San Jose Man Arrested In $3.6 Million COVID Loan Fraud Scheme; Feds Say Funds Used For Luxury Lifestyle
SAN JOSE (CBS SF) -- A San Jose man was arrested for fraudulently obtaining $3.6 million in federal COVID relief loans using fake documents and using the proceeds to finance a luxury lifestyle, authorities announced.
Lebnitz Tran, 40, is charged with six counts of wire fraud and three counts of bank fraud in an alleged scheme involving multiple Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) applications, according to a statement from Acting U.S. Attorney for the Northern District of California Stephanie Hinds.
According to a grand jury indictment returned last week and unsealed Friday, Lebnitz submitted at least 27 PPP and at least seven EIDL loan applications on behalf of multiple persons and business entities. The application allegedly used fictitious information and fake tax documents, including falsified employee information and fictitious or grossly exaggerated payroll figures.
Tran sought more than $8 million in PPP and EIDL funds, obtained over $3.6 million in illicit loan proceeds, and ultimately netted approximately $2 million from the scheme, according to the indictment. Tran and others used the illcit proceeds at restaurants, retail stores, deposit the funds into personal investment accounts, buy cryptocurrency and purchase a $100,000 Tesla vehicle.
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Tran was profiled last June in a KPIX 5 report on how the PPP program was vulnerable to fraud. The report showed four of Tran's businesses received over $1 million in PPP loans just one month after registering the companies in California.
Those four companies - 88 Cloud Computing LLC, 88 Enterprise Services LLC, 88 Investment Empire LLC and 88 Venture Capital LLC - each received between $350,000 and $1 million in loans within the span of a week in June 2020. The four companies purportedly provide cloud computing and investment services and two of them listed 24 employees each; however the address of all four businesses is a home in an affluent South Bay suburb.
"One of the rules of the PPP program is you can only get one loan," said James Wilcox, Professor of Finance and Economics at the Haas School of Business at UC Berkeley. "So if you see multiple loans under the PPP program going to what looks like one source, this would certainly get your attention and be a reason to investigate."
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Wilcox said that to apply for a PPP loan you also have to have been in business by February 15, before the pandemic started. The four companies featured in the report were registered with the California Secretary of State in May.
If convicted, Tran faces a maximum penalty of 30 years in prison as to each count of bank fraud, and 20 years in prison as to each count of wire fraud, along with possible assessments, forfeiture, and restitution. Any sentence after a conviction would take into account U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence.
