DENVER - The U.S. Attorney’s Office for the District of Colorado announced that Michael Lain, 56, of Queen Creek, Arizona, was sentenced to 32 months in federal prison for his role in a wire fraud scheme that stole pandemic relief money from the Small Business Administration (SBA).
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided emergency assistance, administered by the SBA to small business owners affected by the Coronavirus (COVID-19) pandemic. The two primary sources of funding for small businesses were the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL) program.
From March through June 2020, defendant Michael Lain submitted fraudulent EIDL applications to the SBA on behalf of more than 70 limited liability companies (LLCs) seeking both loans and grants from the program. In these applications, Lain made false statements about the number of employees and the amount of gross revenues and cost of goods sold that the LLCs had in the 12 months prior to January 31, 2020. In the applications, Lain also falsely agreed to use the funds as working capital for the LLCs when, in fact, he intended to use the funds for other purposes, including the purchase of a new home. 70 of those EIDL applications were approved and funded by the SBA out of its Denver Finance Center. As a result, LLCs controlled by Lain received $3,830,400 in EIDL proceeds and $336,000 in Economic Injury Disaster Grant (EIDG) proceeds.
“Stealing this money is stealing from the generosity of American taxpayers,” said U.S. Attorney Cole Finegan. “Because of the pandemic, Americans stepped up to help their neighbors who were in danger of losing their businesses. Together with our law enforcement partners, we are holding criminals accountable for taking this money to line their pockets.”
“Today’s sentencing demonstrates our continued resolve to deter pandemic-related fraud and protect Americans from exploitation,” said U.S. Secret Service Special Agent in Charge Marc DellaSala, Denver Field Office. “I want to thank the U.S. Attorney’s Office and our task force partners for their tireless pursuit of those attempting to compromise our financial infrastructure by defrauding taxpayer-funded relief.”
“OIG stands beside the nation’s small businesses by securing and safeguarding SBA programs that support and uplift them through difficult times,” said SBA OIG’s Special Agent in Charge Weston King. “OIG remains committed to rooting out bad actors and protecting the integrity of SBA programs. I want to thank the U.S. Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”
U.S. District Judge William J. Martinez sentenced Lain on February 9, 2022. In addition to 32 months of incarceration, the sentence also included an order to pay $622,683.40 in restitution, a $20,000 fine, and will be followed by a three-year term of supervised release. Defendant Lain had repaid the majority of his fraudulently obtained loans prior to his sentencing. In addition to repaying his fraudulently obtained EIDL loans and grants, as part of his plea agreement, Lain also agreed to repay $294,900 that he received as a result of fraudulent PPP applications he submitted.
The investigation in this case was conducted by the United States Secret Service and the Small Business Administration-Office of Inspector General in connection with their work on the Colorado-based EIDL Fraud Task Force. The prosecution was handled by Assistant United States Attorneys Pegeen Rhyne and Patricia Davies.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the Department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
CASE NUMBER: 21-cr-00175-WJM