PROVIDENCE, R.I. (WPRI) – Federal investigators on Tuesday announced two businessmen have been charged after filing fraudulent loan applications seeking more than $500,000 of COVID-19 relief funds, marking the first time anyone has been charged with such a crime in the United States.
David Butziger, 51, of Warwick and David Staveley, also known as “Kurt Sanborn,” 52, of Andover, Mass., have been accused of falsely claiming to have dozens of paid employees at four companies, when in reality there were no employees at any of the businesses, according to federal investigators.
The two men have been charged with conspiring to make false statement to influence the U.S. Small Business Administration and conspiracy to commit bank fraud, according the Rhode Island U.S. District Attorney Office. Staveley has also been charged with aggravated identify theft, and Butziger has been charged with bank fraud, according to court documents.
“Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic,” Rhode Island U.S. District Attorney Aaron Weisman said in a statement. “It is unconscionable that anyone would attempt to steal from a program intended to help hard working Americans continue to be paid so they can feed their families and pay some of their bills.”
The two men could not be immediately reached for comment.
According to court documents, the businessmen discussed through email the idea to create a fraudulent loan application to seek money from the popular Paycheck Protection Program, a financial assistance program for businesses created as part of the federal relief package known as the CARES Act.
Staveley is accused of requesting more than $438,000 to help cover the cost of dozens of employees at three restaurants, including two in Rhode Island and one in Berlin, Mass. One of the Rhode Island restaurants, the former Remington House, and the Massachusetts restaurant, On the Trax, were not open for business prior to the start of the pandemic, according to court documents.
Staveley’s restaurant in Berlin closed on March 10 when the town revoked its liquor license for several reasons, including accusations that the man had misrepresented that his brother had owned the business. Staveley has also been accused of using his brother’s information in other real estate deals, according to investigators.
Investigators said Staveley didn’t have any relationship to the third restaurant, Top of the Bay.
On Tuesday morning, WPRI 12 captured video of FBI agents at the former Remington House. Boston Field Office Special Agent in Charge Joseph Bonavolonta later said he hoped the newly filed charges will deter others from taking similar actions.
“Thankfully, we were able to stop them before taxpayers were defrauded, but today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud,” he said in a statement.
Butziger, meanwhile, filed a separate PPP application seeking $105,381, claiming ownership of an unincorporated business called “Dock Wireless.” Federal investigators said Butziger told a bank and an undercover FBI agent that he had seven full-time employees.
But R.I. Department of Revenue records show no evidence of any employees at the business and “agents interviewed several of the supposed Dock Wireless employees who reported that they never worked for Butziger or Dock Wireless,” according to court documents.
Staveley and Butziger become the first two people in the United States to be charged with defrauding the PPP.
Butziger was released on unsecured bond Tuesday.
During a telephone conference call where Staveley made his initial appearance before U.S. District Magistrate Judge Lincoln Almond, Assistant U.S. Attorney Lee Vilker said Staveley has been “a fraud machine for the last 10 years.”
Vilker said Staveley has two prior fraud convictions out of New Hampshire for which he served federal prison time and asked that the defendant be held on electronic monitoring.
“He is a clearly an economic danger to the community,” Vilker, adding Staveley could see up to eight years behind bars. “He clearly has an incentive to flee.”
Almond declined to place Staveley under electronic monitoring, saying he did not present a safety risk to the public. Instead, Staveley was released on $10,000 unsecured bond and ordered to stay at the Massachusetts home of his elderly mother.