CT business owner admits to using $1.1M in COVID relief funds for travel, jewelry, cars
Karen Gaston, 44, appeared in federal court in New Haven on Thursday and waived her right to be indicted, according to the U.S. Attorney's Office for the District of Connecticut. She pleaded guilty to wire fraud and making illegal monetary transactions.
According to federal authorities, Gaston in 2020 controlled a number of businesses, some of which were active while one was not and another had only one client. These included LNK, Elegant Clinical, Ruby Red LLC and Diamond Shine LLC.
LNK and Diamond Shine LLC were operational but shared resources and employees, officials said. Ruby Red LLC had only one client and Gaston was its sole employee, according to authorities. Elegant Clinical was no longer operational.
Beginning around April 2020, Gaston submitted loan applications to the Paycheck Protection Program (PPP) and for Economic Injury Disaster Loans (EIDL) — both of which provided emergency funds under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The applications Gaston filed 'falsely represented the status of the operations, resources and employees' of the businesses she controlled, according to federal officials. She also reportedly filed loan applications at separate financial institutions 'in order to disguise the true nature of her criminal activity,' officials said.
The loan applications falsely represented that her businesses were all active and operating, authorities said. They also falsely represented the number of employees and the amount of wages purportedly paid to them, which were outlined in fraudulent tax returns and tax related documents, according to officials. Authorities said Gaston also falsely represented that a family member — who was used as an applicant on an application — was a part owner of one of the businesses.
Gaston reportedly received a little more than $1.1 million in PPP and EIDL loan funds through the scheme, according to officials. Instead of using the funds for payroll or other operating expenses, she reportedly spent the money on 'personal expenditures, including travel, food, luxury home goods, expensive jewelry, cars and paying off her home mortgage,' the U.S. Attorney's office said.
As part of the plea deal, Gaston has agreed to pay full restitution. She also agreed to forfeit a $39,521 ring she purchased in July 2020 from the jeweler Harry Winston.
Gaston is free on a $100,000 bond while she awaits sentencing, which has not yet been scheduled. She faces a maximum of 30 years in prison.
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