Two Downtown Los Angeles Residents Arrested Following Complaint Alleging Fraudulently Obtained $300,000 in COVID Relief Loans | USAO-CDCA

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LOS ANGELES – Two downtown Los Angeles residents were arrested today on a federal criminal complaint alleging they fraudulently obtained more than $300,000 – and attempted to obtain an additional $1 million – in COVID relief loans for multiple businesses which they claimed to own and operate.

Sean Schoepflin, 42, aka “Sean Fitzgerald,” and Erika Leon, 44, aka “Erika Fitzgerald,” are each charged with one count of wire fraud, according to a complaint that was not sealed today. They are expected to make their first appearances this afternoon in United States District Court.

According to an affidavit filed with the complaint, from April 2020 to October 2021, Schoepflin and Leon made numerous false statements to the United States Small Business Administration to obtain more than $300,000 – and attempt to obtain an additional $1 million. – in loans in the event of an economic disaster. (EIDL) for their businesses.

Schoepflin and Leon allegedly falsely stated that the business entities they created had several employees and several hundred thousand dollars in revenue, and that they would use the EIDLs as working capital for these ventures. Schoepflin also allegedly falsely stated on loan applications that he had never been convicted of a crime.

In fact, their so-called companies – Capital Adventures Inc., Lady Capital Inc., Digital Army Ltd. and Lady Pictures LLP – had no employees and little or no income, they used EIDLs largely for personal expenses, and Schoepflin had previously been convicted of several misdemeanors.

For example, Schoepflin falsely stated in a loan application that Capital Adventures had revenues of $560,000 during the 12-month period from February 1, 2019 to January 31, 2020, according to the affidavit. In June 2020, when an SBA employee emailed Schoepflin requesting Capital Adventures’ corporate tax return to prove the company’s existence as a business entity, Schoepflin allegedly sent a form unsigned tax showing that Capital Adventures had sales or gross receipts of $625,112 in 2019.

In fact, Capital Adventures did not file IRS Form 1120 for 2019 until July 2021, after requesting and refusing an increase in its EIDL, according to the affidavit. Additionally, between February 2018 and April 2020, Capital Adventures bank accounts had total deposits of approximately $35,000.

The FBI and the Treasury Inspector General for Tax Administration investigated the matter. The Office of the Inspector General of Small Business Administration provided substantial assistance in the investigation.

Assistant United States Attorneys David Ryan and Solomon Kim of the Terrorism and Export Crimes Section are prosecuting the case.

The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One of the sources of relief provided by the CARES Act is the authorization of up to $349 billion in small business forgivable loans for job retention and certain other expenses through the PPP. In April, Congress authorized more than $300 billion in additional PPP funding.

The EIDL program is designed to provide economic relief to small businesses currently experiencing a temporary loss of revenue. Proceeds from EIDL can be used to cover a wide range of working capital and normal operating expenses, such as continued health care benefits, rent, utilities and fixed debt payments. .

Anyone with information about alleged attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Disaster Fraud Center hotline at (866) 720 -5721 or via the NCDF online complaint form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

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