Disbarred Attorney Charged In COVID-19 Relief Loan Fraud Scheme

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment today charging DOUGLAS RAYMOND ARNTSEN with masterminding a fraudulent scheme to obtain more than $1.3 million in government-funded loans designed to provide relief to small businesses during the COVID-19 pandemic.  ARNTSEN was arrested this morning and presented this afternoon before U.S. Magistrate Judge Sarah Netburn.  The case is assigned to U.S. District Judge P. Kevin Castel.

U.S. Attorney Damian Williams said: “As alleged, Douglas Raymond Arntsen, a disbarred attorney, recruited multiple co-conspirators in a scheme to defraud the government out of more than $1 million by submitting fraudulent loan applications.  These loans were funded by the American taxpayers and meant to help small businesses struggling from the effects of the COVID-19 pandemic.  They were not meant to line people’s pockets for personal gain.  Today’s arrest demonstrates this Office’s ongoing commitment to holding accountable those who illegally profited from a national emergency.”

FBI Assistant Director in Charge James Smith said: “Arntsen allegedly recruited people who were facing financial stress amidst an unprecedented global pandemic into a fraudulent scheme to illegally obtain $1.3 million in COVID-19 relief funds intended for small businesses.  COVID-19 relief schemes abuse a government funded program that was designed to help small businesses who were struggling during a time of economic confusion.  The FBI will bring to justice anyone who attempted to fraudulently exploit COVID-19 relief programs for their personal benefit.”

According to the allegations in the Indictment, which was unsealed today:[1]

Between in or about June 2020 through at least in or about August 2020, DOUGLAS RAYMOND ARNTSEN orchestrated a scheme to defraud the Small Business Administration (“SBA”) by submitting fraudulent loan applications through the Economic Injury Disaster Loan (“EIDL”) Program.  In doing so, ARNTSEN recruited multiple co-conspirators.  ARNTSEN promised potential co-conspirators a way out of their difficult financial circumstances.  Certain of those co-conspirators trusted ARNTSEN because they thought he was an attorney.  In reality, ARNTSEN had been disbarred. 

ARNTSEN asked his co-conspirators to give him their personal information, including social security and driver’s license numbers, and then used this information to submit fraudulent loan applications to the EIDL program.  The applications submitted by ARNTSEN falsely claimed that the co-conspirators owned businesses that had substantial revenue.  Often, the co-conspirators named as owners of the businesses, in fact, had no legitimate connection to the businesses at all.  After the loan applications were submitted, ARNTSEN directed his co-conspirators to lie to the SBA during the loan diligence process.

ARNTSEN also directed his co-conspirators to recruit additional participants to his fraudulent scheme.  After one co-conspirator had obtained a fraudulent loan, ARNTSEN directed him, in sum and substance, to “[g]et me one more warm body.”  The co-conspirator proceeded to give ARNTSEN the personal information of a relative, which was then used to obtain another fraudulent loan.

ARNTSEN and his co-conspirators enriched themselves through the fraud.  In total, ARNTSEN and his co-conspirators obtained at least approximately $1.3 million in fraudulent loans and attempted to obtain hundreds of thousands of dollars of additional loans that the SBA declined to fund.  After one fraudulent loan was approved by the SBA, ARNTSEN texted a co-conspirator, in sum and substance, “Need how you want your bank checks.  Your chariot has arrived this morning.” 

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ARNTSEN, 45, of Staten Island, New York, is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the outstanding investigative work of the FBI and additionally thanked the Suffolk County District Attorney’s Office for its assistance.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Adam Sowlati is in charge of the prosecution.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.