Man pleads guilty in case involving $5 million in fraudulent COVID loans
An Orange County man has pleaded guilty after federal prosecutors say he received more than $5 million in Covid-19 relief loans for three fake front companies. Raghavender Reddy Budamala, 35, used the shell companies to seek a paycheck protection program and economic disaster loans, according to the plea agreement filed in U.S. District Court on June 3.
Budamala pleaded guilty to one count of money laundering and bank fraud; and agreed to return all his “ill-gotten gains” to the government.
His attorney, Diane C. Bass, told news sources she had no comment on the case.
According to the plea agreement, Budamala formed or acquired three front companies in 2019 without any transactions – Hayventure LLC, Pioneer LLC and XC International LLC.
The Paycheck Protection Program (PPP) and Covid-19 Economic Disaster Loans (EIDLs) were offered through the Small Business Administration (SBA) in the early months of the pandemic to help businesses survive shutdowns and quarantines. The loans had minimal interest and were forgivable, as long as the funds were used for specific expenses, like rent or payroll.
Budamala submitted seven applications to the SBA from April 2020 to March 2021, falsely telling banks administering the covid relief business loan programs that his companies employed dozens of people and earned millions of dollars in revenue, and that he needed the money for payroll and business expenses.
Budamala ultimately received six loans totaling $5,151,497, according to the plea agreement. He was charged with using the funds to purchase a $1.2 million “investment property” in Eagle Rock, a nearly $600,000 property in Malibu, a “personal residence” in Irvine and a $970,000 investment in an EB-5 immigrant investor visa program. He then deposited nearly $3 million of the remaining loan money into his personal TD Ameritrade account, according to a press release from the U.S. Attorney’s Office for the Central District of California.
The Orange County resident then requested loan forgiveness on several of the loans, saying the SBA money was all used to pay payroll, the statement said.
However, the addresses listed for the businesses “were false, nonexistent, or residential,” prosecutors said in the statement.
“The states where the Budamala businesses are believed to have operated have no record of these businesses paying salaries to employees, and the businesses’ bank records do not reflect any significant business income or operating expenses,” the statement said. .
Budamala has been in federal custody since his arrest on Feb. 23, when he attempted to flee to Mexico, the statement said. He faces a maximum sentence of 40 years in prison.
The IRS Criminal Investigation, the FBI, and the Office of the Inspector General of the Small Business Administration investigated this matter. Assistant U.S. Attorney Gregory D. Bernstein of the Major Fraud Section is prosecuting the case.
Budamala is among a growing number of people accused of receiving covid-19 relief loans under fraudulent circumstances, according to a Justice Ministry statement.
United States Attorney General Merrick B. Garland established the covid-19 Fraud Enforcement Task Force in May 2021. In a March 10 press release, the United States Department of Justice reported that “efforts to civil application to combat fraud related to covid-19…must-date resulted in criminal charges against more than 1,000 defendants with alleged losses exceeding $1.1 billion; the seizure of more than $1 billion in disaster economic injury loan proceeds; and more than 240 civil investigations of more than 1,800 individuals and entities for alleged wrongdoing in connection with pandemic relief loans totaling more than $6 billion.
TMT was unable to identify exactly which property in Malibu Budamala purchased, but with a price tag of $600,000, it was most likely vacant land.