TEXARKANA, Texas (KETK) – An East Texas man was sentenced in connection to a COVID-relief fraud scheme, according to U.S. Attorney Brit Featherston on Tuesday.

Samuel Morgan Yates, 35, of Maud, pleaded guilty on May 6, to wire fraud. U.S. District Judge Robert W. Schroeder, III sentenced the man to more than 5 years in federal prison.

Yates is also expected to pay $1,066,432 in restitution and forfeiture.

Yates allegedly completed two fraudulent applications for two different lenders for loans through the Paycheck Protection Program. In his first application, Yates was asking for a $5 million loan, and he pretended to have more than 400 employees and a monthly payroll greater than $2 million, said authorities.

For the second application, he said he had more than 100 employees and he received a $500,000 loan, said the US attorney’s office. Yates would turn in a list of his employees that he got from a random name generator on the internet, and he also turned in fake tax documents, said officials.

“Protecting taxpayer dollars remains one of our highest priorities,” said U.S. Attorney Brit Featherston.  “Government programs are designed to assist our citizens in their time of need and are done by following established protocols to ensure the money is properly disbursed and accounted for. Yates chose to steal from those most in need of assistance and is now being punished for his actions. Congratulations to the investigative and prosecution team for this outcome.”

The CARES Act was a federal law created on March 29, 2020 to help Americans impacted by the pandemic. About $349 billion in forgivable loans were offered to small businesses as part of the PPP. In April 2020, law makers provided $300 billion more for the PPP.

The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent.  PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities.  The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the forgiven amount for payroll. 

This case was investigated by the SBA Office of Inspector General and U.S. Postal Inspection Service.  Trial Attorney Louis Manzo of the Criminal Division’s Fraud Section and Criminal Chief Frank Coan and Assistant U.S. Attorney Jonathan R. Hornok for the Eastern District of Texas prosecuted the case.