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MORGANTOWN - Two Morgantown business owners have been named by law enforcement in a national sweep targeting COVID-era loan fraud.
On Tuesday, the Northern District of West Virginia announced the sentencing and plea agreement as part of a nationwide enforcement action led by the Justice Department's National Fraud Enforcement Division, the Small Business Administration, and the SBA Office of Inspector General targeting fraud in the SBA's Paycheck Protection Program (PPP).
The PPP program was created under the CARES Act to help small businesses maintain payroll and cover essential expenses during the public health emergency. Applicants were required to provide accurate payroll documentation, verify their identities, and certify that loan proceeds would be used only for permissible business purposes. In addition, borrowers seeking loan forgiveness were required to certify--under penalty of perjury--that PPP funds were spent on allowable expenses such as payroll, rent, mortgage interest, or utilities.
James Baldwin, II, owner of Morgantown business Select Decks, was sentenced to 30 days in federal prison and ordered to pay $1,007,223 in restitution. Baldwin, 46, applied for and received several Paycheck Protection Program (PPP) loans during the COVID-19 pandemic, both for his deck building business, Select Decks, and for three other businesses that were not in operation before the pandemic. Baldwin falsified documents for the loan application to obtain $738,230 in PPP loans from multiple banks and then obtained forgiveness for the loans from the Small Business Administration.
Baldwin also failed to pay $258,993 in payroll taxes to the Internal Revenue Service. Beginning in tax year 2016, Baldwin issued pay stubs and W‑2 forms to his employees reflecting that employment taxes had been withheld. However, investigators determined that Baldwin failed to file required IRS Forms 941 or W‑3 for Select Decks and did not remit any of the withheld taxes to the Internal Revenue Service.
In a separate case, Kurt Ly, owner and operator of Vin Phat, Inc., in Morgantown, admitted to a scheme to defraud federal pandemic relief programs designed to support small businesses during the COVID‑19 crisis. According to investigators, Ly, 69, of Morgantown, obtained PPP loans, used the funds for impermissible expenses, and then obtained forgiveness from the SBA by falsely certifying to the SBA that the money was used for permissible business expenses.
In addition to the PPP loans, Ly received an Economic Injury Disaster Loan (EIDL) loan of $146,600 in August 2020 after certifying that the funds would be used solely as working capital for Vin Phat. Instead, investigators found that Ly used the money for large personal expenditures, including a $15,000 payment for a vehicle, multiple cryptocurrency investments, and transfers to his personal bank account.
"These defendants deliberately stole from programs funded by American taxpayers and intended to support legitimate small businesses," United States Attorney Matthew Harvey said. "Our office will aggressively pursue those who misuse federal funds and will hold accountable anyone who attempts to defraud the United States."
Under the title “Operation No Doze,” federal prosecutors across the country facilitated fraud enforcement actions spanning over 160 criminal defendants, including 80 newly charged defendants, reaching approximately $245 million in intended loss to American taxpayers.
Those efforts included 40 U.S. Attorney's Offices, along with 20 federal and state investigative agencies.
The Baldwin case was investigated by Homeland Security Investigations and the Internal Revenue Service - Criminal Investigations and prosecuted by Assistant United States Attorney Jennifer T. Conklin.
The Ly case was investigated by the Federal Reserve Bureau – Office of Inspective General and is being prosecuted by Assistant United States Attorneys Jennifer T. Conklin and Eleanor F. Hurney.
"Operation No Doze brings a focused and coordinated approach to pursuing fraud in SBA's pandemic relief programs," SBA Inspector General William Kirk said. "By concentrating our investigative resources and working closely with SBA and our law enforcement partners, we are strengthening our ability to identify fraud, recover taxpayer funds, and hold accountable those who exploited programs created to help small businesses in a time of extraordinary need. This initiative makes clear that the passage of time does not diminish our commitment to accountability."