Massive Fraud Unveiled: Four Individuals Involved in $178M Scheme

Four individuals face severe charges for orchestrating a $178 million COVID-19 relief fraud scheme, leaving the public questioning the efficacy of pandemic assistance systems.

At a Glance

Four individuals charged with defrauding the U.S. Small Business Administration of $178 million in COVID-19 relief loans
Main defendant: Eric Karnezis, 43, from Sedona, Arizona
Charges include conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering
The fraudulent activities took place from January 2021 to at least March 2022

Complex Fraudulent Scheme Unveiled

Federal authorities have charged four individuals with orchestrating a complex scheme to defraud federal COVID-19 relief programs of an estimated $178 million. The main defendant, Eric Karnezis, 43, of Sedona, Arizona, allegedly led the scheme with the help of co-defendants Lynisha Wells, 47, and Nikkia Bennett, 43, both from Chula Vista, California, and Fredrico Williams, 48, from San Diego, California. They face charges of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.

The scheme involved submitting fraudulent Paycheck Protection Program (PPP) loan applications using false business information. Karnezis is accused of submitting at least 1,300 fake PPP applications, seeking more than $178 million, with $105 million being funded.

Karnezis has pleaded not guilty and will be arraigned in Oregon on September 24, 2024. Wells and Bennett have been released pending a jury trial set for February 11, 2025, while Williams is to be arraigned on September 20, 2024. Each charge carries a potential sentence of up to 20 years in federal prison, three years of supervised release, and fines up to $250,000 or twice the gross gains/losses.

Florida Man Charged with COVID Relief Fraud and Health Care Fraud https://t.co/LYchBxZzQW

— U.S. Department of Justice (@TheJusticeDept) July 10, 2020

Details of the Indictment

The fraudulent activities allegedly took place from January 2021 to at least March 2022. Authorities claim Karnezis and his co-conspirators created fictitious documents to support their loan applications, including false payroll information and tax documents.

The case highlights significant vulnerabilities within pandemic relief programs. Over 50 people have been charged in Oregon alone for COVID-19 relief fraud since January 2021, with 38 individuals convicted and sentenced to significant prison terms and probation. Prosecutors Meredith Bateman and Robert Trisotto are leading the charge to hold the defendants accountable and recover misappropriated funds.

https://twitter.com/irs_ci?lang=en

Broader Context of Pandemic Fraud

Fraud in pandemic relief programs is not isolated to this case. Since the pandemic started, over 700 new enforcement actions have been undertaken against 371 defendants for more than $836 million in alleged fraud. Unemployment Insurance (UI) programs have shown particular vulnerability, with an estimated total fraud ranging from $100 billion to $135 billion.

Efforts to combat this fraud are ongoing, with the Department of Labor and GAO implementing recommendations to identify and respond to fraud risks. Despite these efforts, recovery rates for overpayments remain low. People are encouraged to report COVID-19 fraud via the Justice Department’s National Center for Disaster Fraud (NCDF) Hotline or through the NCDF Web Complaint Form.