An Orange County businessman has been accused of submitting false applications to banks to obtain nearly $6.4 million in loans backed by the U.S. Small Business Administration.
Joel Reich, of Chester, was arrested Oct. 18 on a charge of wire fraud and brought before U.S. District Court in White Plains for his initial appearance.
He applied for 10 loans from April 2020 to December 2021 and received five, according to a complaint prepared by U.S. Postal Inspector Greg T. Ghiozzi.
The funding included four Paycheck Protection Program loans totaling nearly $1.4 million and a traditional SBA small business loan for $5 million.
PPP loans were authorized under the federal Coronavirus Aid, Relief and Economic Security Act. If used as intended for payroll, mortgage interest, rent or utilities, the loans could be forgiven.
The traditional SBA loan could be used for typical business needs, such as providing working capital and buying machinery and equipment.
Reich certified on PPP applications that he did not own or share management with any other businesses, the complaint states. But he and his wife actually owned several companies, including Concrete Water Remediation Inc., Drip Drop Waterproofing Inc., Hallmark Enterprises, Sub Enterprises Inc. and Primary Holdings.
Applicants were eligible for one PPP loan in each of two rounds of funding, and they had to certify that they had not already received a PPP loan. Reich repeatedly applied for loans, according to the complaint, certified his eligibility, and received two loans in each round.
He allegedly submitted false documents to support the loan applications, including a bank account statement showing a previous PPP loan as a deposit from another entity, a fictitious IRS quarterly tax form, and a fabricated invoice showing $1.1 million spent on machinery.
When a lender notified Reich that he would have to return one of his PPP loans if, as the SBA had indicated to the lender, he had received an extra loan, Reich allegedly replied by email “We only received one ppp!”
The government claims that significant portions of the proceeds were transferred to other businesses and to bank accounts held by Reich’s wife, and that SBA-backed funds were used for ineligible purposes such as large cash withdrawals, credit card bills, and personal items.
Reich’s attorney, Steven Y. Yurowitz, did not reply to an email asking for Reich’s side of the story.
