A Spring Valley businessman was sentenced to federal prison on Jan. 17 for a year and a day for stealing more than $1.6 million from a Covid-19 disaster relief program.
U.S. District Judge Philip M. Halpern also ordered two years of supervision after Elizier Scher, 34, is released from prison, and forfeiture of $1.6 million.
Scher’s lawyers recommended probation, arguing that he has already repaid the government.
This was not a case where a defendant “frittered away” U.S. Small Business Administration money on personal luxuries, Scher’s lawyers stated in a Dec. 28 sentencing memorandum. “Rather, Elizier … always intended to, and did, use the funds to run a bona fide real estate business whose assets were available as collateral and ultimately were sold to satisfy Elizier’s debt to the SBA.”
The government recommended up to two-and-a-half years in prison.
“The nature of this offense is greed. The defendant saw an opportunity to steal money from the government and executed a multi-step plan over a period of 11 months to do so,” assistant prosecutor James McMahon said in a Jan 3. sentencing memorandum. “He apparently just wanted the easy money and was willing to resort to crime to get it.”
Scher was indicted on a fraud charge in June 2022 and pled guilty to theft of public funds in February 2023.
He exploited the SBA’s Economic Injury Disaster Loan program that was created to help small businesses recover from the impact of the Covid-19 pandemic. Loans were based on business expenses and revenues from February 2019 through January 2020, and the funds could be used only for working capital and normal business expenses.
On July 13, 2020, in about four hours, Scher submitted 12 applications for loans totaling more than $1.9 million. The SBA approved all but one for $1,648,000.
But Scher had falsified the applications. One was for Scher Realty Group, founded in 2015. Eleven were shell companies.
Combined, Scher claimed, the businesses had more than $45 million in revenues and nearly $17 million in profits. Scher Realty claimed a $1.8 million profit on the SBA application, but tax returns show $22,975 in taxable income in 2019 and a loss of $60,568 in 2020. No tax returns were filed for the other companies.
Scher used the SBA money to buy 11 properties in Orange, Rockland and Ulster counties and in Miami. Then in fall 2021, after the FBI paid him a visit, he began selling properties and paying back the SBA.
Scher had struggled to support his wife and six children – now seven children – according to his attorneys. So when he heard about the SBA loans he saw an opportunity to invest more in real estate and support his family.
His plan was to either re-finance the properties or sell them and then pay back the government. He also used about $20,000 to pay off credit card debt to “clean up his credit so he could obtain mortgages on some of the properties.”
His lawyers said the federal sentencing guideline – justifying 24 to 30 months – was misapplied because it was based on a loss of $1.6 million.
But there was no actual loss, they argued, because the properties constituted collateral that secured the SBA loans, and ultimately he sold 10 properties and repaid the loans.
They also said prison would harm his family, and they cited numerous examples of good deeds that evince strong character and a pattern of kindness.
His lawyers – Michael Berkovits, Andrew Goldstein, Susan R. Necheles and Gedalia M. Stern – recommended probation, coupled with home confinement and community service.
The prosecutor countered that Scher never told the SBA what he had done with the funds until after he pled guilty and was required to do so.
Instead, he concealed the existence of the properties: claiming on most of the applications that the borrowers were in businesses unrelated to real estate; holding the properties in names other than the company names; and not notifying the SBA when he sold some of the properties before his guilty plea.
His actions made it unlikely that the SBA would have looked for real estate if the loans had defaulted.
Scher’s position, McMahon stated, “appears to be nothing more than an after-the-fact invention designed to reduce his guidelines offense level.”
Judge Halpern recommended that the Bureau of Prisons place Scher at FCI – Otisville, a minimum to medium security facility in Orange County. He was ordered to surrender on May 1.
