Federal prosecutors say a North Hollywood man fabricated businesses, payroll records and tax documents to obtain millions in taxpayer-backed loans, then moved the money through shell companies and associates.
LOS ANGELES, CA — A 38-year-old California man has been sentenced to 70 months in federal prison for orchestrating fraudulent loan schemes that diverted nearly $5 million from government-backed programs intended to help small businesses.
Sarkis Sarkisyan, of North Hollywood, received the sentence after admitting to wire fraud and money laundering involving federal COVID-19 relief funds and additional small business lending programs.
U.S. District Judge Cynthia Valenzuela imposed the sentence, which amounts to five years and 10 months in federal prison.
According to federal prosecutors, Sarkisyan and his co-conspirators fraudulently obtained $4,866,457 through loan applications supported by fabricated business records, tax documents and payroll information.
Most of the money ultimately benefited Sarkisyan personally, investigators said.
Fake businesses used to obtain taxpayer-backed loans
Sarkisyan pleaded guilty April 29 to two counts of wire fraud and one count of transactional money laundering.
The charges included a fraudulent application for a $786,457 Paycheck Protection Program loan and a subsequent $25,000 money laundering transaction.
The Paycheck Protection Program, commonly known as PPP, was established during the COVID-19 pandemic to help businesses retain employees and cover eligible operating expenses.
Rather than applying on behalf of a legitimate business with qualifying payroll expenses, prosecutors said Sarkisyan manufactured documents designed to make fraudulent applications appear legitimate.
Investigators found that he fabricated business information, payroll records, IRS tax forms and financial statements to obtain federally backed loans.
More than $4 million obtained through additional loan fraud
The government’s investigation uncovered a broader operation involving loans issued through the Small Business Administration’s Preferred Lender Program.
Prosecutors said Sarkisyan orchestrated additional fraudulent loans totaling more than $4 million.
He also attempted to obtain two Economic Injury Disaster Loans worth $500,000 each.
The investigation determined that Sarkisyan and his associates received nearly $4.9 million in fraudulent proceeds across the schemes.
After obtaining the funds, the group transferred money through shell companies and other individuals to conceal its origins.
Those transactions helped disguise the movement of funds that had been obtained through fraudulent applications.
Prosecutors say scheme exploited taxpayers and struggling businesses
In their sentencing memorandum, federal prosecutors characterized the operation as an extensive effort to defraud lenders and misuse government-backed funds.
Sarkisyan “participated in a massive scheme to defraud multiple banks and, ultimately, taxpayers, out of almost $5 million in funds from lending programs designed to benefit small businesses and those in need during the COVID-19 pandemic,” prosecutors wrote.
They said the scheme involved “fabricating out of whole cloth businesses” to make the applicants appear eligible for financial assistance.
Prosecutors argued that the operation exploited programs intended to support legitimate businesses and preserve economic activity during the pandemic.
Restitution hearing scheduled for December
The federal court has scheduled a separate restitution hearing for December 4 to determine Sarkisyan’s financial repayment obligations.
The investigation involved the Small Business Administration’s Office of Inspector General, IRS Criminal Investigation and Homeland Security Investigations.
The federal prison sentence follows Sarkisyan’s guilty plea and concludes the sentencing phase of the criminal prosecution, although the restitution proceedings remain pending.