Sealed Complaint, United States of America v. Marcus Frazier, 21 MAG 4397, Southern District of New York
Summary
A sealed complaint, 21 MAG 4397, sworn on the 22nd day of April, 2021 by Simon Dinits, a Special Agent with SBA-OIG, charging Marcus Frazier in the Southern District of New York with major fraud, bank fraud, wire fraud, false statements and money laundering. It alleges that from about May 2020 to April 2021 Frazier submitted at least seven PPP applications for Frazier, Pringle & Myers, FPM Strategies and Frazier Consulting with false employee and payroll figures, seeking more than $5.8 million and receiving at least about $2.17 million. For Frazier Consulting he claimed 12 employees and an average monthly payroll of $95,666.67, backed by statements showing an end-of-month balance of $1,898,089.63 where the actual balance was $40.30. The complaint says the PPP-funded account paid about $124,982 for hotels, including more than $88,791 at a luxury hotel in Miami, Florida.
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Full text
Approved: _________________________________
KATHERINE REILLY
Assistant United States Attorney
Before: THE HONORABLE JAMES L. COTT
United States Magistrate Judge 21 MAG 4397
Southern District of New York
- - - - - - - - - - - - - - - X
: SEALED COMPLAINT
UNITED STATES OF AMERICA : Violations of
: 18 U.S.C §§ 1031, 1014,
- v. – : 1343, 1344, 1001, 645,
: 1957, and 2.
MARCUS FRAZIER, :
: COUNTY OF OFFENSE:
Defendant. : NEW YORK
:
- - - - - - - - - - - - - - - X
SOUTHERN DISTRICT OF NEW YORK, ss.:
SIMON DINITS, being duly sworn, deposes and says that he is
a Special Agent with the Office of the Inspector General, United
States Small Business Administration (“SBA-OIG”) and charges as
follows:
COUNT ONE
(Major Fraud Against the United States)
1. From in or about May 2020 through at least in or about
April 2021, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, willfully and knowingly executed,
and attempted to execute, a scheme and artifice with the intent
to defraud the United States, and to obtain money and property
by means of false and fraudulent pretenses, representations, and
promises, in a grant, contract, subcontract, subsidy, loan,
guarantee, insurance, and other form of Federal assistance,
including through an economic stimulus, recovery and rescue plan
provided by the Government, the value of which was $1,000,000
and more, to wit, FRAZIER engaged in a scheme to obtain more
than $5.8 million in Government-guaranteed loans by means of
false and fraudulent pretenses, representations, and documents,
for multiple companies controlled by FRAZIER, namely Frazier,
Pringle & Myers, FPM Strategies, and Frazier Consulting
(collectively, the “Frazier Companies”), through a loan program
of the United States Small Business Administration (the “SBA”)
designed to provide relief to small businesses during the novel
coronavirus/COVID-19 pandemic, namely the Paycheck Protection
Program (the “PPP”).
(Title 18, United States Code, Sections 1031 and 2.)
COUNT TWO
(Bank Fraud)
2. From in or about May 2020 through at least in or about
April 2021, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, willfully and knowingly executed,
and attempted to execute, a scheme and artifice to defraud a
financial institution, 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
institution, by means of false and fraudulent pretenses,
representations and promises, to wit, FRAZIER engaged in a
scheme to obtain Government-guaranteed loans for the Frazier
Companies from FDIC-insured banks through the PPP by means of
false and fraudulent pretenses, representations, and documents.
(Title 18, United States Code, Sections 1344 and 2.)
COUNT THREE
(Wire Fraud)
3. From in or about May 2020 through at least in or about
April 2021, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, willfully and knowingly, 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,
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, to wit,
FRAZIER engaged in a scheme to obtain Government-guaranteed
loans for the Frazier Companies from the SBA and financial
institutions through the PPP by means of false and fraudulent
pretenses, representations, and documents, including through
electronic communications transmitted into and out of the
Southern District of New York.
(Title 18, United States Code, Section 1343 and 2.)
