PPP Fraud Sweeps Snare Two MSP CEOs, Two Techs As Feds Crack Down

‘It is disgraceful that anyone would exploit loans meant to protect America’s small-business owners during this public health crisis,’ says Northern Oklahoma U.S. Attorney Trent Shores.

Federal prosecutors nationwide have in recent weeks scooped up a variety of suspects —including several technology professionals—for allegedly manipulating payroll and company records to illegally siphon cash from the Paycheck Protection Program used to keep small businesses afloat as the nation hunkered down to battle the coronavirus.

Among the nearly one-dozen people charged in the past two months since the program went live are two IT solution providers, a software engineer, as well as a technology project manager for Walmart, according to court documents.

“It is disgraceful that anyone would exploit loans meant to protect America’s small-business owners during this public health crisis,” said U.S. Attorney Trent Shores of the Northern District of Oklahoma —where one of the IT professionals was charged—in a statement. “Unfortunately, COVID fraudsters are out there and active. Their victims are people who perform the back-breaking and emotionally challenging work to live their dream as a business owner and give back to their communities.”

In separate cases, MSPs—one outside Boston, the other outside Chicago—boasted of large payroll numbers and revenue in documents filed to obtain a chunk of the hundreds of billions of dollars available in forgivable business loans. Meanwhile, a Washington state software engineer created two companies on paper, each with 20 employees, in order to claim $1.5 million in loans, federal prosecutors said. In another case, on Monday, a project manager who has overseen a massive Salesforce implementation for an oil and gas client, was suspended from his job as a technology project manager for Walmart after he was charged in federal court in Oklahoma.

The MSP outside Chicago was charged last week in U.S. District Court in Northern Illinois with bank fraud and making false statements to a financial institution. A woman who answered the phone at his business said she would take a message, but no one returned a call to CRN seeking comment.

Rahul Shah, 51, of Evanston, Ill. CEO of Katalyst Technologies, is accused of having paperwork submitted to banks in Pittsburg and Wallis, Texas using personal information for employees who no longer worked at the company to win loans worth more than $400,000. A comparison between the documents submitted to the lender and the company’s IRS filings revealed that Shah’s company reported significantly lower payroll expenses to the IRS, the complaint states.

Shah wrote on LinkedIn that he founded Katalyst “to build a world class team of technology experts with a core focus on software quality assurance, testing, Business Intelligence, and Engineering Services.”

In August last year, Katalyst was awarded Microsoft’s Silver Partner status for Application Development competency, according to a press release. In April 2019, it began offering SAP S/4HANA Qualified Partner-Packaged solutions focused on Consumer Product Goods, Life Sciences (Medical Devices, Pharmaceuticals), and Retail and Wholesale Distribution industry segments. In February 2019, Katalyst was designated with Select Consulting Partner status in the Amazon Web Services Partner Network.

A Treasury Inspector General Tax Agent interviewed three former Katalyst employees who confirmed that the forms all had their correct Social Security information, but some had not worked for Shah since 2015, and none had a current business relationship with him. Shah allegedly initially told the agent a payroll company in India prepared the forms that were submitted to the banks and emailed them to him. When asked to see the emails, Shah told agents he did not have any.

Just outside Boston, in Winchester, Mass., Elijah Buoi, 38, the CEO of Sosuda Tech, which claims to be a Salesforce Silver partner, was charged with wire fraud and bank fraud for seeking $13 million in PPP loans through Bank of America claiming the relief for 353 employees and $3 million in monthly payroll expenses, according to the FBI affidavit.

Salesforce, which Sosuda spells “Sales Force” on its website, has no record of a silver tier partner with the name Sosuda or South Sudanese American Technologies, which was the company’s first registered name. Sosuda’s registered address is Buoi’s home in Winchester and the company’s site describes it as “a disruptive innovator.”

“Sosuda Tech serves overlooked areas of global markets and customers, both in the developed and developing countries,” the site states. A phone number for the company went directly to voicemail. A call from CRN was not returned.

