Superseding Information — United States v. Donald Franklin Trosin, No. 20-CR-4066-LTS (Dkt. 53, N.D. Iowa)

Summary

This Superseding Information in the Northern District of Iowa (No. 20-CR-4066-LTS) charges Donald Franklin Trosin with wire fraud, major fraud against the United States and money laundering conspiracy. It alleges that on or about May 13, 2020 an SBA Form 2483 was submitted for a $1.2 million PPP loan in Trosin's name claiming 120 employees, when the business did not exist, backed by a false IRS Form 944 listing $5,800,000 in compensation. It also alleges approximately 20 false EIDL applications in the names of Trosin or A.K., a joint account holder, including one for a fictitious agriculture sole proprietorship with 11 employees. After $1,200,000 in PPP funds arrived, the Information says Trosin wired $25,000 to Arizona, $50,000 to Pennsylvania and $200,000 to Virginia and bought cashier's checks of $150,000, $150,000 and $310,000 for an out-of-state limited liability company.

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION

UNITED STATES OF AMERICA, ) No. 20-CR-4066-LTS
)
Plaintiff, ) SUPERSEDING INFORMATION
)
vs. ) Count 1
) 18 U.S.C. § 1343: Wire Fraud
DONALD FRANKLIN TROSIN, )
) Count 2
Defendant. ) 18 U.S.C. § 1031: Major Fraud
) Against the United States
)
) Count 3
) 18 U.S.C. § 1956(h): Money
) Laundering Conspiracy

The United States Attorney charges:

Count 1

Wire Fraud

Introduction

COVID-19 and the National Emergency

1. According to the United States Centers for Disease Control and

Prevention (“CDC”), Coronavirus Disease 2019 (“COVID-19”) is a respiratory illness

that can spread from person to person. The virus that causes COVID-19 is a novel

coronavirus that was first identified during an investigation into a 2019 outbreak in

Wuhan, China. COVID-19 can attack human lungs and kill infected persons,

especially those who have certain risk factors identified by the CDC.

2. On March 13, 2020, President Donald J. Trump issued a Proclamation

on Declaring a National Emergency Concerning the Novel Coronavirus Disease
(COVID-19) Outbreak (“the Emergency Proclamation”). The Emergency

Proclamation noted that “on March 11, 2020, the World Health Organization

announced that the COVID-19 outbreak can be characterized as a pandemic, as the

rates of infection continue to rise in many locations around the world and across the

United States.” Further, “[t]he spread of COVID-19 within our Nation’s

communities threatens to strain our Nation’s healthcare systems.”

The Paycheck Protection Program

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

federal law enacted in late March 2020 that provides emergency financial

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

COVID-19 pandemic. One form of such financial assistance is 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 Paycheck Protection

Program (“PPP”). Later, in April 2020, Congress authorized an additional $300

billion in PPP funding.

4. In order to obtain a PPP loan, a business submits a PPP loan

application (SBA Form 2483), which must be signed by an authorized

representative of the business. The loan application requires the business, through

its authorized representative, to acknowledge the PPP program rules and to make

certain affirmative certifications regarding its eligibility. In the application, the

small business’s authorized representative must also provide, among other things,

the business’s average monthly payroll expenses and number of employees. These

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figures are used to calculate the business’s eligibility and the amount of money it

may receive under the PPP. In addition, businesses applying for a PPP loan must

provide documentation showing their payroll expenses.

5. A PPP loan application must be processed by a participating lending

financial institution. If a PPP loan application is approved by the participating

financial institution, that institution funds the PPP loan using its own monies,

which are 100% guaranteed by the Small Business Administration (SBA).

Participating financial institutions require that the information provided in PPP

loan applications be truthful, including information about the applicant business’s

employees and payroll expenses, which is material to the financial institution’s

approval and the terms of the PPP loans.

6. Information from the application, including information about the

borrower, the total amount of the loan, and the listed number of employees, is

transmitted by the lending financial institution to the SBA in the course of

processing the loan.

7. PPP loan proceeds must be used by the business for certain

permissible expenses – payroll costs, interest on mortgages, rent, and utilities. The

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

business spends the loan proceeds on these items within a designated period of

time, usually within twenty-four weeks of receiving the proceeds, and if the

business also uses at least 60% of the PPP loan proceeds for payro ll expenses.

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Economic Injury Disaster Loans

8. The SBA’s Economic Injury Disaster Loan (“EIDL”) is a working

capital loan that is available to small businesses. Eligible recipients may include

small agricultural businesses, certain private non-profit organizations, faith-based

organizations, and houses of worship, sole proprietors, independent contractors, and

owners of rental property.