2
COUNT FOUR
(Making False Statements to a Bank)
4. From in or about May 2020 through at least in or about
April 2021, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, knowingly made a false statement
and report and willfully overvalued land, property, and
security, for the purpose of influencing the actions of a
financial institution, the accounts of which were insured by the
FDIC, in connection with an application, advance, discount,
purchase, purchase agreement, repurchase agreement, commitment,
and loan, and insurance agreement and application for insurance
and a guarantee, and charge and extension of any of the same, by
renewal, deferment of action and otherwise, and the acceptance,
release and substitution of security therefor, to wit, FRAZIER
made false statements regarding, among other things, the number
of employees of the Frazier Companies, the wages paid to
employees of the Frazier Companies, and the disbursement of
proceeds of PPP loans, for the purpose of obtaining Government-
guaranteed loans and/or loan forgiveness for the Frazier
Companies from FDIC-insured banks through the PPP.
(Title 18, United States Code, Sections 1014 and 2.)
COUNT FIVE
(Making False Statements)
5. From at least in or about May 2020 through at least in
or about April 2021, in the Southern District of New York and
elsewhere, MARCUS FRAZIER, the defendant, in a matter within the
jurisdiction of the executive branch of the Government of the
United States, knowingly and willfully falsified, concealed and
covered up by a trick, scheme and device a material fact, 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, FRAZIER made false and
misleading statements to the SBA regarding, among other things,
the number of employees of the Frazier Companies and the usage
of proceeds of a PPP loan, for the purpose of obtaining loans
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for the Frazier Companies through the PPP administered by the
SBA.
(Title 18, United States Code, Sections 1001 and 2.)
COUNT SIX
(Making False Statements to the SBA)
6. From in or about May 2020 through at least in or about
April 2021, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, knowingly and willfully made a
false statement, knowing such statement to be false, for the
purpose of obtaining a loan, extension thereof by deferral of
action and otherwise, and the acceptance, release and
substitution of security therefor, for himself and 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, FRAZIER made false and
misleading statements to the SBA regarding, among other things,
the number of employees of the Frazier Companies and the usage
of proceeds of a PPP loan, for the purpose of obtaining loans
for the Frazier Companies through the PPP administered by the
SBA.
(Title 18, United States Code, Section 645(a) and 2.)
COUNT SEVEN
(Money Laundering)
7. From in or about May 2020 through at least in or about
August 202, in the Southern District of New York and elsewhere,
MARCUS FRAZIER, the defendant, in an offense involving and
affecting interstate and foreign commerce, knowingly engaged and
attempted to engage in a monetary transaction in criminally
derived property of a value greater than $10,000 that was
derived from specified unlawful activity, to wit, the bank fraud
and wire fraud offenses charged in Counts Two and Three of this
Complaint.
(Title 18, United States Code, Section 1957 and 2.)
The bases for my knowledge and the foregoing charges are,
in part, as follows:
8. I am a Special Agent with the Office of Inspector
General of the U.S. Small Business Administration (“SBA”). I am
currently assigned to the Investigations Division, and as part
of my duties, I have participated in numerous investigations of
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financial fraud relating to loan programs administered by the
SBA. I am familiar with the facts and circumstances set forth
below from my personal participation in the investigation,
including my examination of reports and records, interviews in
which I have participated, and conversations with other law
enforcement officers and other individuals. 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, unless noted otherwise.
9. Based upon my involvement in this investigation,
including my review of publicly available information
disseminated by the SBA, I am aware of the following, in
substance and in part:
a. 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
b. The Coronavirus Aid, Relief, and Economic
Security ("CARES") Act is a federal law enacted on March 29,
2020, 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 business 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. The first round of the PPP
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closed to new applications on August 8, 2020. On December 27,
2020, the Consolidated Appropriations Act of 2021, which
included the Economic Aid to Hard-Hit Small Businesses,
Nonprofit, and Venues Act (the "Relief Act") was signed into
law, which provided an additional $284.5 billion for the PPP.
Under the Relief Act, certain businesses that had already
obtained a PPP loan under the original PPP were eligible for an
additional "second draw" PPP loan, provided they met certain
requirements. The Relief Act also re-opened the application
period for "first draw" PPP loans to businesses that had not
been approved for a "first draw" loan prior to August 8, 2020,
or who may have been eligible to receive more funds during the
"first draw" period than they actually received.
c. The PPP allows qualifying small businesses and
other organizations to receive unsecured SBA-guaranteed loans.