When Buoi’s first loan was denied by Bank of America, he filed an application with a different bank on May 21. This time Sosuda had 18 employees with a monthly payroll of $150,000, the affidavit states. Two weeks later he filed another loan application to a different bank which received paperwork that said Sosuda employed 96 people with monthly payroll expenses of $800,000. He then filed those same numbers with still one more bank.

“Buoi submitted at least four PPP loan applications on behalf of the same entity,” the FBI affidavit states. “In three of the four applications, Buoi provided different information concerning the number of Sosuda employees and the company’s average monthly payroll.”

Agents later found that while Buoi stated his employees lived in Massachusetts, there is no quarterly record of wages and earning with the state department of unemployment assistance, which is required by law. Annual payroll expenses also varied wildly between the applications with the first claiming he spent $9.4 million each year, and another, stating he spent $450,000, the affidavit said.

While the investigation into Buoi was ongoing, Sosuda was granted a $2 million PPP loan by one of the banks, which was deposited in two accounts, both of which have since been frozen by the Justice Department. Buoi was arrested Monday, arraigned via teleconference in Worcester, Mass. He was later released after posting $15,000 in cash bail.

A call to a number listed to Buoi was not returned.

In Oklahoma, Walmart’s senior manager of Global Technology Operations & Portfolio, Benjamin Hayford, has been suspended without pay following charges of PPP fraud.

On his LinkedIn profile, Hayford lists his tech credentials, including work for an oil and gas company “implementing Salesforce CRM, enabling 1,100 sales associates to exceed $4 billion in 2018 revenues” and “Before that, helped 660 finance associates with monthly, quarterly, and annual financial closes using SAP BPC and drove business and technology transformation programs and projects forward.”

For Walmart, Hayford said his job was to “develop, manage, and implement Walmart enterprise strategic portfolio programs and services” for the vice president of global technology operations.

Federal prosecutors charged him with wire fraud and bank fraud after he claimed a company he ran from a Texas apartment had 244 employees and monthly payroll expenses of $1.7 million, according to federal paperwork.

However in 2019, he stated on his income tax return that the same company generated just $2,500 in income and $25,000 in expenses. He was seeking $4.4 million from the relief fund.

After failing to win a loan with one bank, he sought a loan from a bank in Oklahoma which was granted, but a bank employee did not fund the loan immediately after noticing the payroll data “looked strange,” the FBI stated. When the bank called, Hayford said he had no payroll records, and used no payroll services, because prior to 2020, he paid workers only in cash. Hayford appeared in court on Monday. He was assigned a federal public defender and released on $10,000 unsecured bond. His lawyer did not return a call to CRN for comment.

However, in a statement to CRN, Walmart spokesman Randy Hargove said none of Hayford’s alleged criminal actions were carried out on behalf of the retailer.

“Mr. Hayford has been suspended without pay under our arrested associate policy and no longer has access to any company property or systems,” he wrote. “The criminal charges filed by the Department of Justice are not connected to Walmart or Mr. Hayford’s work for the company.”

In Washington state, Baoke Zhang, 35, a software engineer purported to run a business with 25 employees and submitted false IRS records and payroll receipts to multiple banks as part of an attempt to get $1.5 million from the relief fund, a federal complaint states.

“As part of an effort to show that this business had been operating for several quarters, Zhang allegedly submitted to two lenders documentation purporting to show that, on April 3, 2017, the IRS had assigned an Employer Identification Number to his sole proprietorship,” federal prosecutors said in a statement. “In fact, the IRS assigned the EIN on April 3, 2020, only a week before Zhang submitted his application to the lender”

Zhang, of Issaquah, Washington, was charged in a federal criminal complaint filed in the Western District of Washington with wire fraud and bank fraud.

“This defendant tried more than once to defraud the Paycheck Protection Program (PPP) – a program designed to keep people working,” said U.S. Attorney Brian T. Moran for the Western District of Washington. “I am pleased that the systems designed to detect and deny fraudulent payments caught his scheme before federal funds went out the door.”