Ex-financial adviser spared prison in Erie federal case over $150,000 COVID-19 fraud

In the spring of 2020, at the start of the pandemic, financial adviser Martin M. Kobsik got a $150,000 COVID-19 federal disaster assistance loan from the Small Business Administration.

But Kobsik did not use the money on his business in northwestern Pennsylvania.

He used it to pay for a vacation to see his sister in Alaska and to fund an addition to his house.

Kobsik has been sentenced to three years of probation for stealing from the government.

The sentence, imposed in federal court in Erie on Friday, came after the defense and prosecution widely diverged on the punishment for Kobsik, 42, who no longer works in the financial field.

The defense asked for a sentence of probation.

The U.S. Attorney's Office wanted prison.

Kobsik got the loan by falsely saying it would provide relief during the pandemic for the financial advising and insurance business where he worked when he successfully applied for the loan in April 2020. The business, North Country Financial LLC, remains in operation in Franklin in Venango County, northeast of Kobsik's residence in Stoneboro, near Sandy Lake in Mercer County.

Kobsik asked U.S. District Judge Susan Paradise Baxter for leniency.

Kobsik, who is employed at strip club in Pittsburgh, according to court records, said he must stay out of prison to work to pay restitution. He also said he is the sole provider for his family, which, according to court records, includes four children, his girlfriend and her child and Kobsik's father.

"This was a horrendous mistake, but I accept full responsibility. I will repay this debt to my country," Kobsik told Baxter.

"Jail is not something my family will survive," he said.

Kobsik's lawyer, Sean Logue, of the Pittsburgh area, blamed the federal COVID-19 financial relief system for some of his client's problems.

He said Kobsik used poor judgment, but told Baxter "the system is not the clearest black-and-white system."

Judge calls crime 'egregious' but says probation appropriate

The U.S. Attorney's Office asked for a prison sentence of six months to a year — the same range that the federal sentencing guidelines recommended in the case. Kobsik's conduct "hardly deserves leniency," Assistant U.S. Attorney Christian Trabold said in a sentencing memo.

Kobsik, Trabold said in the memo, "pilfered $150,000 from a government program designed to help businesses withstand the COVID epidemic. A probation sentence would send the decidedly wrong message that ripping off taxpayers during a national emergency will merely result in a slap on the wrist."

Baxter accepted more of the defense's argument when she sentenced Kobsik to three years of probation, fined him $10,000 and ordered him to pay full restitution. She said Kobsik must serve six months of the probation on house arrest.

Baxter called Kobsik's crime "egregious" and said "your arrogance is more than off-putting." But she said she considered Kobsik's need to work to care for his family and pay restitution.

"You have to do it," Baxter told Kobsik of repaying the government. "You can't squirm out of it. Or I will see you here again."

Case is one of thousands of COVID fraud prosecutions in U.S.

A federal grand jury in Erie indicted Kobsik in May 2021 on one felony count of theft of government property. He pleaded guilty to that count on Dec. 20.

Kobsik applied for the $150,000 loan despite one of his partners in the financial advising firm telling him "that he did not approve of obtaining the loan on behalf of the business," according to Trabold's sentencing memo.

Kobsik, according to the memo, got the $150,000 Economic Injury Disaster Loan from the Small Business Administration by "falsely representing that he needed the loan to maintain operations and falsely representing the revenue earned. Kobsik arranged for the loan proceeds to be deposited in his personal bank account and not a business account.

"Shortly after obtaining the loan, Kobsik began freely spending the proceeds on personal expenses, a vacation to Alaska and improvements/additions to his home."

Kobsik is the only defendant to be prosecuted for pandemic-related loan fraud in the Erie Division of the Pittsburgh-based U.S. District Court for the Western Division of Pennsylvania.

But over the past three years, the Justice Department’s COVID-19 Enforcement Task Force has charged more than 3,500 people with federal crimes, recovered more than $1.4 billion in stolen pandemic funds and reached more than 400 civil settlements and judgments, officials in the administration of President Joe Biden said, according to USA Today.

The Justice Department cited the statistics on Tuesday as the Biden administration announced support for proposed legislation that would allocate $1 billion "to crack down on systemic pandemic fraud across government programs and help victims of identity theft recover," the White House said in a statement.

In federal court in Erie on Friday, Trabold pushed for a prison sentence by telling Baxter that Kobsik was also an example of a defendant who chose to "take advantage of the system during a national emergency."

"You cannot steal from the government while the rest of the country is suffering," Trabold said.

Contact Ed Palattella at epalattella@timesnews.com. Follow him on X @ETNpalattella.

This article originally appeared on Erie Times-News: Ex-financial adviser spared prison in COVID fraud in Erie federal case