PPP loan proceeds must be used by businesses on payroll costs,
mortgage interest, rent, and/or utilities, among other specified
expenses. The PPP allows the interest and principal to be
forgiven if businesses spend the proceeds on these expenses
under certain conditions. Pursuant to the CARES Act, the amount
of PPP funds a business is eligible to receive is 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 is overseen by the SBA, which has authority over all PPP
loans, but individual PPP loans are issued by approved
commercial lenders who receive and process PPP applications and
supporting documentation. PPP rules limit eligibility to
businesses in existence before on or about February 15, 2020.
d. Borrowers through the PPP are also eligible to
apply for loan forgiveness once all loan proceeds for which
forgiveness is requested have been used.
10. As set forth in greater detail below, between in or
about May 2020 and in or about April 2021, MARCUS FRAZIER, the
defendant, submitted at least seven applications for PPP loans
for various businesses controlled by FRAZIER, including Frazier,
Pringle & Myers, FPM Strategies, and Frazier Consulting. These
applications relied upon fraudulent statements regarding the
number of employees of each business and the amount of payroll
involved in each business and were submitted, in many cases,
alongside fake bank statements designed to support FRAZIER’s
false statements. FRAZIER sought more than approximately $5.8
million in PPP loans and was awarded at least approximately
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$2.17 million. A substantial portion of the funds awarded were
spent not on payroll for the Frazier Companies but, rather, on
FRAZIER’s personal expenses.
11. Based upon my involvement in this investigation,
including my review of documents produced to the SBA by certain
financial institutions, I am aware of the following, in
substance and in part:
a. In or about September 2019, MARCUS FRAZIER, the
defendant, opened a checking and a savings account at a New
York, New York-based credit union (the "Credit Union Checking
Account" and the "Credit Union Savings Account," collectively,
the "Credit Union Accounts").
b. Between in or about May 2020 and in or about
March 2021, FRAZIER is believed to have submitted at least seven
applications for PPP loans across the two rounds of funding.
FRAZIER provided an address in New York, New York in connection
with all seven of those applications.
c. On or about May 22, 2020, FRAZIER submitted an
application for a "first draw" PPP loan for Frazier Consulting
through a small business and commercial real estate lender
("Lender-1"). As a result of the application submitted through
Lender-1 (the “Lender-1 Application”), on or about June 2020,
Frazier Consulting was issued a PPP loan in the amount of
approximately $260,166.00 (the “Lender-1 Loan”).
i. In connection with the Lender-1 Application,
FRAZIER indicated in loan application documents that Frazier
Consulting had 12 employees and an average monthly payroll of
$95,666.67.
ii. In addition, FRAZIER provided, among other
things, what purported to be monthly account statements for the
months ending December 31, 2019, January 31, 2020 and February
29, 2020 for the Credit Union Accounts. These purported
statements reported end-of-month account balances for the Credit
Union Checking Account in excess of $1.8 million; in truth and
in fact, the Credit Union Checking Account had almost no funds
in it for these months, as set forth below:
7
Statement Period Purported End-of-Month Actual End-of-Month
Balance Balance
12/1/19 – 12/31/19 $1,898,089.63 $40.30
1/1/20 – 1/31/20 $2,031,535.62 $5.81
2/1/20 – 2/29/20 $2,166,861.61 $0
iii. The purported monthly account
statements for the Credit Union Accounts submitted by FRAZIER in
connection with the Lender-1 Application also each showed twelve
withdrawals for “Frazier Consult Payroll,” which totaled
approximately $70,000 per month. In truth and in fact, actual
statements for the Credit Union Checking Account for those
months did not show any withdrawals for “Frazier Consult
Payroll” or anything similar.
iv. On or about June 17, 2020, the Lender-1
Loan was funded, and approximately $260,166 was deposited into
the Credit Union Checking Account. On or about the next day,
June 18, 2020, FRAZIER wrote a check to himself from the Credit
Union Checking Account for approximately $255,000. The check
was deposited into a personal account in FRAZIER's name at
another financial institution (“Bank Account-1”).
d. On or about June 14, 2020, FRAZIER submitted an
application for a "first draw" PPP loan for Frazier, Pringle &
Myers LLC through a business loan broker, which referred the
application to an FDIC-insured financial institution (the
"Lender-2 Application"). In the Lender-2 Application, FRAZIER
sought a PPP loan in the amount of approximately $1,165,953.
