North Carolina Man Charged with Fraudulently Seeking Over $6 Million in COVID Relief Funds

A North Carolina man was charged with fraudulently seeking over $6 million in Paycheck Protection Program (PPP) loans, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Robert J. Higdon Jr. of the Eastern District of North Carolina.  

Tristan Bishop Pan, 38, of Garner, is charged with wire fraud, bank fraud, and engaging in unlawful monetary transactions. 

The indictment, unsealed today, alleges that Pan perpetrated a scheme to submit fraudulent PPP loan applications to federally insured banks.  The Small Business Administration (SBA) guarantees PPP loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  According to the allegations, Pan submitted numerous fraudulent PPP loan applications, including on behalf of entities named Pan Insurance Agency, White Walker, Khaleesi, and The Night’s Watch.  The indictment alleges that, in support of the fraudulent PPP loan applications, Pan made false statements about the companies’ employees and payroll expenses.  The PPP loan applications were supported by fake documents, including falsified tax filings, according to the indictment.  Pan allegedly submitted fourteen PPP loan applications seeking over $6.1 million and received more than $1.7 million in benefits following approval of the Pan Insurance Agency and White Walker PPP loan applications.  The government was able to seize some of the allegedly fraudulent loan benefits.

The CARES Act is a federal law enacted March 29.  It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic.  One source of relief the CARES Act provides is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP.  In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent.  Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities.  The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.  

A criminal indictment is merely an accusation.  A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

This case was investigated by the U.S. Treasury Inspector General for Tax Administration, the Federal Deposit Insurance Corporation Office of Inspector General, and the FBI, with the assistance of the Small Business Administration Office of Inspector General.  Trial Attorney Justin M. Woodard of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Ethan A. Ontjes and John Harris are prosecuting the case.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

