NEW YORK (1010 WINS/WCBS 880) -- Seventeen city and state employee from New York were arrested for $1.5 million in COVID-19 era relief fraud, federal prosecutors announced Wednesday.
Most of the defendants were arrested Wednesday morning and face charges that include wire fraud and conspiracy to commit wire fraud after they allegedly ripped off federal programs meant to help Americans cope with the pandemic and spend their fraudulent earnings on everything from luxury items to casino gambling.
Among the public sector workers are a half-dozen members of the NYPD, as well as employees from the MTA and NYC Department of Education. A NYC Department of Correction captain was also nabbed.
The fraud accusations were detailed in nearly a dozen criminal complaints unsealed in Manhattan federal court Wednesday.
Nine of the defendants allegedly conspired together to obtain fraudulent Small Business Administration loans under the Economic Injury Disaster Loan program. They were charged with conspiring to commit wire fraud.
Among them were five members of the NYPD. Others worked for the MTA and NYC Human Resources Administration.
The fraudulent loan applications submitted in their names allegedly made various false claims, including that they operated hair and nail salons, prosecutors said.
Some of the accused allegedly paid kickbacks after their fraudulent loans were funded.
Another 10 people were charged with wire fraud for submitting fraudulent loan applications under the SBA’s EIDL program and/or its Paycheck Protection Program.
Three worked for the NYC Department of Education, two for the NYPD, two for the NYC Department of Correction, one for the NYC Department of Transportation and one for the NYC Administration for Children’s Services.
Throughout 2020, they submitted fraudulent applications in their own names, claiming they were business owners, prosecutors said.
They allegedly claimed six-figure gross revenues for businesses that earned far less—or didn’t even exist. Some claimed they hired employees they didn’t actually have, prosecutors said.
Many of them spent their ill-gotten gains on personal expenses, including gambling at casinos, online gambling, personal stock investments, home furniture, electronics and luxury clothing items, according to the complaints.
In all, they bilked more than $1.5 million from the SBA and financial institutions that issued SBA-guaranteed loans, prosecutors said, adding that they intended or attempted to steal hundreds of thousands of dollars more.
U.S. Attorney for the Southern District of New York Damian Williams announced the arrests, saying in a statement that “scheming to steal Government funds intended to help small businesses weather a national emergency is offensive.”
“And, as public employees, these folks should have known better,” Williams said.
Special Agent in Charge Thomas M. Fattorusso, of IRS Criminal Investigation, said the agency is committed to uncovering COVID-19 fraud even as “the pandemic has receded from the headlines.”
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