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Another Guilty Plea in Nation’s First CARES Act Fraud Case

May 26, 2021

A Massachusetts man pleaded guilty last week in the country’s first prosecution for CARES Act fraud. As we previously reported, federal authorities charged David Staveley and David Butziger last May with fraudulently seeking pandemic relief loans guaranteed by the Small Business Administration (SBA). Specifically, the men allegedly sought hundreds of thousands of dollars in loans for businesses that they did not own or that were not operating. As such, the businesses did not qualify for loan relief.

The CARES Act and Paycheck Protection Program

Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES) on March 29, 2020. Congress enacted CARES to provide emergency assistance to Americans suffering economic hardship due to the COVID-19 pandemic. One of CARES’ key components is the Paycheck Protection Program, which provided loans to small businesses to help support their ongoing operations. Recipients must use PPP funds to fund businesses’ payroll, mortgage interest, rent, and other essential expenses. The SBA forgave repayment for businesses that spent the funds within eight weeks and used at least 75 percent for payroll. To date, the government has lent almost $800 billion as part of the PPP.

The CARES Act Fraud

It didn’t take long for the defendants to try to take advantage of the PPP’s generous loan provisions. Congress passed CARES on March 29, 2020. According to DOJ’s press release announcing the charges, Butzinger applied for a PPP loan on April 6th, barely a week later. He sought the loan claiming to own a business that did not exist and which had no employees. Staveley filed loan applications claiming that he owned three restaurants employing dozens of employees. In fact, two of the restaurants were closed at the time and Staveley did not own the third. Authorities arrested the two men on May 5, 2020. They were the first persons to face criminal prosecution for fraudulently seeking pandemic relief loans authorized by CARES.

Defendant Pleaded Guilty After Evading the Law

After arrest, the defendants appeared in federal court. The court released them to home detention with electronic monitoring. Three weeks later, Staveley made a break for it. He removed his electronic monitoring device and fled his home. He eventually faked his own death by leaving suicide notes with associates and in his car, which he abandoned by the ocean in Massachusetts. Law enforcement determined that between May 26 and July 23, 2020, Staveley illegally traveled from state to state using false identities and stolen license plates. While on the run, he missed his federal court date on June 2nd. The United States Marshals Service eventually apprehended Staveley in Alpharetta, GA, on July 23, 2020.

Staveley pleaded guilty last Monday, to conspiring to commit bank fraud and failing to appear in court. The court has scheduled his sentencing for August 2, 2021. Staveley’s co-defendant, Butziger, pleaded guilty on September 18, 2020, to conspiring to commit bank fraud. He is to be sentenced on June 23, 2021.

Looking Ahead

Thanks to scientists and healthcare workers, COVID-19 vaccines are now widely available across the United States. The end of the pandemic appears to be in sight – or at least a return to relative normalcy. Sadly, pandemic relief efforts – such as PPP in this case – created attractive targets for fraud. Staveley and Butzinger may have been the first but they were by no means the only persons who committed COVID-19 stimulus fraud. Opportunists will continue to target relief efforts as the country recovers from the pandemic’s catastrophic effects. These frauds steal taxpayer funds and divert resources from those who most need them. Whistleblowers will continue to be crucial in uncovering COVID-19 fraud schemes.

***Margaret Houtz is a student at Boston University School of Law, who is working as a summer law clerk with Whistleblower Law Collaborative***