 21, 2020.

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Issuer: Source documents
Document type: Row099 1132091 Rocco Malanga
Case: Row099 1132091 Rocco Malanga

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“United States v. Rocco Malanga — Complaint, District of New Jersey (Case 2:20-mj-08452-JAD).” Original at www.justice.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/row099-1132091-rocco-malanga/, SHA-256 2d8bdb4b3ee7b12b120e487bd3f783558c8f67c16f2d0cac086298fe0e9f2c4e.

Full text

Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 1 of 11 PageID: 1
Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 2 of 11 PageID: 2

ATTACHMENT A

Counts One
(Wire Fraud)

In or around April 2020, in Warren County, in the District of New Jersey
and elsewhere, defendant

ROCCO AMERICO MALANGA

did knowingly and willfully devise and intend to devise a scheme and artifice to
defraud, and to obtain money and property by means of materially false and
fraudulent pretenses, representations, and promises, and for the purpose of
executing and attempting to execute such scheme and artifice, did transmit and
cause to be transmitted by means of wire communications in interstate
commerce, certain writings, signs, signals, pictures, and sounds, to wit:

Approximate Description
Count
Date
Wire transfer of approximately $564,632 representing
a Payment Protection Program (“PPP”) loan
1 April 28, 2020
disbursement for Cloud Accounting LLC d/b/a Cedar
Grove Transportation from an account at Bank 4 in
Utah to an account at Bank 3 in New York.

In violation of Title 18, United States Code, Sections 1343 and 2.
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Counts Two and Three
(Bank Fraud)

From at least in or around April 2020 through in or around August 2020,
in Warren County, in the District of New Jersey and elsewhere, defendant

ROCCO AMERICO MALANGA

did knowingly and intentionally execute and attempt to execute a scheme and
artifice to obtain moneys, funds, and credits owned by and under the custody
and control of financial institutions, to wit: Bank 1 and Bank 2, the deposits of
which are insured by the Federal Deposit Insurance Corporation, by means of
materially false and fraudulent pretenses, representations, and promises, each
constituting a separate count of this Complaint.

Approximate Description
Count
Date
The submission of an application on behalf of Cedar
June 3, 2020
2 Grove Transportation Inc to Bank 1 for approximately
$441,260 in PPP funds.
The submission of an application on behalf of Pixie
August 3, 2020
3 Hollow LLC d/b/a Pixie Technologies to Bank 2 for
approximately $810,204 in PPP funds.

In violation of Title 18, United States Code, Sections 1344(2) and 2.
Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 4 of 11 PageID: 4

Count Four
(Money Laundering)

On or about August 21, 2020, in Warren County, in the District of New
Jersey and elsewhere, defendant

ROCCO AMERICO MALANGA

did knowingly engage and attempt to engage in a monetary transactions by,
through, or to a financial institution, affecting interstate and foreign commerce,
in criminally derived property of a greater value than $10,000, that is, the
transfer of approximately $275,000 of U.S. currency from an account in the
name of Pixie Hollow LLC at Bank 2 to an account in the name of Cedar Grove
Ventures LLC at Bank 3, such property having been derived from a specified
unlawful activity, that is, bank fraud, in violation of Title 18, United States Code,
Section 1344.

In violation of Title 18, United States Code, Sections 1957 and 2.
Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 5 of 11 PageID: 5

ATTACHMENT B

I, Vincent Flynn, am a Special Agent with the Internal Revenue Service,
Criminal Investigation. Recently, I have been assigned to work with the U.S.
Department of Justice and other law enforcement partners to investigate
possible fraud associated with the stimulus and economic assistance programs
created by the federal government in response to the COVID-19 program. I am
fully familiar with the facts set forth herein based my conversations with other
law enforcement officers, and my review of reports, documents, and evidence.
Where statements of others are related herein, they are related in substance and
part. Because this complaint is being submitted for a limited purpose, I have
not set forth each and every fact that I know concerning this investigation.
Where I assert that an event took place on a particular date, I am asserting that
it took place on or about the date alleged.