The loan was not funded by Lender-2.
i. In connection with the Lender-2
Application, FRAZIER submitted a worksheet providing certain
requested information about Frazier, Pringle and Myers, LLC.
FRAZIER indicated, in substance and in part, that Frazier,
Pringle & Myers LLC had 48 employees and an average monthly
payroll of $382,933.40. In the worksheet, FRAZIER also
certified that “all data and information entered to support the
PPP loan amount is true and correct and based on documentation I
have hereby submitted with my application[,]” and “I understand
that the data provided is being used for an application for a
FEDERAL LOAN GUARANTEED BY THE SMALL BUSINESS ADMINISTRATION.
Any errors, either intentional or not, can result in federal
prosecution.”
ii. In connection with the Lender-2
Application, FRAZIER submitted to Lender-2, among other things,
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what purported to be monthly account statements for the Credit
Union Checking Account for the months ending December 21, 2019,
January 31, 2020, February 29, 2020, March 31, 2020, April 20,
2020, and May 31, 2020. These purported statements reported
end-of-month account balances for the Credit Union Checking
Account in excess of $9.8 million; in truth and in fact, the
Credit Union Checking Account had almost no funds in it for
these months, as set forth below:
Statement Period Purported End-of-Month Actual End-of-Month
Balance Balance
12/1/19 – 12/31/19 $9,804,533.48 $40.30
1/1/20 – 1/31/20 $11,026,613.08 $5.81
2/1/20 – 2/29/20 $10,742,679.88 $0
3/1/20 – 3/31/20 $10,464,746.75 -$49.14
4/1/20 – 4/30/20 $10,186,813.58 $0
iii. The purported monthly account
statements for the Credit Union Accounts submitted by FRAZIER in
connection with the Lender-2 Application also each showed 48
withdrawals for “Frazier Consult Payroll,” which totaled in
excess of approximately $276,000 per month. In truth and in
fact, actual statements for the Credit Union Checking Account
for those months did not show any withdrawals for “Frazier
Consult Payroll” or anything similar.
e. On or about June 24, 2020, FRAZIER submitted an
application for a "first draw" PPP loan for Frazier, Pringle &
Myers through a commercial lender ("Lender-3"), seeking a PPP
loan in the amount of $957,300. The loan was not funded by
Lender-3.
i. In connection with the application to
Lender-3, FRAZIER submitted to Lender-3, among other things,
what purported to be monthly account statements for the Credit
Union Checking Account for the months ending January 31, 2020,
February 29, 2020, March 31, 2020, April 30, 2020, and May 31,
2020. These purported statements reported end-of-month account
balances for the Credit Union Checking Account in excess of $9.9
million; in truth and in fact, the Credit Union Checking Account
had almost no funds in it for these months, as set forth below:
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Statement Period Purported End-of-Month Actual End-of-Month
Balance Balance
1/1/20 – 1/31/20 $11,026,613.08 $5.81
2/1/20 – 2/29/20 $10,742,679.88 $0
3/1/20 – 3/31/20 $10,464,746.75 -$49.14
4/1/20 – 4/30/20 $10,186,813.58 $0
5/1/20 – 5/31/20 $9,908,880.48 $0
ii. The purported monthly account
statements for the Credit Union Accounts submitted by FRAZIER in
connection with the Lender-2 Application also each showed 48
withdrawals for “Frazier Consult Payroll,” which totaled in
excess of approximately $276,000 per month. In truth and in
fact, actual statements for the Credit Union Checking Account
for those months did not show any withdrawals for “Frazier
Consult Payroll” or anything similar.
iii. In connection with the application to
Lender-3, FRAZIER also submitted a list of employees on the
payroll of Frazier, Pringle & Myers and their Social Security
numbers (“SSNs”). Based on my communications with other law
enforcement agents, I am aware that a sample of five of these
purported employees’ names and SSNs were provided to the Social
Security Administration (the “SSA”) and, based on SSA records,
the purported employees’ names do not match the SSNs provided by
FRAZIER. Accordingly, I believe that FRAZIER fabricated the
payroll information for at least these five purported employees
(the “Fictitious Employees”).
f. On or about August 2, 2020, FRAZIER submitted an
application for a "first draw" PPP loan for Marcus Frazier d/b/a
Frazier, Pringle & Myers through an FDIC-insured financial
institution ("Lender-4") (the "First Lender-4 Application").
