Ex-Small Business Administration employee sentenced to 4.5 years for PPP fraud

Miami Herald

5 hours ago

A former Small Business Administration employee who learned the system from the inside and cashed in on pandemic loans for herself and others was sentenced Friday to over four years in prison for committing fraud.
Malaina Chapman was also ordered to pay back about $1.3 million to her former employer by U.S. District Judge Rodolfo Ruiz in Miami federal court.
Chapman, 38, of Hialeah, pleaded guilty in March to conspiracy to commit wire fraud, including submitting COVID-19 loan applications and advising a half-dozen others on filing similar requests for emergency benefits that were managed by the Small Business Administration.
In that scheme, her associate, Raisha Kelly, 44, of Palm Beach County, was sentenced in May to five years in prison after being found guilty by a Miami federal jury of multiple counts of wire fraud for submitting falsified tax returns on loan applications. She was also ordered to reimburse about $445,000 to the SBA, which guaranteed pandemic loans through the agency's Paycheck Protection Program.
As the coronavirus swept across the country, the two South Florida women teamed up to steal more than $1 million in federal government loans that were meant to help small businesses survive the economic collapse during the public health crisis, according to prosecutors in the U.S. Attorney's Office.
Assistant U.S. Attorney Dan Bernstein noted that Chapman was making about $57,000 a year as an SBA employee when she stole not only from the agency's PPP loan program but also from other relief programs at the federal, state and local levels. Bernstein pointed out that Chapman spent the ill-gotten funds at luxury stores such as Louis Vuitton and Chanel and leased a BMW for more than $2,300 a month — not on her side businesses or employee payroll, as was required by law.
In a sentencing memo, Bernstein said Chapman 'never met a trust-based government program that she didn't steal from,' calling her 'a financial predator who views government relief programs as her personal piggy bank that existed to fund her dreams of living in the luxury she felt entitled to.'
Since Congress adopted the pandemic relief program run by the SBA, South Florida has been a hotbed of PPP loan fraud. Business people, law enforcement officers and hundreds of others have been convicted of stealing millions from the government program by fabricating loan applications for their companies. Several used their emergency loans to buy Lamborghinis, Teslas, Porsches and other expensive cars.
READ MORE: Lambos. Jewels. How 'easy money' from Uncle Sam made Miami a feast for PPP fraudsters
First ex-SBA employee charged
Chapman was employed as a disaster relief specialist with the Small Business Administration from Sept. 28, 2020, through her resignation on March 18, 2021, according to court records. During her employment, Chapman fleeced the PPP and Economic Injury Disaster loan programs, as well as credit unions and pandemic-related rental programs, according to federal court records.
Chapman was the first ex-SBA employee in the country to be charged with bilking the agency responsible for doling out $800 billion in PPP and other pandemic loans, according to federal authorities. Chapman advertised her side businesses in real estate and credit services on her Instagram account under the handle upscale_yourhomegirl.
Chapman was accused of helping Kelly and five other members in a South Florida ring with their bogus PPP loan applications, leading to disbursements of hundreds of thousands of dollars in 2021 by private lenders backed by the SBA.
With the exception of Kelly, five members of the ring agreed to plead guilty to charges of fraudulently receiving more than $800,000 in PPP loans, court records show. Chapman and Kelly received kickbacks from loan applicants, according to prosecutors.
In addition, on Feb. 10, 2021, Chapman submitted a PPP loan application in the name of her company, Upscale Credit Lounge, which included a falsified tax document that reported revenue of $103,674 and a profit of $81,860. Eleven days later, a private lender approved another loan for $17,052, according to court records.
On Feb. 19, 2021, Chapman, again while still employed by the SBA, submitted another PPP loan application for her business, DA TRAP. Chapman claimed that she had four employees and an average monthly payroll of $14,191. As backup material, Chapman submitted four IRS Employers Quarterly Tax Return forms, which documented the wages paid by DA TRAP. A week later, a private lender approved a loan for $35,477.
All of the information in her application was fabricated, prosecutors said.
In a similar manner, on April 10, 2021, Chapman submitted another PPP loan application for a property management business, falsely claiming on a tax form that it generated revenue of $123,950, with profits of $78,187, court records show. Five days later, a private lender approved that loan for $20,833.
In addition to defrauding the PPP program, Chapman was also accused of exploiting the state of Florida and the city of Miami's COVID-19 Emergency Rental Assistance programs.
On Oct. 13, 2021, Chapman began the process of applying for benefits under Florida's Emergency Rental Assistance program. Chapman pretended to be a tenant at a residence in Miami, according to court records. She submitted information and documents through an online portal set up to distribute benefits.
On Jan. 20, 2022, Chapman submitted a written document titled '3-day notice to pay rent or quit.' The document was dated Dec. 7, 2021, showing it was signed by Chapman's mother. But her mother had died the previous year on May 25, 2020.
Nonetheless, the state accepted Chapman's misrepresentations and approved payments totaling $15,000. They were made into her bank account, according to authorities.
The PPP fraud cases, investigated by the U.S. Postal Service Office of Inspector General and other federal agencies, were handled by prosecutors Bernstein, Eduardo Gardea Jr. and Gabrielle Charest-Turken.