Long Island COVID relief fraud: Nearly $100M allegedly stolen, prosecutions ongoing

A small-business owner from Freeport is set to enter prison on May 4 for her role in a scheme to steal $4.6 million in federal pandemic-relief loans — part of a widening web of COVID-aid fraud cases targeting Long Island residents.

The business owner, Sherril Baez, will serve six months in prison for her crime. 

“Sherril was headed down the wrong road and a voice in her head said to turn around, but another voice said to just keep going — and she picked the wrong voice,” said Randy Zelin, her Manhattan-based attorney.

Baez is one of at least 31 Long Islanders charged with defrauding pandemic-era programs that include the Paycheck Protection Program, COVID-19 Economic Injury Disaster Loans, the Employee Retention Credit and several other tax credits, a Newsday analysis found. Together, the defendants are accused of illegally obtaining more than $98 million, according to federal court filings in Central Islip, New York City and White Plains.

The relief programs were created to help businesses and nonprofits survive the economic shutdown of 2020 and 2021 that was imposed to slow the coronavirus’ spread. The stolen money could have sustained hundreds of local businesses and preserved thousands of jobs.

Instead, prosecutors said, the defendants spent the money on vacation homes, luxury watches and cars, cryptocurrency and nights out in Manhattan.

And the damage is still being uncovered.

Since Newsday last cataloged 20 cases against Long Islanders in a database published in February 2024, federal authorities have arrested 11 more local residents. The authorities said they’re committed to pursuing all leads, even if it takes years to hold the fraudsters accountable.

In Baez's case, prosecutors said she signed blank applications for two PPP loans in 2021. A co-conspirator then filled them out with false information about her business — Polish Nail Lounge in Rosedale, Queens — and submitted them. After receiving $76,425 in loans, Baez paid a $22,364 kickback to the co-conspirator and pocketed $1,000 for recruiting five others into the scheme, including her daughter, according to the indictment.

Her attorney said Baez, 52, tried unsuccessfully to obtain a COVID relief loan on her own before becoming involved in the scheme, which was allegedly led by the host of a business radio show, Glenroy Walker. He is in custody awaiting trial and his attorney didn't respond to a request for comment.

As for Baez, the PPP lender has since recovered the funds awarded to her, except for the kickback payment, which she must repay as restitution.

“Sherril got taken out by the tide and she didn’t know how to get back in,” said Zelin, her attorney. “This has destroyed her.”

$200 billion in fraud nationwide

Between 2020 and 2022, the federal government issued $1.2 trillion in relief through the Paycheck Protection Program, or PPP, and the COVID-19 Economic Injury Disaster Loan program, known as COVID EIDL, according to the U.S. Small Business Administration’s independent inspector general. SBA officials said more than $200 billion — 17% — was stolen.

“It’s a massive, massive amount of fraud,” said John J. Durham, who, as U.S. Attorney for the Eastern District of New York, is Long Island’s top prosecutor. 

The PPP offered forgivable bank loans of up to $10 million per applicant. COVID EIDL loans, a variation of the SBA's decades-old relief program for victims of natural disasters, ranged in amounts from $150,000 to $3 million per applicant. The SBA administered both loan programs.

“You had people dying, you had people sick, you had schools shut down during the pandemic — and these fraudsters decided to rip off billions of dollars from the programs designed to help people," Durham told Newsday. "That conduct is repugnant, and the fraudsters need to be held accountable.”

On Long Island, 12 defendants have been convicted so far of ripping off the PPP and COVID EIDL programs. Seven have been sentenced to an average of three years in prison, according to the Newsday analysis.

That’s in line with national data showing that 64% of nearly 880 people convicted of PPP fraud have been sentenced to up to three years in prison, said Jim Richards, a consultant and former head of financial-crimes risk management at Wells Fargo bank who has been tracking PPP cases.

“Only about 2.5% [of defendants] have had their PPP cases dismissed and 95% have been found guilty or pleaded guilty,” he said.

At the pandemic’s height, during President Donald Trump’s first term, Trump and Congress prioritized getting loans and grants to employers over stopping fraudsters.

“SBA and Treasury adopted a trust-and-don’t verify approach,” Richards said. “Loan applicants reported their losses due to pandemic, the number of people that they employed and the size of their payroll. That information wasn’t checked by the bank or SBA. It was a perfect storm for fraud."

Investigators shift focus toward tax credits

Law enforcement officials said they have reached the midway point of investigating and prosecuting COVID relief crime. In 2022, Congress extended the statute of limitations for PPP and COVID EIDL fraud from five to 10 years. Legislation with bipartisan support has been introduced to do the same for other pandemic aid.

