Federal prosecutors announced charges Tuesday against a man they say lied about being a lending institution, got approved as a pass-through for coronavirus loans, and “faked” his way into collecting more than $70 million in taxpayer money through his deception.
Prosecutors said Rafael Martinez also lied on his own application for loans, making up employees to bilk the Small Business Administration out of nearly $300,000 for a Payroll Protection Program loan.
Mr. Martinez was arrested Monday on bank fraud, wire fraud, false statements and aggravated identity theft charges.
“Rafael Martinez faked his way into building his company MBE Capital Partners into an almost $1 billion PPP lender,” said Damian Williams, the U.S. attorney for the Southern District of New York.
The size of the operation makes it among the largest pandemic fraud cases brought so far.
Authorities said Mr. Martinez, 56, spent the money on a 2017 Ferrari 488 Spider, a 2018 Porsche 911 Turbo, a 2017 Bentley Continental GT, a BMW 750 and a 1962 Mercedes Benz 190. He also bought a $10 million villa in the Dominican Republic and a $3.5 million home in Franklin Lakes, New Jersey.
When the pandemic hit, Congress created the PPP to pump money out to small businesses to keep them afloat amid government-ordered business shutdowns. The goal was to keep people on payroll and off unemployment, even if the businesses they worked for weren’t operating at normal capacity.
Under the PPP, more than $800 billion was sent from the SBA to lenders, who then approved businesses’ applications and disbursed the money.
Prosecutors say MBE, which Mr. Martinez ran as CEO, applied to the SBA to be a non-bank lender for the PPP, claiming the company already serviced more than $3.8 billion in business loans and was up for the task of handling the PPP.
He said he wanted to support minority and women-owned businesses.
Based on that application, MBE was approved and handled more than 36,000 PPP applications and $932 million in funds, including $832 million from the Federal Reserve Bank and $100 million from a partnership with another company.
MBE itself earned $71.3 million in lender fees, deposited into an account Mr. Martinez alone controlled, an IRS special agent wrote in a court affidavit.
Authorities say Mr. Martinez also applied for his own PPP loan for MBE, claiming the company had 15 employees and an average monthly payroll of nearly $120,000. In fact, prosecutors say, the company never had more than four people and payroll was about $25,000 a month.
Martinez filed doctored tax returns, with a forged signature, to bolster his application, the government charged.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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