Business Owner Charged In $420K COVID-Relief Fraud Scheme: Feds

PARK FOREST, IL — A Park Forest businessman was indicted on federal fraud charges after taking more than $420,000 in small business loans under the Coronavirus Aid, Relief and Economic Security Act (CARES), according to the Northern District of Illinois U.S. Attorney's Office. According to the indictment, Carlos Smith, 56, lied about the number of people he employed and his monthly payroll. He also made false statements to conceal a previous felony conviction, prosecutors said.

On Tuesday, Smith was charged with two counts of wire fraud, one count of making false statements to a financial institution and one count of money laundering, according to the U.S. attorney's office.

Smith is accused of defrauding the federal Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. PPP loans allow the interest and principal to be forgiven if businesses spend a certain amount of money on essential expenses, like payroll, rent and utilities. EIDL provides loan assistance or grants to cover working capital and other operating expenses.

"The Paycheck Protection Program and the Economic Injury Disaster Loan Program were designed as lifelines for small businesses struggling to survive the COVID-19 pandemic,” said John R. Lausch, Jr., United States Attorney for the Northern District of Illinois. "Our office is committed to working with our law enforcement partners to root out abuse of the important relief programs established under the CARES Act."

Prosecutors said Smith applied and received $270,000 in PPP funds for CLS Financial Services Inc., an Indiana company he owned. In his loan application, Smith stated that the company had 61 employees and an average monthly payroll of $108,000, while knowing the company did not have any employees or payroll expenses, the indictment states.

According to the indictment, in his application, Smith also said he had not been convicted or plead guilty to a felony criminal offense in the last five years. The indictment states Smith has and was aware of it.

Prosecutors said Smith also received $151,900 in EIDL loans after stating in the application that his company had two employees and $1.8 million in gross revenue last year, even though the company had no employees or revenue.

An arraignment hearing is set for Jan. 14 at 11 a.m. before U.S. District Judge Manish S. Shah. The office said Smith's indictment was announced by Lausch, acting special agent-in-Charge of the IRS Criminal Investigation Division in Chicago Tamera Cantu, and Hannibal Ware, inspector general of the U.S. Small Business Administration.

The government is represented by Assistant U.S. Attorney Kelly Greening.

Anyone with information about fraud involving COVID-19 can report it by calling the National Center for Disaster Fraud Hotline at 866-720-5721 or filling an online complaint form, here.

Indictments are merely charges and not evidence of guilt. The defendant is presumed innocent until proven guilty by the courts.