Durham, the U.S. attorney,  said his office is increasingly focused on three pandemic-era tax credits that came after the loan programs: the Employee Retention Credit, the Paid Sick Leave Refundable Credit and the Paid Family Leave Refundable Credit.

“These are incredibly complex cases, and we expect to see more of them,” he said.

The ERC was offered to small- and midsize businesses that continued to pay employees during the government-ordered shutdown. The maximum tax credit or refund was $5,000 per employee per quarter in 2020 and $7,000 in 2021, according to a description from the Internal Revenue Service.

The sick leave and family leave tax credits reimbursed businesses for the wages they paid to employees who took time off because they fell ill with COVID or needed to care for sick family members. The maximum credit or refund was $5,110 per employee for sick leave and $10,000 for family leave.

Three Long Islanders have been charged in the nation’s largest COVID fraud case involving the ERC and other tax credits.

Keith Williams, 46, of West Hempstead, has been accused of leading a group of seven people who attempted to steal more than $600 million from the tax programs between November 2021 and June 2023. The defendants and their clients successfully got more than $44 million from the IRS, according to the indictment.

The group allegedly obtained the money by submitting more than 8,000 quarterly payroll tax returns for multiple businesses with false information about how many people were employed at the businesses, the size of the payroll and whether they even existed during the pandemic, the indictment states.

Prosecutors alleged that Williams, in a recorded telephone call with a co-conspirator, said ripping off the tax credit programs was like "taking candy from a baby."

The stolen funds were allegedly used to buy jewelry, electronics, clothing and automobiles. Investigators said they seized from Williams’ home designer items from Rolex, Gucci, Louis Vuitton, Fendi, Balenciaga and Versace, as well as luxury vehicles, including a Land Rover, Polaris Slingshot and Tesla Model Y.

Besides receiving tax refunds, Williams and the others, including business owner Morais Dicks, 55, of Dix Hills, and tax preparer and business owner Janine Davis, 41, of Wheatley Heights, allegedly charged clients a fee or a percentage of their refund in return for submitting false payroll records, according to the indictment.

Some of the defendants also lied on PPP applications to receive undisclosed loan amounts, the indictment states.

Each defendant has pleaded not guilty to multiple counts, including conspiracy to defraud the United States, wire fraud and aiding and assisting in the preparation of false tax returns.

Williams’ attorney, Christopher J. Cassar, said in an interview his client “did not intentionally or knowingly defraud the United States government. He processed these [tax credit] applications based on information that was provided to him from customers.”

Davis’ attorney, Felipe Garcia, said she “is presumed innocent of the charges.”

Dicks’ attorney did not respond to a request for comment.

Money hard to recoup

Locally, the Newsday analysis shows the longest prison sentence for COVID relief fraud — 10 years — was handed down last year to construction worker Rami Saab for fraudulently obtaining more than $9.6 million in PPP and COVID EIDL loans and grants.

Saab, 45, formerly of Glen Cove, pleaded guilty to wire fraud in July 2023. He and others secured loans for shell companies with no employees in 2020 and 2021 and then sent some of the funds to friends in Turkey and elsewhere overseas, according to a sworn statement from Matthew Ammann, a special agent for the IRS' criminal investigation unit.

Saab has been in prison before for bail jumping, enterprise corruption and illegally selling Sudafed at his family's gas station in Arkansas, prosecutors said at his recent sentencing hearing. 

Prior to the hearing, Saab said he defrauded the PPP and COVID EIDL to impress others. “I am a person who has always liked to look good in the eyes of other people and sometimes that meant ‘getting over’ on them. To be the smart one,” he wrote in a letter to the judge.

Court filings don't specify how much of the $9.6 million that Saab stole has been recovered, though he has been ordered to pay the same amount in restitution.

The Saab case illustrates the difficulty in recouping stolen pandemic-relief funds, said Michael Horowitz, chairman of the federal Pandemic Response Accountability Committee, which was created five years ago to pursue fraud.

“If you get a few cents on the dollar back you are doing well,” he said. “Much of the stolen funds ended up overseas with organized crime entities…and as time goes by the fraudsters have spent the money.”

Horowitz, who also is the Department of Justice's independent inspector general, said the accountability committee’s work hasn’t been interrupted by President Donald Trump’s January firing of 17 inspectors general, some of whom served on the committee. 

"Five years [after the coronavirus struck], we're just as busy as we always were,” Horowitz told Newsday.

The same is true for postal inspectors in the metropolitan area who've been looking into instances where fraudulent loan applications and other documents used to commit crimes were sent via the U.S. Post Office. The inspectors said they would pursue COVID fraud into the future. 

“It doesn’t matter if the crime happened yesterday or several years ago,” said Hope Cerda, a postal inspector who has worked on 15 cases. “We want to hold everyone accountable for what they did.”

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.