Puerto Rico Embroiled in Massive Embezzlement Scandal: 19 Indicted for Fraudulent Use of Federal Recovery Funds

A grand jury in Puerto Rico has indicted 19 individuals for their alleged involvement in a massive embezzlement scheme, which defrauded federal recovery funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The accused are charged with multiple counts of wire fraud and money laundering.

Scheme Details

According to court documents, between April 2020 and February 2024, the defendants submitted at least 30 Paycheck Protection Program (PPP) loan applications, seeking to illegally disburse over $587,442 in federal recovery funds from the U.S. Small Business Administration (SBA) and Bank 1.

Investigation Ongoing

“This is the fifth round of defendants charged since April 2023 relating to this fraud scheme,” said W. Stephen Muldrow, U.S. Attorney for the District of Puerto Rico. “The investigation remains ongoing, and we expect more charges.”

False Applications Submitted

Authorities claim that the defendants knowingly devised a scheme to defraud the SBA and Bank 1 by submitting false and fraudulent applications for Economic Injury Disaster Loans (EIDL) and PPP loans.

CARES Act and EIDL Program

The CARES Act authorized federal assistance through the issuance of SBA loans to small businesses and non-profit entities affected by the COVID-19 pandemic. The EIDL program was one such loan assistance program, which required applicants to provide detailed operational information from the 12-month period prior to the pandemic.

False Documents Used

However, authorities allege that the defendants submitted false and fictitious tax documents, payroll records, bank records, and identification documents to procure PPP loans. They also allegedly directed recipients of the fraudulently obtained loans to remit a portion of the proceeds to themselves and their co-conspirators, using the loan proceeds for personal gain.

Penalties

If convicted, the defendants face up to 30 years in prison for wire fraud counts, as well as additional time for money laundering charges. José Carmona Morales, aka “Cheka,” and Cecy Casiano Santiago are also facing up to 20 years of imprisonment for money laundering.

Prosecution Team

Assistant U.S. Attorney Timothy R. Henwood and Chief of the Criminal Division Daniel J. Olinghouse are handling the prosecution of the case.

Important Note

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.