Overview

1. Defendant Rocco Americo Malanga (“MALANGA”) used a variety of false
statements to fraudulently obtain approximately $1.8 million in federal COVID-19
emergency relief funds meant for distressed small businesses. Specifically,
MALANGA submitted at least three PPP loan applications on behalf of three
different business entities that fabricated the number of employees and average
monthly payroll. MALANGA then diverted the PPP loan funds to accounts under
the control of his relatives, including his minor children and to another company
that did not obtain a PPP loan.
Background

The Paycheck Protection Program

2. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a
federal law enacted in or around March 2020 and 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 a program
referred to as the PPP. In or around April 2020, Congress authorized over $300
billion in additional PPP funding.

3. In order to obtain a PPP loan, a qualifying business must submit a PPP
loan application, which is signed by an authorized representative of the business.
The PPP loan application requires the business (through its authorized
representative) to acknowledge the program rules and make certain affirmative
certifications in order to be eligible to obtain the PPP loan. In the PPP loan
application, the small business (through its authorized representative) must state,
among other things, its: (a) average monthly payroll expenses; and (b) number of
employees. These figures are used to calculate the amount of money the small
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business is eligible to receive under the PPP. In addition, businesses applying for
a PPP loan must provide documentation showing their payroll expenses.

4. A PPP loan application must be processed by a participating lender. If
a PPP loan application is approved, the participating lender funds the PPP loan
using its own monies, which are 100% guaranteed by Small Business
Administration (“SBA”). Data from the application, including information about
the borrower, the total amount of the loan, and the listed number of employees, is
transmitted by the lender to the SBA in the course of processing the loan.

5. PPP loan proceeds must be used by the business on certain permissible
expenses—payroll costs, interest on mortgages, rent, and utilities. The PPP allows
the interest and principal on the PPP loan to be entirely forgiven if the business
spends the loan proceeds on these expense items within a designated period of
time after receiving the proceeds and uses a certain amount of the PPP loan
proceeds on payroll expenses.

Relevant Entities and Individuals

6. At various times relevant to this complaint:

a. Defendant MALANGA was a resident of Hackettstown, New Jersey.

b. MALANGA was associated with various corporate entities that were
used to apply for PPP loans, as follows:

i. Cloud Accounting LLC, d/b/a Cedar Grove Transportation
(“Cloud Accounting”) was a New Jersey Corporation formed on
or about April 13, 2016. 1 On or about May 15, 2020, the
business name Cloud Accounting LLC was amended to the
business name Cedar Grove Ventures LLC.

ii. Cedar Grove Transportation Inc, 2 was a Florida Corporation
formed on or about October 27, 2017.

1 Initially, Cloud Accounting’s business purpose was listed as an internet retail store

focusing on direct and auction-style sales. On or about March 28, 2017, the alternative
business name “Cedar Grove Transportation” was added and the business purpose was
listed as “transportation – provider of support activity for transportation.” On or about
November 16, 2018, Cloud Accounting was suspended. On or about May 21, 2019, the
company was reinstated.
2 Incorporation records show the name of the company without the use of a period at

the end of “Inc”.
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iii. Pixie Hollow LLC, d/b/a Pixie Technologies (collectively “Pixie
Hollow”) was a Florida Limited Liability Company formed on
or about May 11, 2016.

c. Company 1 was a financial-technology company based in California.
Company 1 participated in the SBA’s PPP by, among other things, acting as a
service provider between small businesses and certain lenders. Small
businesses seeking a PPP loan could apply through Company 1, which would
review the PPP loan applications. If a PPP loan application received by Company
1 was approved for funding, a partner lender, such as Bank 4, disbursed the
loan funds to the applicant.

d. Bank 1 was a FDIC-insured financial institution headquartered in
Salk Late City, Utah.

e. Bank 2 was a FDIC-insured financial institution headquartered in
Edgewater, New Jersey.

f. Bank 3 was a FDIC-insured financial institution headquartered in
New York, New York.

g. Bank 4 was a FDIC-insured financial institution headquartered in
Salk Late City, Utah.