9. Unlike the PPP, EIDL applicants do not apply through a participating

financial institution, but instead apply directly to the SBA’s Disaster Assistance

Program. Further, EIDL loans may be used to pay fixed debts, payroll, accounts

payable, and other bills that could have been paid had the disaster not occurred.

10. The EIDL Advance (“the Advance”) is for any entity that is eligible to

apply for a COVID-19 EIDL. COVID-19 EIDL applicants may request to be

considered for an advance of up to $10,000. The disbursement amount will be

determined by the number of the small business’s employees before the COVID -19

disaster (i.e., as of January 31, 2020). The Advance will provide the EIDL applicant

with $1,000 per pre-disaster employee, up to a maximum of $10,000.

The Funnel Accounts

11. At all relevant times, defendant DONALD FRANKLIN TROSIN

maintained accounts at Bank-1 and Bank-2. Bank-1 is a national bank with

branches throughout the United States, including within the Northern District of

Iowa. Bank-2 is based in Spencer, Clay County, Iowa, within the Northern District

of Iowa, and has locations in Iowa and Nebraska.

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12. Specifically, in September 2019, defendant DONALD FRANKLIN

TROSIN opened an account ending in 6191 at Bank-1, as the sole owner of the

account. Defendant provided a State of Iowa Driver’s License and listed a mailing

address for the account in Champlin, Minnesota.

13. When he opened the account ending in 6191 at Bank-1, however,

defendant DONALD FRANKLIN TROSIN already maintained a joint account with

A.K. at Bank-2 ending in 8387. The account at Bank-2 ending in 8387 had an

account address in Armstrong, Emmet County, Iowa, within the Northern District

of Iowa.

The Scheme to Defraud

14. From about May 2020, through July 2020, in the Northern District of

Iowa and elsewhere, and in relation to and involving a benefit authorized,

transported, transmitted, transferred, disbursed, and paid in connection with, a

presidentially declared major emergency (as those terms are defined in section 102

of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §

5122), defendant did voluntarily and intentionally (1) participate in a scheme and

artifice to defraud the United States with knowledge of its fraudulent nature and

(2) obtain the money and property of the United States by means of false and

fraudulent pretenses, representations, and promises (“the scheme to defraud”).

Manner and Means of the Scheme to Defraud

15. It was part of the scheme to defraud that, on or about May 13, 2020, a

SBA Form 2483 was completed and submitted for a $1.2 million PPP loan for the

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“Business Legal Name” of defendant DONALD FRANKLIN TROSIN. The SBA

Form 2483 was purportedly signed by defendant, listing defendant’s Social Security

Number (SSN) as both defendant’s SSN and as the business taxpayer identification

number (TIN). Defendant was listed as owning 100% of the business. The SBA

Form 2483 falsely and fraudulently stated defendant’s business had 120 employees

on its payroll when, in truth, the business did not exist and defendant had no

employees or any payroll expenses.

16. It was also part of the scheme to defraud that false and fraudulent

documents were submitted in support of the PPP loan. Specifically, a false and

fraudulent IRS Form 944, Employer’s Annual Federal Tax Return for 2019, listed

total compensation for “Donald Trosin” in the amount of $5,800,000. Further,

Schedule C, Form 1040 or 1040-SR, Profit or Loss From Business for 2019,

indicated wages of $5,760,000. A false and fraudulent monthly bank statement

from Bank-1, dated in February 2020, purports to show that defendant DONALD

FRANKLIN TROSIN was regularly receiving large incoming wire transfers for his

business from major companies in the United States and had paid payroll expenses

in excess of $900,000 during the month of January 2020. Again, in truth, defendant

DONALD FRANKLIN TROSIN did not operate a business in January 2020 and had

no payroll expenses for that month.

17. It was also part of the scheme to defraud that approximately 20 false

and fraudulent EIDL applications were submitted to SBA in the name of defendant

DONALD FRANKLIN TROSIN or A.K., the person with whom defendant held a

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joint account at Bank-2. For example, on or about May 5, 2020, an EIDL

application was filed in A.K.’s name. The false and fraudulent application indicated

the fictitious entity A.K. was a “Sole Proprietorship” established November 30,

2017, in the agriculture industry, with 11 employees. The agreed-upon amount of

the loan was $30,000, less a $100 filing fee, with a net disbursement amount of

$29,900 to the account ending in 8387 held jointly by defendant DONALD

FRANKLIN TROSIN and A.K. at Bank-2.

18. Finally, it was part of the scheme to defraud that, after receiving PPP

and EIDL loans at Bank-1 and Bank-2, respectively, based on false and fraudulent

representations to the SBA and its participating lenders, defendant DONALD

FRANKLIN TROSIN conducted, and attempted to conduct, a series of smaller

financial transactions to various entities and individuals in other states, Canada,

and the People’s Republic of China.

