Feds bust $28M pandemic loan-fraud ring after tip on South Florida liquor store owner

At the height of the coronavirus outbreak, a South Florida man charged with drug dealing applied for and received a $250,000 federal government loan for his liquor store that was supposed to be for businesses struggling during the pandemic.

His bogus application tipped off federal investigators to what would turn out to be a $28 million fraud ring run by a Broward County tax preparer who submitted a pile of phony Paycheck Protection Program loan applications that were guaranteed by the Small Business Administration.

Now, the tax preparer, Wally Dorlus, 41, of Margate, and his recruits, Marcgenson Marc, 37, of Coconut Creek, Edward Moise, 45, of Coral Springs, and Roberto Geronimo, 40, of Miami Gardens, are serving various prison terms after pleading guilty to fraud charges.

Marc was sentenced on Friday to one year and three months in prison. Dorlus, the ringleader, was previously sentenced to four years; Moise to one and a half years; and Geronimo to nearly six years. Geronimo’s term also included punishment for his conviction on drug-conspiracy charges.

According to factual statements filed with their plea deals, Dorlus played the lead role of the tax preparer who, in exchange for kickbacks, filed approximately 170 fraudulent PPP loan applications. Dorlus admitted that he fabricated the number of employees, payroll expenses, and gross revenues on the applications to qualify for the loans seeking more than $28 million for his companies and more than 100 others.

In total, banks approved 33 of the loans for a total of $5.5 million. The SBA’s COVID-19 relief program was designed to forgive the loans as long as the businesses legitimately used the funds for their overhead costs. As part of their punishment, the four defendants were ordered to repay the loan proceeds to the U.S. government.

As the leader, Dorlus collected kickbacks ranging from 12.5% to 25% of the PPP loan proceeds, according to prosecutor Stephanie Hauser with the U.S. Attorney’s Office.

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Marc was a recruiter for Dorlus, and they split some of the kickback payments, according to their factual statements. Marc, in turn, recruited Moise to apply for fraudulent PPP loans run through Dorlus and to recruit additional applicants.

One of Moise’s recruits was Geronimo, who at that time was on bail as he awaited trial on drug conspiracy charges filed in 2020. Under indictment, Geronimo was prohibited from applying for a PPP loan. Yet, he applied for and received the PPP loan for $250,000 for his liquor store based on falsified payroll tax documentation submitted by Dorlus.

According to his factual statement, Geronimo paid 25% of the loan proceeds as a kickback shared between Dorlus and Marc.

It was Geronimo’s phony PPP loan application for the liquor store that led to the broader investigation by the Drug Enforcement Administration and Internal Revenue Service into Dorlus’ fraudulent PPP loan and recruitment scheme.

The Paycheck Protection Program, approved as part of the CARES Act by Congress in 2020, was designed to help businesses following shutdowns caused by the rapid spread of the coronavirus. Determined to inject money quickly in the faltering economy, the U.S. government waived many traditional requirements that lenders normally check before issuing business loans — and that policy, according to the SBA’s inspector general, led to an “unprecedented level of fraud activity” because of the lack of controls.

READ MORE: PPP firms gave selves loans, bought Porsche, $8M home, says report on COVID loan fraud

As the nation’s No. 1 fraud capital, South Florida has led the financial crime wave that followed the passage of the CARES Act, according to the U.S. Attorney’s Office.

Among the worst offenders: Former TD Bank executive Daniel Hernandez, who oversaw 80 employees at 27 branches in Miami-Dade County.

The regional manager’s job gave him the opportunity to fleece the SBA’s pandemic relief program by exploiting his bank from the inside, federal authorities say.

In less than a year, authorities say, Hernandez lined his pockets with kickback-like “commissions” as he collaborated with TD Bank customers, a former bank employee and other associates to submit falsified paperwork for more than 80 PPP loans worth $30 million — all guaranteed by the SBA. Hernandez also directed others to apply for another $7 million in pandemic benefits from the SBA under its Economic Injury Disaster Loan program.

In total, Hernandez and his illicit network received more than $17 million in fraudulent loans approved by TD Bank and one of his previous employers, Bank of America, as well as by the SBA itself, according to court records.

The 50-year-old Hernandez, who was fired from his TD Bank job before his arrest in August, pleaded guilty to a wire fraud conspiracy charge in December and now faces up to 10 years in prison at his sentencing in March.