Covid-19 pandemic fraud — COVID-19 Pandemic Fraud

NEWARK, NJ — Two more defendants have been sentenced in connection with a national COVID-19 fraud scheme, bringing the total number of sentenced individuals to 22. Toni A. Smith, 46, of New Jersey, received a 15-month prison sentence, while Dontae Antonio Murphy, 40, of Charlotte, was sentenced to 12 months in prison. Both were also ordered to pay several hundred thousand dollars in restitution to the Small Business Administration (SBA), which includes interest and processing fees, for fraudulently obtaining Paycheck Protection Program (PPP) loans.

Smith and Murphy secured fraudulent PPP loans under the guise of running janitorial and cleaning service companies. This sentencing marks the latest development in a broad investigation that has led to nine additional guilty pleas in the Eastern District of North Carolina, with those defendants still awaiting sentencing.

“This is the latest in a series of defendants involved in a national conspiracy to steal taxpayer money meant to be a lifeline to our nation’s most vulnerable businesses during a global pandemic,” said U.S. Attorney Michael Easley. “Even though the pandemic is behind us, we are working closely with our partners at the IRS to identify, investigate, and prosecute cases of fraud to put cheats behind bars and recover taxpayer money.”

Court documents reveal that Smith and Murphy conspired with Edward Whitaker and Schunda Coleman, among others, to obtain the fraudulent loans. Whitaker and Coleman had pleaded guilty in January 2023 for their role in orchestrating a nationwide scheme from their Texas home, helping individuals across the country commit millions of dollars in PPP fraud.

The scheme involved the creation of fraudulent documents and applications, with Whitaker and Coleman taking a 25% cut of the loan proceeds. The fraudulent applications exaggerated the number of employees and wages paid before the COVID-19 pandemic by using backdated IRS forms. Once the PPP loans were disbursed, Whitaker provided the defendants with detailed instructions via text messages on how to make the payments appear legitimate. In reality, much of the money was funneled back to the defendants, with fraudulent payroll records subsequently submitted to the SBA to obtain full loan forgiveness.

“The Paycheck Protection Program was designed to help small businesses facing financial difficulties during the COVID-19 pandemic,” said Donald “Trey” Eakins, Internal Revenue Service Criminal Investigation Special Agent in Charge in the Charlotte Field Office. “Through our partnership with the U.S. Attorney’s Office and our federal law enforcement partners, IRS Criminal Investigation Special Agents will continue to aggressively pursue individuals who try to exploit federal relief programs for their personal gain.”

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