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While small businesses struggled to remain afloat amid the coronavirus pandemic, owners of a chain of New York nail salons allegedly defrauded the federal government of millions in COVID-19 relief funds.
Three family members who own more than a dozen nail salons in New York were arrested for a scheme that landed them approval for $13 million in loans that were intended to help small businesses adversely affected by the coronavirus pandemic, according to prosecutors. The fraudulent activities also included smuggling immigrants to work at the salons for lower wages.
The U.S. Attorney’s Office for the Southern District of New York reported Thursday that Peter Nguyen, Victoria Ho and Dat Ho were arrested for allegedly misrepresenting their payroll figures to obtain the funds from the U.S. Small Business Administration’s Paycheck Protection Program.
With over 15 nail salons called “Victoria Nails & Spa” located in Brooklyn, the Bronx and Long Island, the owners “falsely and grossly overstated the number of employees and payroll at their nail salons and other businesses through fraudulent and doctored payroll and tax records in order to obtain larger loans,” prosecutors said.
From April through June of this year, the defendants allegedly “engaged in a scheme to submit online applications to at least two financial institutions for a total of over $13 million in government-guaranteed loans,” the complaint filed in Brooklyn Federal Court Thursday read.
According to the filing:
In order to support the false representations in the loan applications about the number of employees at, and the wages paid by, the Victoria Companies, the defendants submitted fraudulent and doctored payroll and tax records. In addition, the defendants falsely listed the same employees in applications for different nail salons to support the loan amounts applied for, and some purported employees were listed as employees of as many as seven different nail salons during the same time period.
More than $13 million in PPP loans were approved and approximately $7.8 million in funds were deposited into their bank accounts by the government. The salon owners began searching online for “ppp fraud” and “ppp loan fraud arrests,” after a hold was placed one of the accounts that had received PPP funds due to “suspicion of fraudulent activity,” prosecutors said.
“As alleged, these defendants conspired to rip off the SBA’s COVID-relief small business loan program and financial institutions by lying about how many people they employed in their family business and how much they paid those employees,” Acting U.S. Attorney Audrey Strauss said.
“They allegedly exploited a program designed to provide vital funding for small businesses that are legitimately struggling in the midst of the pandemic,” Strauss added. “Thanks to the combined efforts of the SBA, the FBI, and IRS-CI, the defendants face prosecution.”
Nguyen, 44, and Dat Ho, 33, also allegedly smuggled immigrants into the U.S. illegally from Vietnam to work in the salons. Along with Victoria Ho, 31, the three owners have each been charged with one count of conspiracy to commit bank and wire fraud, and face a maximum of 30 years in prison. They also each face one count of major fraud against the United States and one count of conspiracy to make false statements.
“Falsifying documents to fraudulently gain access to SBA program funds is unconscionable. OIG and its law enforcement partners will relentlessly pursue fraudsters and bring them to justice,” SBA-OIG Special Agent-in-Charge Amaleka McCall-Brathwaite said.
“The benefits offered by the CARES Act for PPP loans were established to help small businesses survive during the pandemic. Unfortunately, the owners of Victoria Nails & Spa saw this program as their own personal piggy bank,” FBI Assistant Director William F. Sweeney Jr said.
IRS-CI Special Agent in Charge Jonathan Larsen condemned their actions, saying it was “repugnant that there are those who would fraudulently take advantage of relief efforts offered.”
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