‘Love & Hip Hop’ Star Among Those Facing COVID-19 Loan Fraud Charges

A “Love & Hip Hop: Miami” star and the owner of a Pennsylvania towing company have joined the ranks of those facing federal criminal charges for their alleged participation in a COVID-19 loan fraud ring.

Diamond Blue Smith, 36, a rapper with the group Pretty Ricky, and Tonye C. Johnson, 28, both face charges of wire fraud, bank fraud, and conspiracy to commit wire and bank fraud, Local 10 reported.

The defendants’ alleged actions were part of a larger loan fraud scheme to file fraudulent applications seeking more than $24 million in Paycheck Protection Program (PPP) loans that are guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, according to a U.S. Department of Justice press release.

The Justice Department said Smith was arrested and appeared in court yesterday. Johnson was arrested Oct. 1 and appeared in court the following day.

Smith allegedly falsified documents to obtain a PPP loan of $426,717 for his company Throwbackjersey.com LLC, according to the Justice Department. Smith then allegedly falsified documents once again in order to obtain a second PPP loan in the amount of $708,065 for his other company, Blue Star Records LLC.

According to the Justice Department, Smith used the funds to purchase luxury items, including a Ferrari for $96,000. He also allegedly withdrew $271,805 in loan proceeds and sought PPP loans on others’ behalf “in order to receive kickbacks.”

Authorities have seized the Ferrari.

Johnson allegedly committed loan fraud to obtain a PPP loan of $389,627 for his company, Synergy Towing & Transport LLC.

Johnson’s PPP loan application was submitted in mid-May from an IP address associated with a Broward County, Florida, residence of a loan fraud co-conspirator who is now cooperating with the investigation, according to the complaint.

Among the documents included with the application package were a purported Synergy bank statement and Forms 941 for each quarter of 2019.

As law enforcement was investigating the case, text messages surfaced between Johnson and Phillip J. Augustin, 51, of Coral Springs, Florida. Augustin was charged in July with wire fraud, bank fraud, conspiracy to commit wire fraud and bank fraud, and obstruction in connection with the loan fraud scheme, according to the Justice Department.

The text messages show Augustin asked Johnson to send him screenshots of emails Johnson had received from the bank processor regarding the loan application.

On May 19, 2020, Augustin allegedly sent Johnson a text containing instructions for wiring a kickback payment to another co-conspirator, the complaint says. Johnson wired a $97,418 payment on May 21.

In August, an undercover federal agent had phone and text conversations with Johnson, according to the lawsuit.

While on a call Aug. 25, Johnson accessed Dropbox links sent to him by the undercover agent. He viewed the Forms 941 at those links, and confirmed to the agent that the forms were correct.

However, according to the lawsuit, Internal Revenue Service (IRS) records indicate the company did not file any Forms 94 in 2019, and the Pennsylvania Department of Labor & Industry does not have any recorded business or wage information from Synergy from Jan. 1, 2018, through August 2020.

While on a recorded call with a different undercover agent, Johnson indicated that he paid his employees by check.

But according to the lawsuit, Synergy’s bank records show that during a typical week between January 2019 and July 2020, Johnson paid one to three employees by check in amounts between about $500 and $650; no bank records exist that indicate the company’s monthly payroll was $155,851 as Johnson had represented on his loan application.

Eleven defendants in addition to Smith and Johnson also face charges for their alleged involvement in the broader loan fraud scheme, the Justice Department said.

According to the criminal complaint filed in Johnson’s case, the conspirators were able to inflate the loan amounts by submitting false bank statements and payroll tax forms. At least 90 fraudulent applications were prepared or planned, and most of them were submitted.

Evidence indicates Johnson and his co-conspirators applied for PPP loans totaling more than $24 million. At least 42 of them were approved and funded, for a total of $17.4 million.

NBC Miami reported that though the PPP loans were intended to help small businesses weather the COVID-19 pandemic, Congress later found more than $1 billion in aid was obtained via fraud.

What do you think the outcome of these cases will be? Tell us your thoughts in the comments.

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