Transit and court officers sentenced in $770K COVID fraud

March 21, 2024 Robert Abruzzese, Courthouse Editor

The U.S. District Court for the Eastern District of New York in Central Islip, where two former public servants were sentenced to 18 months in prison for stealing approximately $770,000.
Photo: Americasroof via Wikimedia Commons

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In a crackdown on COVID-19 relief fraud, Arthur Cornwall and Sean Williams, former public servants in New York, were sentenced to 18 months in prison for their involvement in a fraudulent scheme that swindled approximately $770,000 from federal disaster relief funds.

The sentencing, delivered by U.S. District Judge Joan Azrack in the Eastern District of New York, also includes an order for the defendants to return the stolen funds to the U.S. Small Business Administration.

Cornwall, who once maintained signals for the New York City Transit Authority, and Williams, a former New York State court officer, admitted to charges of wire fraud in June 2023, following their arrest for misusing the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDLP).

These programs were established under the Coronavirus Aid, Relief and Economic Security (CARES) Act to help small businesses stay afloat during the pandemic. Instead of aiding the economic victims of the crisis, Cornwall and Williams fabricated business entities to receive loans fraudulently and spent the funds on personal expenses, including settling credit card debts and investing in cryptocurrency.

Between May and July 2020, amidst the economic turmoil caused by the COVID-19 pandemic, the duo deceitfully obtained six loans through the PPP and EIDLP, using manipulated documentation to overstate their business operations and the purpose of the loan proceeds. Their scheme came to light following a thorough investigation, leading to their guilty pleas and subsequent resignations from their government jobs.

The PPP was designed to provide emergency financial assistance for struggling small businesses to cover payroll and other essential operating costs, with the possibility of loan forgiveness to encourage retention of employees. Similarly, the EIDLP aimed to assist small businesses, homeowners, and renters in disaster-affected regions, offering advances that did not require repayment.

Investigations and prosecutions of fraud related to the Paycheck Protection Program (PPP), a crucial part of the $2.2 trillion CARES Act for COVID-19 relief, are increasing. The FBI and other agencies are targeting misuse of PPP funds, initially meant to cover payroll and business expenses during the pandemic.

With more than $64 billion estimated in PPP fraud out of $800 billion distributed, the U.S. Small Business Administration (SBA) is auditing large loan recipients, and the Department of Justice (DOJ) is actively bringing charges. An estimated 17% of all PPP loans involved fraud, leading to thousands of investigations and hundreds of criminal charges. With the statute of limitations extended to 10 years, efforts to combat PPP loan fraud, including for forgiven loans, are expected to continue for years.

“Abuse of public benefits programs, particularly shameful when those defrauding the government are public servants, will not be tolerated and not forgotten with the passage of time from the darkest days of the COVID-19 pandemic,” said Breon Peace, U.S. attorney for the EDNY. “The defendants’ theft of relief money, despite holding jobs with good salaries and benefits, so they could purchase real estate, cryptocurrency and pay off credit card bills with the stolen funds, is deserving of jail sentences.”