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    In U.S GAO News
    The Department of Defense (DOD) continues to face financial management issues and challenges that have prevented it from obtaining a clean audit opinion on the fair presentation of its financial statements. Specifically, financial statement auditors issued disclaimers of opinion on DOD's and the military services' fiscal year 2018 and 2019 financial statements. These disclaimers resulted from numerous material weaknesses based on thousands of notices of findings and recommendations (NFR) that the auditors issued. Of the 2,409 NFRs issued to DOD and its components in fiscal year 2018, DOD's auditors were able to close 623 (26 percent) in fiscal year 2019; the remaining 1,786 (74 percent) remained open. These results provide useful insights on DOD's remediation progress since beginning department-wide full audits in fiscal year 2018; it is important for DOD to equal or exceed this progress in the future. Financial statement audits have value beyond the audit opinion and can help management save resources and improve military readiness. DOD leadership identified a number of benefits that resulted from these financial statement audits. For example, the Navy identified a warehouse that was not in its property records that contained approximately $126 million in aircraft parts. The Navy was able to fill over $20 million in open orders for these parts. By using these parts, aircraft were repaired quicker and made available for use, which improved military readiness. To help guide and prioritize department-wide efforts, DOD identified eight audit remediation priority areas (four in 2019 and four in 2020), seven of which specifically related to material weaknesses that its auditor reported. The military services also developed methodologies to prioritize NFRs and determined that over half of their fiscal year 2018 NFRs are high priority and significant to their financial statement audits. DOD and its components have taken steps to develop corrective action plans (CAP) to address NFRs. However, most of the CAPs that GAO tested did not include at least one data element or evidence that a root-cause analysis was performed, as directed by Office of Management and Budget (OMB) and other related guidance, in part, because DOD guidance and monitoring efforts did not clearly identify the need for such documentation. As a result, DOD and its components may lack sufficient information and assurance that their remediation efforts will resolve the underlying causes associated with the NFRs and related material weaknesses. Based on these issues, DOD and its components are at increased risk that their actions may not effectively address identified deficiencies in a timely manner. DOD developed an NFR Database that contains useful information on deficiencies that financial auditors identified and actions to address them, which has improved its ability to monitor and report on audit remediation efforts using dashboard reports based on real-time data contained in the database. However, certain database information on which these reports are based may not be accurate, reliable, and complete. For example, although DOD reviews NFR Database information monthly, it does not follow up on instances of outdated information or other exceptions identified to ensure components resolve them timely. Without complete and reliable information on DOD's audit remediation efforts, internal and external stakeholders may not have quality information to effectively monitor and measure DOD's progress. DOD is responsible for about half of the federal government's discretionary spending, yet it remains the only major federal agency that has been unable to receive a clean audit opinion on its financial statements. After years of working toward financial statement audit readiness, DOD underwent full financial statement audits in fiscal years 2018 and 2019. This report, developed in connection with fulfilling GAO's mandate to audit the U.S. government's consolidated financial statements, examines the (1) actions taken by DOD and the military services to prioritize financial statement audit findings; (2) extent to which DOD and its components developed CAPs to address audit findings in accordance with OMB, DOD, and other guidance; and (3) extent to which DOD improved its ability to monitor and report on audit remediation efforts. GAO reviewed documentation and interviewed officials about DOD's and the military services' audit remediation prioritization, monitoring, and reporting. GAO selected a generalizable sample of 98 NFRs to determine whether CAPs to address them were developed according to established guidance. GAO is making five recommendations to DOD to improve the quality of CAPs to address audit findings and information in the NFR Database and related reports provided to internal and external stakeholders to monitor and assess audit remediation efforts. DOD concurred with three of GAO's recommendations, partially concurred with one recommendation, and disagreed with one recommendation. GAO continues to believe that all the recommendations are valid. For more information, contact Asif A. Khan at (202) 512-9869 or khana@gao.gov.
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  • DHS Office of Inspector General: Preliminary Observations on Long-Standing Management and Operational Challenges
    In U.S GAO News
    What GAO Found GAO's preliminary work has identified a number of management and operational challenges, including frequent leadership turnover, since fiscal year 2015 that have impeded the overall effectiveness of the Department of Homeland Security (DHS) Office of Inspector General (OIG). DHS OIG senior leaders have acknowledged that these challenges have contributed to organizational weaknesses, and have taken steps to begin addressing some of them. GAO's preliminary work has identified issues in the following areas, among others: Strategic planning: DHS OIG has not consistently developed strategic plans, which are a necessary input for developing the organization's other guiding documents and governance framework. Specifically, DHS OIG has operated for 4 of the past 6 years without a strategic plan, and the plan it adopted for fiscal years 2018–2019 included some, but not all, of the elements considered standard for federal entities. In 2020, DHS OIG contracted with a nonprofit academy of government experts to develop a strategic plan for fiscal years 2021–2025, with expected delivery in June 2021. Quality assurance: Internal and external reviews have reported on concerns about quality assurance in some of DHS OIG's work. In 2017 and 2018, after an internal review found that some reports issued by DHS OIG may not have adhered to the professional standards cited, DHS OIG retracted 13 audit reports that had been issued over a 5-year period. In 2018, an external review determined that DHS OIG needed to improve its system of quality control. Though DHS OIG concurred with all of the recommendations from that external review, it did not fully implement them. In addition, DHS OIG has not established roles and responsibilities for an organization-wide quality assurance program. Moreover, GAO's preliminary work indicates that current staff allocations may limit DHS OIG's quality assurance reviews to focusing on audit work and not on the other types of work it produces, including inspections, evaluations, special reviews, and management alerts. Timeliness: DHS OIG project time frames for work from its offices of Audits and Special Reviews and Evaluations have increased over the 4 fiscal years GAO assessed. For example, in fiscal year 2017, 79 of 102 Office of Audits projects were completed in 1 year or less and eight of 102 took more than 18 months. In fiscal year 2020, seven of 67 reports were completed in 1 year or less and more than half (35 of 67) took more than 18 months. In addition, DHS OIG has not assessed time frames for work completed by these offices, though timeliness in reporting is a key element of effective oversight and DHS OIG staff considered it an organizational weakness. GAO will complete its evaluation of these and other management and operational areas, and will issue a final report in the coming months. Why GAO Did This Study DHS OIG has a critical role in providing independent and objective oversight of DHS, which encompasses multiple operational and support components. OIGs are expected to maintain high standards of professionalism and integrity in light of their mission, according to quality standards developed by the community of federal Inspectors General. However, DHS OIG has faced a number of challenges that have affected its ability to carry out its oversight mission effectively. This statement is based on GAO's draft report on DHS OIG's management and operations, which is currently at the agency for comment. It provides preliminary observations on DHS OIG's strategic planning processes; quality assurance processes; and reporting time frames for work from DHS OIG's offices of Audits and Special Reviews and Evaluations. To develop these preliminary observations, GAO reviewed relevant federal laws and quality standards for federal OIGs as well as DHS OIG documentation, including organizational policies; internal communications such as emails and memoranda; and DHS OIG's semiannual reports to Congress and published reports. GAO also analyzed DHS OIG project data from fiscal years 2015 through 2020, and interviewed DHS OIG leaders and other staff.
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    Today, the expansion of Operation Legend was announced in Cleveland, Detroit, and Milwaukee. Operation Legend is a sustained, systematic and coordinated law enforcement initiative in which federal law enforcement agencies work in conjunction with state and local law enforcement officials to fight violent crime. The Operation was first launched on July 8 in Kansas City, Missouri, and expanded on July 22, 2020, to Chicago and Albuquerque. Operation Legend is named in honor of four-year-old LeGend Taliferro, who was shot and killed while he slept early in the morning of June 29 in Kansas City. The first federal arrest under Operation Legend was announced on July 20.
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    A federal court in the Eastern District of North Carolina entered a consent judgment and injunction requiring a North Carolina pharmacy, Seashore Drugs Inc., its owner, John D. Waggett, and its pharmacist-in-charge, Billy W. King II, to pay $1,050,000.00 in civil penalties and to cease dispensing opioids or other controlled substances, the Department of Justice announced.
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