$2.1M In Fraudulent CARES Act Loans Used To Buy Yacht, DC Home

WASHINGTON, DC — A D.C. man is facing federal charges for fraudulently obtaining more than $2.1 million in Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL), according to a release from the U.S. District Attorney's Office for the District of Columbia.

D.C. resident Kenneth Gaughan, 41, was arrested and charged Tuesday on a criminal complaint that said he fraudulently obtained over $2.1 million in PPP and EIDL loans and Economic Injury Disaster Loans, which he used, in part, to purchase a $300,000 yacht, a $1.13 million rowhouse, and a $46,000 luxury sports sedan.

Gaughan was also charged Tuesday on a separate indictment in connection with an embezzlement scheme involving the theft of more than $472,000 from the Catholic Archdiocese of Washington, D.C. (ADW), where he had previously been an assistant superintendent.

The complaint related to the PPP/EIDL loan fraud case charged Gaughan with one count each of bank fraud, the theft of government funds, wire fraud, and money laundering. The complaint says that Gaughan pursued and received approximately $2.1 million in loans by applying to the Small Business Administration on the behalf of multiple companies, which he falsely claimed registered emotional support animals. According to the complaint, Gaughan used part of the loan proceeds to buy a 2020 Cruisers Yachts 338 CX 33-foot watercraft, a 2020 Kia Stinger, and a rowhouse in Northeast. The government obtained a warrant allowing it to seize the yacht and vehicle, as well as Guaghan's investment and bank accounts. A civil forfeiture complaint is being filed against the home Gaughan bought and a lis pendens is being filed on that property.

PPP loans are part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted March 29 to provide emergency financial assistance to millions of Americans facing economic hardships from the coronavirus pandemic. EIDL is an SBA program that provides assistance to businesses experiencing a temporary loss of revenue.

“We will not tolerate exploitation of this national emergency for personal gain,” said Acting U.S. Attorney Michael R. Sherwin, in the release. “This Office will not allow fraudsters to steal taxpayer money intended to help small businesses that are currently struggling as a result of the COVID-19 pandemic.”

Kelly R. Jackson, IRS-CI special agent in charge of the D.C. Field Office, said that it was unfortunate that "greedy individuals" would take advantage of a program designed to help businesses impacted by the pandemic in order to enrich themselves.

“This conduct will be investigated to ensure crooks are held responsible for stealing this money away from those who were in need," Jackson said.

The 12-count indictment in connection with the archdiocese claims that Gaughan conducted a scheme that involved mail fraud, wire fraud, and money laundering to defraud ADW of more than $472,000.

Gaughan worked as an assistant superintendent at ADW, which is headquartered in Hyattsville, Maryland. Between at least June 2010 and through April 2018, he caused ADW to pay invoices to three companies he owned and controlled, according to the indictment. The money was meant to pay for anti-bullying and crisis intervention programs. Gaughan is accused of creating virtual and private mailboxes in order to receive checks from ADW, depositing the money into accounts he controlled, and then converting it to money for his personal use, authorities say.