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December 13, 2022

Oregon Man Pleads Guilty in Payroll Protection Program Loan Scheme

On October 14, 2022, in the District of Oregon, Justin Cunningham pled guilty to wire fraud. Cunningham was previously indicted on January 21, 2022.

According to the court documents, between April 2021 and May 2021, Cunningham devised a scheme to defraud the Small Business Administration by submitting a fraudulent loan application for Coronavirus Aid, Relief, and Economic Security (CARES) Act funding through the Paycheck Protection Program (PPP). Cunningham created a fictitious sole proprietorship, JC Shoe Juice (JCSJ), on whose behalf he intended to apply for a PPP loan. In April 2021, in order to give JCSJ the veneer of an operating employer and business, Cunningham applied over the Internet for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). In his application for the EIN, Cunningham reported that JCSJ began operating in June 2018, would start paying wages in May 2020, and anticipated employing seven employees over the ensuing year. The IRS issued Cunningham an EIN the same day.

In May 2021, Cunningham applied for a PPP loan for JCSJ. Cunningham submitted four IRS Forms 941, Employer's Quarterly Federal Tax Return, purportedly filed by JCSJ for each quarter of 2019, in support of the application. Each of those Forms 941 indicated that JCSJ employed six persons and paid a total of $57,631.25 in “wages, tips, and other compensation” in the relevant quarter.  These representations were false, and JCSJ never filed any IRS Form 941 for any quarter of 2019.

As a result of his guilty plea, Cunningham was ordered by a United States District Judge to forfeit $77,340. At sentencing, Cunningham could receive a maximum term of 20 years’ imprisonment, a fine of $250,000, and three years of supervised release.

Source:  The facts in this case narrative come from the following publicly available documents: D. Or., Indict., filed Jan. 21, 2022; D. Or., Petition to Enter Plea of Guilty, filed Oct. 14, 2022; and D. Or., Order of Forfeiture, filed Oct. 19, 2022.