Marcus Frazier d/b/a Frazier, Pringle & Myers was issued a PPP
loan in the amount of approximately $957,333.
i. In connection with the First Lender-4
Application, FRAZIER indicated in loan application documents
that Marcus Frazier d/b/a Frazier, Pringle & Myers had 48
employees and an average monthly payroll of $382,933.40.
FRAZIER also submitted a list of employees on the payroll of
Frazier, Pringle & Myers and their SSNs; that list included the
purported names and SSNs of the Fictitious Employees.
ii. In addition, FRAZIER provided what
purported to be monthly account statements for the months ending
January 31, 2020 and February 29, 2020 for the Credit Union
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Accounts; these purported statements reported end-of-month
account balances for the Credit Union Checking Account of
approximately $10,975,022.74 and approximately $10,697,268.91,
respectively. In truth and in fact, as set forth above, the
Credit Union Checking Account had end of-month account balances
of approximately $5.81 as of January 31, 2020 and approximately
$0 as of February 29, 2020.
iii. As a result of FRAZIER’s submission of
the First Lender-4 Application, Frazier, Pringle & Myers was
issued a PPP loan in the amount of approximately $957,333 (the
“Lender-4 Loan”). On or about August 19, 2020, the Lender-4
Loan was funded, and approximately $957,333 was deposited into
the Credit Union Checking Account. On or about the same day,
FRAZIER wrote a check to himself from the Credit Union Checking
Account for approximately $250,000. On or about August 26,
2020, FRAZIER wrote a second check to himself from the Credit
Union Checking Account for approximately $700,000. Both checks
were deposited into Bank Account-1.
g. On or about January 10, 2021, FRAZIER submitted
an application to forgive the Lender-4 Loan (the “Forgiveness
Application”); that application is currently pending with the
SBA. In the Forgiveness Application, FRAZIER indicated that the
entirety of the loan proceeds from the Lender-4 Loan had been
spent on payroll.
h. On or about January 13, 2021, FRAZIER submitted
an application for a "second draw" PPP loan for Marcus Frazier
d/b/a Frazier, Pringle & Myers through Lender-4 (the "Second
Lender-4 Application"). Marcus Frazier, d/b/a Frazier, Pringle
& Myers was issued a second PPP loan in the amount of
approximately $957,333. The funds were disbursed on or about
March 18, 2021 and were returned to Lender-4 because the Credit
Union Accounts had been restricted by the credit union;
additionally, Lender-4 became aware of the instant investigation
shortly after the funds were disbursed.
i. In connection with the Second Lender-4
Application, FRAZIER indicated in loan application documents
that Marcus Frazier, d/b/a Frazier, Pringle & Myers had 48
employees and an average monthly payroll of $382,933.40.
FRAZIER also submitted a list of employees on the payroll of
Frazier, Pringle & Myers and their SSNs; that list included the
purported names and SSNs of the Fictitious Employees.
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ii. In connection with the Second Lender-4
Application, FRAZIER also submitted to the SBA what purported to
be Articles of Organization for Frazier, Pringle & Myers, LLC,
indicating, in substance and in part, that the entity was
registered with the New York State Department of State, Division
of Corporations as of at least on or about July 1, 2010. Based
on my review of information available through the publicly-
available website of the New York State Department of State,
Division of Corporations, I believe that FRAZIER, PRINGLE &
MYERS, LLC was not, in fact, registered with the Division of
Corporations until on or about July 1, 2020. Based upon my
review of these documents and information, I believe that
FRAZIER registered Frazier, Pringle & Myers, LLC with the
Division of Corporations well after the beginning of the COVID-
19 pandemic and fabricated the registration documents submitted
to Lender-4 in an effort to support his assertions that Frazier,
Pringle & Myers was a longstanding business, with employees and
a significant payroll.
