DOJ announces first charges of alleged COVID-19 stimulus relief fraud

The department says two men fraudulently sought nearly half a million in loans.

May 5, 2020, 4:21 PM

The Justice Department announced its first series of charges targeting fraud in the COVID-19 stimulus relief package for small businesses on Tuesday after two Rhode Island men allegedly filed for more than half a million dollars in loans to help pay employees that the government says do not exist.

Federal prosecutors said David Staveley and David Butziger fraudulently applied for forgivable loans from the Small Business Association's established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress last month.

According to court documents, both claimed to have "dozens of employees" across several different businesses, but the government said in actuality they had "no salaried employees" and in one instance applied for a loan "to pay employees at a business [they] did not own."

The Robert F. Kennedy Department of Justice Building in Washington, D.C. is seen in an undated photo.
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In one application cited by prosecutors, Staveley allegedly requested $438,500 that he said he would pay out to employees across three restaurants. Two of the restaurants, according to the criminal complaint, were not operational before or after the current crisis. Stavely had no ownership stake in the third, the government claims.

In a separate instance cited in the complaint, Butziger is alleged to have spoken to an FBI undercover agent who was posing as a bank compliance officer and claimed he had seven full-time employees on his payroll that he had to lay off at the end of March and planned to pay with the government loans.

After providing the agent with the list of supposed employees, though, those reached by the FBI reportedly said they were never employed with the company.

“Thankfully we were able to stop them before taxpayers were defrauded," said Joseph Bonavolonta, the Special Agent in Charge of the FBI's Boston Field Office. "But today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud.”

Both men were charged with conspiracy to commit bank fraud and other financial charges. As of Tuesday afternoon, neither had listed representation in the case and ABC News' attempts to reach them were not immediately successful.