'Unconscionable': MA Man Charged In Nation's First PPP Fraud Case

ANDOVER, MA — A local man and a Rhode Island man have been charged with trying to get more than a half-million dollars from the Paycheck Protection Program under false pretense, the first two people in the nation charged with defrauding the federal coronavirus relief program, prosecutors said.

David Stavely, 52, of Andover and David Butzinger, 51, of Warwick, R.I., were both arrested Tuesday by federal agents. Prosecutors said they provided false information in an effort to get $543,959 worth of loans under the Small Business Association's PPP, which will forgive loans to businesses that devote at least 75 percent of their loans to payroll.

Stavely and Butzinger claimed to have dozens of employees working at four businesses, but had no employees working at any of the businesses, according to a release by the US Attorney's Office for the District of Rhode Island, where they are charged.

Both are charged with conspiracy to make a false statement to influence the Small Business Administration and conspiracy to commit bank fraud. Stavely is also charged with aggravated identity theft. Butzinger is charged with bank fraud.

"Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic," U.S. Attorney Aaron Weisman said in a statement. "It is unconscionable that anyone would attempt to steal from a program intended to help hard-working Americans continue to be paid so they can feed their families and pay some of their bills."

Prosecutors accuse Stavely of requesting more than $438,500 in loans for payroll at two restaurants in Warwick, R.I., and one in Berlin, Mass. Investigators found that one Rhode Island restaurant, the former Remington House, and the Berlin restaurant, On The Trax, were not open before or during the coronavirus outbreak, while Stavely did not own or have any role in the other Warwick restaurant, Top of the Bay.

According to court documents, On The Trax was closed by March 10, when the town of Berlin revoked its liquor license — also in connection with fraud. Prosecutors accuse Stavely, under the name Kurt Sanborn, of falsely claiming to the town that his brother owned the restaurant and of using his brother's identity in other real estate dealings.

Officials accuse Butzinger of applying for a $105,381 loan for an unincorporated business called Dock Wireless with seven employees. Prosecutors said there is no evidence of Dock Wireless having any employees.

The investigation began with a tip to Berlin police that Stavely was using his brother's identity on real estate dealings. He has two prior federal fraud convictions, both in New Hampshire.

Both men appeared in court for initial appearances today and were released on unsecured bond, with no future appearances scheduled as of now.