In a significant development in the hospitality sector, a federal grand jury in San Diego returned an indictment against two restaurant owners on May 19, citing allegations of conspiracy to commit wire fraud, wire fraud, and money laundering. The accused, Leronce Suel and Ravae Smith, operated a chain of restaurants in the San Diego area under their LLCs, Rockstar Dough LLC and Chicken Feed LLC.
According to the indictment, from March 2020 to June 2022, the duo reportedly conspired to underreport over $1.7 million in gross receipts on Rockstar Dough LLC’s 2020 corporate tax return (Form 1120S) filed with the IRS. This alleged falsification was an attempt to qualify for the COVID-related Paycheck Protection Program (PPP) and Restaurant Revitalization Funding loans. Suel and Smith are also accused of making materially false certifications on loan applications regarding the utilization of the loan proceeds.
Furthering the gravity of the allegations, the indictment charges Suel and Smith with money laundering, claiming they made significant cash withdrawals from their business bank accounts to obscure the origin of the fraudulently obtained funds. They also allegedly concealed over $2.4 million in cash at their residence, a clear violation of both tax law and the terms of the federal relief programs.
On their initial court appearance before U.S. Magistrate Judge William V. Gallo, the pair learned the seriousness of the charges. If convicted, they could face a maximum penalty of 30 years in prison for wire fraud and conspiracy to commit wire fraud, and 10 years in prison for money laundering.
In announcing the charges, U.S. Attorney Randy Grossman for the Southern District of California reminded small businesses of the purpose behind the COVID-19 relief loans. “During an unprecedented public health emergency, the United States provided these loan programs to deliver economic relief to Americans,” he said. “This office will investigate and prosecute those who exploited the global pandemic to unjustly enrich themselves.”
The charges against Suel and Smith underline the importance of maintaining transparency and integrity in dealing with federal aid programs. In particular, small businesses must exercise caution and honesty when applying for and utilizing COVID-relief loans.
In response to these allegations, Special Agent in Charge Tyler Hatcher of the Los Angeles Field Office emphasized the IRS’s commitment to justice. “Submitting false returns in support of a fraudulent loan application is a crime. IRS-CI is committed to aggressively investigating these crimes and bringing those to justice who stole funds and targeted relief programs during the pandemic.”
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Source : SmallBizTrends