Fort Myers Construction Contractor Pleads Not Guilty to PPP Loan Fraud After Being Accused of Using Federal Loan Money to Buy Boat
Business owners using their companies’ money for personal expenses is nothing new. In fact, sometimes there is a fine line between business expenses and personal luxuries. The year of the COVID-19 pandemic is, undisputedly, not the time to walk that fine line. During the pandemic, businesses have been closing at an alarming rate, and the ones that are still open are in a precarious position and uncertain about their future. Audacity is, arguably, a necessary component of successful entrepreneurship, but using emergency loans to buy luxury consumer goods is a whole new level of audacity. Prosecutors are alleging that the owner of a construction contracting company in Southwest Florida did just that, but the business owner denies that interpretation of events. Here, our Miami white collar crimes defense lawyer explains the fraught history of the Paycheck Protection Program and how the contractor’s case may play out.
The Paycheck Protection Program: Haste Makes Waste
The Paycheck Protection Program (PPP), a provision of the CARES Act enacted this spring during the first wave of the COVID-19 pandemic, has all the hallmarks of an emergency measure. Its purpose was to get money into the bank accounts of small businesses quickly so that those companies could continue to keep their employees on the payroll; in other words, it aimed to reduce the number of new applicants for unemployment benefits. For this reason, the process for obtaining PPP loans was much simpler and less rigorous than what most business loans require. Applicants simply had to show that they employed 500 people or fewer and that they planned to use at least 60 percent of the loan amount on payroll and the other up to 40 percent on essential overhead expenses such as rent and utilities. Applications required little documentation besides the applicants’ tax returns. The program’s architects knew that they were taking a risk of not being able to catch all false statements made on applications, but the urgent need for funding for small businesses made these desperate measures necessary.
The Charge: Fraud, Namely Making False Statements to Obtain a PPP Loan
Casey Crowther is the third generation in his family to own a roofing contracting company in Florida; his father David and grandfather Lee are in a similar line of work. On April 7, shortly after the PPP launched, Casey Crowther’s company, Target Roofing and Sheet Metal, which employs 135 workers, obtained a PPP loan valued at just over $2 million from Sanibel Captiva Community Bank. Upon receipt of the loan, Crowther wired $689,000 to a boat dealer for the purchase of a boat.
For example, under ordinary circumstances, it would be easy to tell whether a big-ticket purchase made by a business owner was for business purposes or commercial ones. Typically, even if the owner owns the company 100 percent and does not share ownership with any partners, another officer’s signature is required before the entrepreneur spends six figures or more on real estate, a vehicle, or some other purchase of comparable size. The second signer is usually a chief financial officer or other employee who exercises a high degree of responsibility over the company’s finances.
Crowther’s purchase of the boat automatically raised suspicions. Why would a roofing company need a boat? When Crowther posted pictures to social media of himself riding on his new boat with his children, that was all the evidence investigators needed. Crowther was arrested on his 35th birthday on charges of PPP fraud.
Defendant Pleads Not Guilty to PPP Fraud
Crowther entered a plea of not guilty; if convicted, he could receive a sentence of up to 30 years in federal prison. His trial is scheduled for November 2. Crowther does not deny that he used part of the PPP loan amount to purchase the boat, but he claims that it was a legitimate business expense. Specifically, he planned to sell the boat at a profit and used the proceeds to fund his roofing business and provide the employees with even more paychecks than they could have received if he had just used the money directly for payroll. The lender, Sanibel Captiva Community Bank, has a history of objecting to Crowther’s boat selling business strategy. Before the pandemic, Crowther tried to deposit $400,000, the proceeds from the sale of a boat, into his business account, but the bank refused to allow the deposit.
Let Us Help You Today
Even though PPP loans were meant as a no-strings-attached lifeline for small businesses, they have often indirectly led to loan recipients undergoing more scrutiny than they expected. A Miami white collar crime lawyer can help you if you are facing legal trouble because of your use of PPP loan funds. Contact Ratzan & Faccidomo for help today.