The Scheme to Defraud

7. Evidence gathered in the investigation demonstrates that from in or
around April 2020 through in or around August 2020, MALANGA submitted, or
caused to be submitted, at least three fraudulent PPP loan applications in order
to obtain funds through the PPP.

8. In connection with this fraud, MALANGA submitted or caused to be
submitted, the following PPP loan applications:

Approximate
Name of Business Amount Lender
Application Status
Applicant Approved
Date

Company 1 /
$564,632.00 April 27, 2020 Funded
Cloud Accounting
Bank 4
Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 8 of 11 PageID: 8

Cedar Grove $441,260 Bank 1 June 3, 2020 Funded
Transportation Inc

$810,204 Bank 2 August 3, 2020 Funded
Pixie Hollow

Falsified Cloud Accounting Loan to Company 1 and Bank 4

9. On or about April 27, 2020, MALANGA submitted a PPP loan
application on behalf of Cloud Accounting to Company 1 seeking a PPP loan in the
amount of $564,632 (“Application-1”). Application-1 was submitted in MALANGA’s
name and listed MALANGA as the owner of Cloud Accounting.

10. Application-1 stated that Cloud Accounting’s average monthly payroll
was $225,853 and that the company had 41 employees. As purported
documentation of Cloud Accounting’s payroll numbers, the PPP application
included a 2019 Average Monthly Payroll Cost schedule listing Gross Payroll
amounts ranging for $101,742.88 to $243,880.76.

11. Application-1 contained materially false and fraudulent information:

a. Application-1 represented that Cloud Accounting had 41 employees.
Records obtained from the Florida Department of Revenue (“FDOR”)
reveal that Cedar Grove Transportation, which is the d/b/a for
Cloud Accounting and has the same tax identification number,
reported to the FDOR that the company had between two to six
employees per quarter in 2019 and three to 14 employees in the first
two quarters of 2020. Records obtained from the payroll company
Gusto Company (“Gusto”) corroborate FDOR’s information.
Specifically, Gusto records indicate that from January 1, 2020
through April 24, 2020, Cloud Accounting issued payroll to a total
of 4 employees. In addition, three of those four employees were
relatives of Malanga, including his spouse and his two minor
children.

b. Application-1 also represented that Cloud Accounting’s average
monthly payroll was $225,853. Records obtained from Gusto
indicate that Cloud Accounting had a total payroll of only
approximately $110,000 for all of its employees for the tax year
2019. Records obtained from the Internal Revenue Service (“IRS”)
also indicate that Cloud Accounting had a total payroll of
Case 2:20-mj-08452-JAD Document 1 Filed 11/17/20 Page 9 of 11 PageID: 9

approximately $110,000 for all of its employees for the tax year
2019.

11. On or about April 27, 2020, Application-1 was approved and Bank
4 disbursed approximately $564,632 in PPP loan funds into an account ending
in 9759 in the name of Cloud Accounting at Bank 3 (“Account #9759”).

Falsified Cedar Grove Transportation Inc’s Application to Bank 1

12. On or about June 3, 2020, MALANGA submitted a PPP loan application
on behalf of Cedar Grove Transportation Inc to Bank 1 seeking a PPP loan in the
amount of $441,260 (“Application-2”). Application-2 was submitted in
MALANGA’s name and listed MALANGA as the owner of Cedar Grove
Transportation Inc.

13. Application-2 stated that Cedar Grove Transportation Inc’s average
monthly payroll was $176,504 and that the company had 30 employees. As
purported documentation of Cedar Grove Transportation Inc payroll numbers,
Application-2 included a purported IRS Form 940 for 2019.