i. On or about January 14, 2021, FRAZIER submitted
an application for a "first draw" PPP loan for Marcus Frazier
d/b/a FPM Strategies through a financial institution ("Lender-
5"), seeking a PPP loan in the amount of approximately
$957,332.50 The loan was not funded by Lender-5. In connection
with the application through Lender-5, FRAZIER submitted a list
of employees on the payroll of FPM Strategies and their SSNs;
that list included the purported names and SSNs of the
Fictitious Employees. FRAZIER also provided, among other
things, what purported to be monthly account statements for the
months of July 2020 through December 2020 for the Credit Union
Accounts; these purported statements reported end-of-month
account balances for the Credit Union Checking Account that
never fell below approximately $4.9 million. The purported
account statements also demonstrated significant monthly payroll
outlays. In truth and in fact, the Credit Union Checking
Account did not have an end-of-month balance in excess of
approximately $2,000 at any point during this time period, and
no such payroll withdrawals were made from the account.
j. On or about January 28, 2021, FRAZIER submitted
an application for a “second draw” PPP loan for Frazier
Consulting through a financial institution (“Lender-6”), seeking
a PPP loan in the amount of approximately $239,100. Lender-6 is
a loan broker that refers applications to both FDIC-insured and
non-FDIC-insured financial institutions. The loan FRAZIER
applied for was not funded by Lender-6. In connection with the
application through Lender-6, FRAZIER indicated, among other
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things, that the average monthly payroll for Frazier Consulting
was approximately $95,667 and that Frazier Consulting’s gross
revenue in the first quarter of 2020 was approximately $322,500.
FRAZIER also submitted a list of employees on the payroll of
Frazier Consulting and their SSNs; that list included the
purported names and SSNs of the Fictitious Employees. FRAZIER
also provided to Lender-6, among other things, what purported to
be a monthly account statement for the month of February 2020
for the Credit Union Accounts, which indicated that the end-of-
month account balance was approximately $2.16 million. The
purported account statement also demonstrated significant
payroll outlays. In truth and in fact, the Credit Union
Checking Account had an end-of-month balance of $0 in February
2020, and no such payroll withdrawals were made from the
account.
12. On or about April 5, 2021, I participated in a
recorded telephone call with MARCUS FRAZIER, the defendant, on
the pretext of the SBA inquiring further into the Second Lender-4
Application. In the course of that recorded telephone call,
FRAZIER made the following statements, in substance and in part:
a. FRAZIER stated, in substance and in part, that
Frazier, Pringle & Myers is a management consulting firm
consulting on, among other things, cyber issues for large
clients including a prominent national technology company and a
large international financial institution, among others.
b. FRAZIER stated, in substance and in part, that he
intended to use the proceeds of any loan issued as a result of
the Second Lender-4 Application for “mostly payroll” and rent.
c. FRAZIER stated, in substance and in part, that
Frazier, Pringle & Myers employs approximately 48 employees.
FRAZIER further stated that the firm’s average monthly payroll
is between approximately $370,000 and $380,000, and payroll is
purportedly processed in house by FRAZIER. FRAZIER further
stated that Frazier, Pringle & Myers has not terminated any
employees since the pandemic began in approximately March 2020,
nor cut salaries for any employees.
d. FRAZIER stated, in substance and in part, that
Frazier, Pringle & Myers is based in New York, and its employees
work remotely.
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e. FRAZIER stated, in substance and in part, that
Frazier, Pringle & Myers earned approximately $7 million in
2020, which was approximately $4 million less than in 2019.
f. FRAZIER stated, in substance and in part, that
neither FRAZIER nor any of his employees have claimed
unemployment benefits since approximately March 1, 2020.
g. FRAZIER stated, in substance and in part, that
the First Lender-4 Loan proceeds went to payroll for Frazier,
Pringle & Myers; as of the date of the call, the funds had been
depleted.
h. FRAZIER stated, in substance and in part, that
Frazier Consulting is a management consulting firm focused on
grant and contract writing services, that Frazier Consulting has
12 employees and an average monthly payroll of approximately
$96,000 or $97,000 per month.
