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An additional epidemic loan fraud case was successfully prosecuted by the U.S. Attorney’s Office in Portland, and a Beaverton man was found guilty of defrauding banks and the federal government.
Theodore Johnson, 62, was given a 15-month prison term by the U.S. District Court in Portland last week on one count of bank fraud. As compensation for making misleading statements on applications for federal pandemic funds, he must also pay $320,000.
Johnson “devised” a plan to defraud two federally insured financial institutions in 2021 through his nonprofit Ten Penny International Housing Foundation, according to court documents filed by U.S. Attorney Natalie Wight in Portland. The strategy comprised making loan applications through the Paycheck Protection Program, which provided guaranteed loans of up to $10 million for qualified firms to aid in employee retention.
Oregonians Sentenced for Embezzling Millions in COVID Relief Funds
One of two programs that the U.S. Small Business Administration oversaw throughout the epidemic to keep NGOs and businesses operating was the one that was in place at the time. If companies met specific standards, such as utilizing the money for employees, mortgage interest payments, rent, or utilities, Paycheck Protection Program loans did not need to be repaid.
The COVID-19 Economic Injury Catastrophe Loan Program, the other program, provided catastrophe loans with 30-year maturities and attractive fixed interest rates (3.75% for corporations and 2.75% for nonprofit organizations). These loans need to be repaid.
The programs gave firms and NGOs nearly $1.2 trillion in 2021 and 2022. To fast-release funds, officials shortened the verification process, leaving them open to fraud. The Small Business Administration’s inspector general assessed last month that 17% of the loans were supported by false applications.
The U.S. Attorney’s Office in Oregon has successfully prosecuted 21 defendants for pandemic relief fraud. According to agency spokesman Kevin Sonoff, the great majority have admitted guilt to felonies, primarily wire or bank fraud, and received prison sentences.
Salwan Wesam Adjaj, a former dentist from West Linn who is 44 years old, was the target of the biggest case in Oregon. For attempting to embezzle more than $170 million in COVID relief funds, he was sentenced in February to pay $10.5 million in restitution and serve over six years behind bars. Adjaj submitted numerous fraudulent loan applications utilizing bogus company names and employer identification numbers.
Andrew Aaron Lloyd, 51, of Lebanon, was found guilty of pandemic relief fraud and was sentenced in January 2022 to four years in prison and $4 million in restitution. From his accounts, the government took shares, securities, and money totaling more than $18 million.
Oregon Capital Chronicle confirms the news on its official Twitter account:
The U.S. Attorney's Office in Portland has been busy: It just won its 21st conviction for fraud involving pandemic relief funds. https://t.co/kKsxcNowsx
— Oregon Capital Chronicle (@ORCapChronicle) July 12, 2023
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Fake Tax Forms Used to Obtain $143,000 Loan
According to Sonoff, the U.S. Attorney’s Office is still pursuing cases and will soon hire an assistant U.S. attorney to focus only on them. He didn’t want to go into specifics.
The office’s most recent case regarding pandemic relief fraud is the one against Johnson. In accordance with court records, he got a $143,000 loan in 2021 for Ten Penny, alleging that the nonprofit had 16 employees and an average monthly payroll of more than $57,000. Additionally, he included a 2019 tax form revealing that Ten Penny made approximately $785,000 in total revenue and paid nine people as executives, directors, or trustees up to $99,000 annually.
According to court documents, Johnson even attempted to prove the legitimacy of the 990-EZ tax form by using a phony Internal Revenue Service stamp. According to court filings, Johnson lied about paying $624,000 to employees in a 2019 Employer’s Annual Federal Unemployment Tax Return for Ten Penny that he submitted to support his application.
The actual 2019 tax return, which Johnson signed on behalf of Ten Penny, listed six people as executives, directors, or trustees and disclosed around $23,000 in revenue. According to the form, none were paid.
In addition to that loan, Johnson was granted $130,000 using a form in which he once more stated that Ten Penny employed 16 workers, with an average monthly payroll of $50,000. According to court documents, Johnson also received close to $35,000 in 2021 from the Oregon Cares Fund program.
Johnson will serve his 15-month sentence in the medium- and minimum-security Sheridan Correctional Institution in Sheridan, according to U.S. District Judge Michael Simon. After his release, Johnson will be under surveillance for three years.
According to a document with the Oregon Secretary of State’s Office, Ten Penny, which was initially incorporated in 2017 with Johnson serving as the incorporator and director of operations, discontinued operations last November.
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