14. Application-2 contained materially false and fraudulent information:

a. Application-2 represented that Cedar Grove Transportation Inc had
30 employees. Records obtained from the FDOR indicate that FDOR
has no record of any wages paid by Cedar Grove Transportation Inc
to employees in 2019. Records from Gusto corroborate FDOR’s
information.

b. The purported Form 940 provided to Bank 1 claimed that Cedar
Grove Transportation Inc. had paid employees $2,118,058.56 for
2019. IRS records indicate that Cedar Grove Transportation Inc was
established in October 2017. However, according to IRS records,
Cedar Grove Transportation Inc has never filed any tax returns,
including an IRS Form 940.

12. On or about June 3, 2020, Application-2 was approved and Bank 1
disbursed approximately $441,260 in PPP loan funds into Account #9759. 3

3 According to records from Bank 3, on or about June 5, 2020, Malanga changed the

name on Account #9759 from Cloud Accounting to Cedar Grove Ventures LLC d/b/a
Cedar Grove Group. This name change occurred approximately one week after Malanga
obtained a PPP loan for Cloud Accounting, which was deposited into this account
(Account #9795).
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The Pixie Hollow Application to Bank 2

15. On or about August 3, 2020, MALANGA submitted PPP loan application
on behalf of Pixie Hollow to Bank 2 seeking a PPP loan in the amount of $810,294
(“Application-3”). Application-3 was submitted in MALANGA’s name and listed
MALANGA as the owner of Pixie Hollow.

16. Application-3 stated that Pixie Hollow’s average monthly payroll was
$324,081 and that the company had 47 employees. As purported documentation
of Pixie Hollow’s payroll numbers, Application-3 included a purported IRS Form
940 for 2019, an IRS Form W-3 for 2019, and IRS Form 941s for each quarter of
2019.

17. Application-3 contained materially false and fraudulent information:

a. The purported Form 940 provided to Bank 2 claimed that Pixie
Hollow had paid employees $3,888,980.50 in total payments in
2019. IRS records indicate that Pixie Hollow did not file an IRS Form
940 in 2019. IRS records also indicate Pixie Hollow did not file an
IRS Form W-3 or any IRS Form 941s in 2019. Pixie Hollow filed its
first IRS Form 941 in September 2020.

b. Furthermore, according to the IRS, in 2019, Pixie Hollow filed an IRS
Form 1065. The IRS Form 1065 represented that Pixie Hollow paid
no salaries or wages in 2019.

13. On or about August 10, 2020, Application-3 was approved and Bank
2 disbursed approximately $810,204.28 in PPP loan funds into an account
ending in 7427 in the name of Pixie Hollow at Bank 2 (“Pixie Hollow Account
#7427”).

Use of PPP Loan Proceeds

18. Bank records show that upon receiving the PPP proceeds from
Application-1, Application-2, and Application-3, MALANGA diverted a portion of
the PPP loan proceeds to accounts under the control of his relatives, including
accounts in the names of his two minor children and his wife.

19. Bank records also show that MALANGA transferred loan proceeds from
Application-2 and Application-3, which were intended for use by his companies
Cedar Grove Transportation Inc and Pixie Hollow, respectively, to accounts in the
name of Cedar Grove Ventures LLC, a company that did not obtain a PPP loan.

a. On or about August 10, 2020, Bank 2 disbursed approximately
$810,204 in PPP loan funds to Pixie Hollow Account #7427. On or
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about August 14, 2020, MALANGA transferred approximately
$785,204.28 from Pixie Hollow Account #7427 to another Pixie
Hollow account at Bank 2 ending in Account #7435 (“Pixie Hollow
Account #7435”).

b. On or about August 21, 2020, MALANGA transferred approximately
$275,000 from Pixie Hollow Account #7435 to an account ending in
2515 in the name of Cedar Grove Ventures LLC at Bank 3. Cedar
Grove Ventures LLC did not obtain a PPP loan.

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