Two New England restaurateurs — David Staveley of Andover, Massachusetts, who is also known as Kurt D. Sanborn, and David Butziger of Warwick, Rhode Island — were arrested on May 6 for allegedly attempting to defraud the Paycheck Protection Plan (PPP). The men are the first in the nation to be arrested and charged with attempting to defraud the federal government’s small business lending program, which was instituted as part of the CARES Act to help businesses pay employee wages while closed due to the COVID-19 pandemic.
Staveley and Butziger were charged with conspiracy to make false statement to influence the SBA and conspiracy to commit bank fraud.
The pair sought nearly $500,000 in order to pay dozens of employees at three restaurants (one in Massachusetts, the other two in Rhode Island), according to reporting from The New York Times. But federal authorities claim that Staveley does not have an ownership stake in one of the restaurants listed on the PPP application, while the two additional restaurants — On the Trax in Berlin, Massachusetts, and the former Remington House in Warwick, Rhode Island — have not been in operation since before the coronavirus pandemic struck. (Indeed, the Remington House has not been open since late 2018.)
The feds say according to court documents, Staveley’s Massachusetts restaurant was closed by March 10, when the town of Berlin revoked the business’ liquor license for numerous reasons, including that “Sanborn” allegedly misrepresented that his brother owned the restaurant.
Investigators obtained information that Staveley/Sanborn allegedly used his brother’s personal identifying information in other real estate transactions as well.
On the Trax had its liquor license revoked by the Berlin Board of Selectmen in early March and closed shortly thereafter. Its closure was not related to the COVID-19 pandemic, therefore disqualifying it from being able to access PPP funds. The restaurant was guilty of a laundry list of violations that led to the liquor license revocation, according to reporting from the Worcester Telegram: The restaurant allegedly failed to include an individual with a financial interest on its applications; filed falsified applications; failed to notify the Board of Selectmen of a name change in a timely manner; and had an unauthorized person managing the business and buying alcohol.
Staveley and Butziger reportedly hatched the plan to defraud the SBA’s PPP program via “very incriminating” emails.
The dozens of employees whom the money from the applications was supposed to pay do not exist, according to reporting from The New York Times and WCVB-TV.
• Two New England Men Face the First Federal Fraud Charges Related to Small Business Loan Program. [NYT]
• New England Businessmen First in Nation Charged with Fraudulently Seeking CARES Act Loans [WCVB-TV]
• Berlin Selectmen Revoke Liquor License for On The Trax [WT]
• Warwick Man, Former Remington House Owner Charged With Lying to Get Payroll-Protection Loans [PJ]