The Oregon Division of Financial Regulation has settled a lawsuit with a company that sold overpriced precious metals to Oregonians. (Getty Images)
The U.S. Attorney’s Office in Portland has won another case involving fraud of pandemic loans, with a Beaverton man convicted of defrauding banks and the federal government.
The U.S. District Court in Portland last week sentenced 62-year-old Theodore Johnson to serve 15 months in federal prison for one count of bank fraud. He also has to pay $320,000 in restitution for false declarations on applications for federal pandemic funds.
Court documents filed by U.S. Attorney Natalie Wight in Portland said that Johnson had “devised” a scheme to defraud two federally insured financial institutions in 2021 through his nonprofit Ten Penny International Housing Foundation. The scheme involved submitting applications for loans under the Paycheck Protection Program, which offered guaranteed loans up to $10 million for qualified employers to help them retain workers.
The program was one of two overseen by the U.S. Small Business Administration during the pandemic to keep nonprofits and businesses afloat during the pandemic. Paycheck Protection Program loans didn’t have to be paid back if employers met certain requirements, including using the money for staff, mortgage interest payments, rent or utilities. The other program, the COVID-19 Economic Injury Disaster Loan program, issued 30-year disaster loans with favorable fixed interest rates – 3.75% for businesses and 2.75% for nonprofit organizations – with 30-year terms. Those loans had to be paid back.
The programs disbursed about $1.2 trillion in 2021 and 2022 to businesses and nonprofits. Officials streamlined vetting procedures to release money quickly, making them vulnerable to fraud. An inspector general report from the Small Business Administration estimated last month that about 17% of the loans were based on fraudulent applications.
In Oregon, the U.S. Attorney’s Office has won convictions against 21 people for pandemic relief fraud. The vast majority have pleaded guilty to felonies – mostly wire or bank fraud – and sentenced to prison, office spokesman Kevin Sonoff told the Capital Chronicle.
The largest case in Oregon was against Salwan Wesam Adjaj, a 44-year-old former dentist from West Linn. He was ordered in February to pay $10.5 million in restitution and serve nearly six years in prison for attempting to steal more than $170 million in COVID relief funds. Adjaj submitted dozens of fraudulent loan applications using the names and employer identification numbers of fictitious business entities.
Another case in January 2022 led to Andrew Aaron Lloyd, 51, of Lebanon, being sentenced to four years in prison and $4 million in restitution for pandemic relief fraud. The government seized stock, securities and cash from his accounts worth more than $18 million.
Sonoff said the U.S. Attorney’s Office continues to pursue cases and will add an assistant U.S. attorney in the coming months to work exclusively on these cases. He declined to provide details.
The case against Johnson is the office’s latest involving pandemic relief fraud. He obtained a $143,000 loan in 2021 for Ten Penny, claiming that the nonprofit employed 16 people and had an average monthly payroll of more than $57,000, court documents said. He also submitted a 2019 tax form showing that Ten Penny’s total revenue was about $785,000 and that nine people were paid as officers, directors or trustees up to $99,000 a year.
Court records show Johnson even used a counterfeit Internal Revenue Service stamp on the 990-EZ tax form to try to show that the document was legitimate. To further support his application, Johnson submitted a 2019 Employer’s Annual Federal Unemployment Tax Return for Ten Penny, falsely claiming that he paid $624,000 to employees, court documents said.
The real 2019 tax form signed by Johnson on behalf of Ten Penny reported about $23,000 in revenue and identified six people as officers, directors or trustees. None was paid, the form showed.
Besides that loan, Johnson obtained $130,000 with an application that claimed – again – that Ten Penny employed 16 people, with an average monthly payroll of $50,000. Johnson also obtained nearly $35,000 in 2021 through the Oregon Cares Fund program, court records said.
U.S. District Judge Michael Simon sentenced Johnson to serve his 15 months at Sheridan Correctional Institution in Sheridan, which has medium and minimum security facilities. Johnson will face three years of supervision after he is released.
Ten Penny, originally incorporated in 2017, with Johnson as incorporator and director of operations, ceased operations last November, according to a filing with the Oregon’s Secretary of State’s Office.
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