13. Based on my participation in the investigation
described above and my review of documents produced in response
to grand jury subpoenas, I am aware of the following, in
substance and in part:
a. MARCUS FRAZIER, the defendant, is the sole signer
on Bank Account-1. Bank Account-1 is a savings account.
FRAZIER also holds a checking account with the same financial
institution that holds Bank Account-1. FRAZIER is also the sole
signer on the checking account (“Bank Account-2”).
b. As set forth above, the Lender-1 Loan was funded
on or about June 17, 2020 in the amount of approximately
$260,166. On or about the following day, FRAZIER transferred
the bulk of the proceeds of the Lender-1 Loan from the Credit
Union Checking Account to Bank Account-1. The balance in Bank
Account-1 as of on or about June 18, 2020 was approximately
$28,957.43.
c. As further set forth above, the Lender-4 Loan was
funded on or about August 19, 2020 in the amount of
approximately $957,333. Between on or about August 19, 2020 and
on or about August 26, 2020, FRAZIER transferred the bulk of the
proceeds of the First Lender-4 Loan from the Credit Union
Checking Account to Bank Account-1.
d. Between on or about June 18, 2020 and on or about
April 7, 2021, FRAZIER transferred approximately $338,000 from
14
Bank Account-1 to Bank Account-2. 1 The balance of Bank Account-1
prior to these transfers was approximately $28,957.43.
Accordingly, more than $300,000 of the funds transferred from
Bank Account-1 to Bank Account-2 constituted PPP loan proceeds.
Further, during the period between on or about June 18, 2020 and
on or about March 31, 2021, there is no evidence that any
revenue associated with the purported business of any of
FRAZIER’s businesses was paid into Bank Account-1, nor that Bank
Account-1 was used to pay payroll to any employees of any of
FRAZIER’s businesses.
e. The balance of Bank Account-2 prior to the
transfers from Bank Account-1 that began on or about June 18,
2020 was approximately $4,000. Between on or about June 18, 2020
and on or about April 7, 2021, Bank Account-2 received the
following credits: (i) approximately $338,000 from Bank Account-
1, as set forth above, which was mostly loan proceeds; (ii)
approximately $21,000 in unemployment benefits; (iii)
approximately $4,125 transferred directly from the Credit Union
Checking Account; and (iv) approximately $7,650 in other
miscellaneous credits. Thus, the vast majority of funds in Bank
Account-2 during the period between on or about June 18, 2020
and on or about April 7, 2021 were PPP loan proceeds. Further,
there is no evidence that any revenue associated with the
purported business of any of FRAZIER’s businesses was paid into
Bank Account-2 during this period, nor that Bank Account-2 was
used to pay payroll to any employees of any of FRAZIER’s
businesses.
f. Rather than using Bank Account-2, which, as set
forth above, was funded primarily with PPP loan proceeds, to pay
payroll, FRAZIER appears to be using Bank-2 to fund his personal
expenses. During the period between on or about June 18, 2020
and on or about April 7, 2021, FRAZIER utilized the funds in Bank
Account-2 to spend approximately $124,982 on hotels, including
more than approximately $88,791 at a luxury hotel located in
Miami, Florida. During the same period, FRAZIER utilized the
funds in Bank Account-2 to spend approximately $63,000 on
restaurants and food service, approximately $17,000 on
1 As set forth herein, I have reviewed monthly account
statements for both Bank Account-1 and Bank Account-2, which are
held by the same financial institution (“Bank-1”). To date,
Bank-1 has provided account statements for Bank Account-1
through March 31, 2021 and for Bank Account-2 through April 7,
2021.
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transportation using the ride-hailing app Uber, approximately
$16,519 on airline travel, and approximately $11,000 on clothing.
WHEREFORE, deponent prays that an arrest warrant be issued
for MARCUS FRAZIER, the defendant, and that he be arrested and
imprisoned or bailed, as the case may be.
/s/Simon Dinits with permission JLC
_______________________________
SIMON DINITS
Special Agent
Office of the Inspector General
U.S. Small Business Administration
Sworn to me through the
transmission of this Affidavit
by reliable electronic means, pursuant to
Federal Rule of Criminal Procedure 4.1,
this 22nd day of April, 2021
______________________________
THE HONORABLE JAMES L. COTT
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF NEW YORK
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