software engineer was charged in a complaint unsealed today for
allegedly filing fraudulent bank loan applications seeking more than $1
million in forgivable loans guaranteed by the Small Business
Administration (SBA) under the Coronavirus Aid, Relief, and Economic
Security (CARES) Act.
Baoke Zhang, 35, of Issaquah, Washington, was charged in a federal
criminal complaint filed in the Western District of Washington with wire
fraud and bank fraud.
“The defendant allegedly submitted false documents in a brazen scheme
to acquire over 1.5 million dollars in loan funds made available for
legitimate businesses adversely affected by COVID-19,” said Assistant
Attorney General Brian A. Benczkowski of the Justice Department’s
Criminal Division. “The department and our law enforcement partners
will continue to identify and bring to justice those who commit fraud on
CARES Act programs.”
“This defendant tried more than once to defraud the Paycheck
Protection Program (PPP) – a program designed to keep people working,”
said U.S. Attorney Brian T. Moran for the Western District of
Washington. “I am pleased that the systems designed to detect and deny
fraudulent payments caught his scheme before federal funds went out the
“SBA OIG applauds due diligence by SBA’s lending partners to maintain
the integrity of the lending programs,” said Special Agent in Charge
Weston King of the SBA Office of Inspector General (SBA OIG) Western
Region. “Providing false statements to gain access to SBA’s programs
will be aggressively investigated by our office in partnership with our
law enforcement counterparts. I want to thank the Justice Department
and our law enforcement partners for their dedication and pursuit of
“In the midst of this pandemic, anyone who attempts to engage in
illegal activity will be aggressively pursued,” stated J. Russell
George, Treasury Inspector General for Tax Administration (TIGTA). “Our
mission at TIGTA is to protect the integrity of the nation’s system of
tax administration. I appreciate the assistance of the Small Business
Administration Office of Inspector General, the Department of Justice,
and other law enforcements partners in this effort.”
“This is an example of someone who was attempting to take advantage
of a program to help Americans during one the most difficult times in
recent memory,” said Special Agent in Charge Raymond Duda of the FBI’s
Seattle Field Office. “We are proud to partner with SBA and TIGTA in
ensuring funds provided for programs such as PPP, make it to the people
who need it the most.”
Zhang allegedly sought over a million dollars in forgivable loans
guaranteed by the SBA from multiple banks by claiming fictitious payroll
expenses associated with fictitious information technology companies
that he created. Zhang allegedly provided fraudulent documents to two
different lenders in support of applications for loans guaranteed by the
SBA for COVID-19 relief through the PPP. In total, Zhang sought
forgivable loans in the amount of $1,525,000.
Allegedly, Zhang provided lenders with fraudulent IRS documentation
purporting to show federal tax withholdings for a sole proprietorship in
his name for 25 employees. As part of an effort to show that this
business had been operating for several quarters, Zhang allegedly
submitted to two lenders documentation purporting to show that, on April
3, 2017, the IRS had assigned an Employer Identification Number (EIN)
to his sole proprietorship. In fact, the IRS assigned the EIN on April
3, 2020, only a week before Zhang submitted his application to the
lender. Zhang allegedly also provided fraudulent IRS documentation
purporting to show federal tax withholdings for 20 employees for a
limited liability company he created.
Zhang allegedly provided falsified documentation purporting to show
that an EIN for the second company had been assigned in 2018. In fact,
the IRS assigned the EIN on April 21, 2020, just two days before Zhang
submitted an application for the company to the lender. Zhang also
allegedly provided the lender with a bank statement purporting to show
that the company had disbursed payroll payments in December 2019. In
fact, Zhang opened that account in April 2020.
The CARES Act is a federal law enacted on March 29, 2020, designed to
provide emergency financial assistance to the millions of Americans who
are suffering the economic effects caused by the COVID-19 pandemic.
One source of relief provided by the CARES Act was 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 1
percent. PPP loan proceeds must be used by businesses on 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 eight weeks of receipt and use at least 75
percent of the forgiven amount for payroll.
A federal criminal complaint is merely an accusation. A defendant is
presumed innocent until proven guilty beyond a reasonable doubt in a
court of law.
Trial Attorney Amanda Vaughn of the Criminal Division’s Fraud Section
and Assistant U.S. Attorney Brian Werner for the Western District of
Washington are prosecuting the case.
The Justice Department acknowledges and thanks the TIGTA, the SBA OIG and the FBI for their efforts investigating this mater.
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.