19. For example, after receiving $1,200,000 in PPP funds into his account

at Bank-1, defendant DONALD FRANKLIN TROSIN initiated a series of interstate

wire transfers to various individuals at different financial institutions. Specifically,

from about May 14, 2020, to about May 19, 2020, Trosin initiated wires in the

amounts of $25,000 to Arizona, $50,000 to Pennsylvania, and $200,000 to Virginia.

Further, on June 11, 2020, Trosin withdrew $300,020 from his account at Bank-1 to

purchase two cashier’s checks, each in the amount of $150,000, for an out-of-state

limited liability company. On or about July 1, 2020, Trosin withdrew another

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$310,010 from his account at Bank-1 to purchase a $310,000 cashier’s check in favor

of the same limited liability company.

Execution of the Scheme to Defraud

Count 1: On or about May 19, 2020, for the purpose of executing the

scheme to defraud described above, defendant DONALD FRANKLIN TROSIN

received an interstate wire in the amount of $149,000 from the SBA into his joint

account with A.K. at Bank-2.

This was in violation of Title 18, United States Code, Section 1343.

Count 2

Major Fraud Against the United States

20. Paragraphs 1 through 19 are incorporated by reference here.

21. From about May 2020, through July 2020, in the Northern District of

Iowa and elsewhere, defendant DONALD FRANKLIN TROSIN did voluntarily and

intentionally participate in the scheme to defraud with knowledge of its fraudulent

nature and obtain the money and property of the United States by means of false

and fraudulent pretenses, representations, and promises.

22. The scheme to defraud was in connection with loans, guarantees, and

other forms of federal assistance, including an economic stimulus, recovery, and

rescue plan provided by the Government, and the value of such loans and a

constituent part thereof was $1 million or more, specifically, the $1.2 million PPP

loan and 20 false and fraudulent EIDL applications, as described above.

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Execution of the Scheme to Defraud

Count 2: On or about May 19, 2020, for the purpose of executing the

scheme to defraud described above, defendant DONALD FRANKLIN TROSIN

received an interstate wire in the amount of $149,000 from the SBA into his joint

account with A.K. at Bank-2.

This was in violation of Title 18, United States Code, Section 1031.

Count 3

Money Laundering Conspiracy

23. Paragraphs 1 through 19 are incorporated here.

24. From about May 2020, through July 2020, in the Northern District of

Iowa and elsewhere, defendant did knowingly combine, conspire, and agree with

other persons known and unknown to the United States Attorney to commit

offenses in violation of Title 18, United States Code, Sections 1956(a)(1)(B)(i) and

1957(a), specifically,

(a) to knowingly conduct and attempt to conduct financial transactions

affecting interstate commerce and foreign commerce, which transactions

involved the proceeds of specified unlawful activity, that is, Wire Fraud in

violation of 18 U.S.C. § 1343 as set forth in Count 1 above, knowing that the

transactions were designed in whole or in part to conceal and disguise the

nature, location, source, ownership, and control of the proceeds of specified

unlawful activity, and that while conducting and attempting to conduct such

financial transactions, knew that the property involved in the financial

transactions represented the proceeds of some form of unlawful activity; and

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(b) to knowingly engage and attempt to engage, in monetary transactions by,

through or to a financial institution, affecting interstate and foreign

commerce, in criminally derived property of a value greater than $10,000,

that is Wire Fraud in violation of 18 U.S.C. § 1343 as set forth in Count 1

above, such property having been derived from a specified unlawful activity,

that is, Wire Fraud in violation of 18 U.S.C. § 1343 as set forth in Count 1

above.

Manner and Means

25. After receiving PPP and EIDL loans at Bank-1 and Bank-2,

respectively, based on false and fraudulent representations to the SBA and its

participating lenders, defendant conducted, and attempted to conduct, a series of

financial transactions each in excess of $10,000, to various entities and individuals

in other states, and countries including Canada and the People’s Republic of China

26. Specifically, after receiving $1,200,000 in PPP funds into his account at

Bank-1, defendant initiated a series of interstate wire transfers to various

individuals at different financial institutions. From about May 14, 2020, to about

May 19, 2020, defendant initiated wires in the amounts of $25,000 to Arizona,

$50,000 to Pennsylvania, and $200,000 to Virginia. Further, on June 11, 2020,

defendant withdrew $300,020 from his account at Bank-1 to purchase two cashier’s

checks, each in the amount of $150,000, for an out-of-state limited liability

company. On or about July 1, 2020, defendant withdrew another $310,010 from his

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account at Bank-1 to purchase a $310,000 cashier’s check in favor of the same

limited liability company.

This was in violation of Title 18, United States Code, Section 1956(h).

PETER E. DEEGAN, JR.
United States Attorney

By: /s/ Timothy L. Vavricek

TIMOTHY L. VAVRICEK
Assistant United States Attorney

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