Warwick Man Accused Of Defrauding Small Business Loan Program

PROVIDENCE, RI — A Warwick man is accused being part of a conspiracy to fraudulently apply for more than half of a million dollars in coronavirus relief loans from the federal government. David Butziger, 51, and a Massachusetts man are facing federal conspiracy charges, Rhode Island U.S. Attorney Aaron Weisman announced Tuesday, making them the first in the country to be charged with defrauding the Small Business Administration's Paycheck Protection Program.

David A. Staveley, also known as Kurt D. Sanborn, 52, of Andover, Massachusetts was also charged. The pair is accused of falsely applying for forgivable loans guaranteed by the SBA as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Both were charged by a federal complaint with conspiracy to make false statements to influence the SBA and to commit bank fraud. Butziger was also charged with bank fraud, while Staveley was charged with aggravated identity theft.

"Tens of millions of Americans have lost their jobs and have had their lives thrown into chaos because of the coronavirus pandemic," Weisman said. "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. Attorney General Barr has directed all U.S. Attorneys to prioritize the investigation and prosecution of crimes related to coronavirus and COVID-19, and we are doing just that."

According to court documents, the loan requests were made to pay employees at businesses that were actually operating at the start of the pandemic and had no employees on the payroll. Another loan was applied for a business that the applicants did not actually own, Weisman's office said.

"As alleged, David Staveley and David Butziger tried to capitalize on the coronavirus crisis by conspiring to fraudulently obtain more than half a million dollars in forgivable loans that were intended to help small businesses teetering on the edge of financial ruin," said Special Agent in Charge Joseph R. Bonavolonta of the FBI’s Boston Field Office. "Thankfully we were able to stop them before taxpayers were defrauded, but today’s arrests should serve as a warning to others that the FBI and our law enforcement partners will aggressively go after bad actors like them who are utilizing the COVID-19 pandemic as an opportunity to commit fraud."

SBE Inspector General Hannibal Ware said it is currently "a critical time for our nation's small businesses."

"It is well known that fraudsters prey upon those in vulnerable positions. As this result shows, SBA-OIG and its law enforcement partners are actively working together to root out fraud in SBA’s programs and bring those responsible to justice," Ware said. "I want to thank the U.S. Attorney’s Office and our law enforcement partners for their leadership and dedication throughout this investigation."

Staveley and Butziger are accused of discussing the fraud over email, with Staveley posing as his brother in real estate transactions. He claimed to need $438,500 to pay for dozens of employees at three restaurants he owned: two in Warwick and another in Berlin, Massachusetts. One of the Warwick locations, the former Remington House, was closed before the started of the pandemic, as well as On The Trax in Massachusetts. Staveley does not have any connection to the third restaurant, Top of The Bay in Oakland Beach.

On the Trax was closed in early March after its liquor license was revoked. Staveley was accused of falsely claiming that his brother owned the restaurant, using his information on other real estate transactions as well. Police in Berlin began investigating after receiving a tip that he was using his brother's identity in real estate.

Staveley was previously convicted on federal fraud charges twice, both in New Hampshire.

Butziger, meanwhile, is accused of applying for $105,381 in loans on April 6, saying he was the owner of "Dock Wireless." He claimed to have seven full-time employees, including himself, saying he had hired them at the beginning of the year and laid them off at the end of March. He said the PPP loan funding would be used to pay the employees through the month of April, since they had continued to work without paychecks following the layoff. The Rhode Island Department of Revenue said no such business existed in their records, and "employees" interviewed said they never worked for the company or Butziger.

"Every dollar stolen from the Paycheck Protection Program comes at the expense of employees and small business owners who are working hard to make it through these difficult times," said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. "The Criminal Division is committed to working with our law enforcement partners to root out abuse of the important relief programs established under the CARES Act."

Special Agent in Charge Kristina O’Connell of the IRS-Criminal Investigation called the pair's accused actions "criminally reprehensible."

"Defrauding a government program designed to provide financial assistance to small business owners during the Coronavirus pandemic is tantamount to taking money directly out of the pockets of those who need it most," O'Connell continued. "Today’s arrests exemplify the hard work, dedication and efficiency of IRS-CI and the entire investigative team."

Both Staveley and Butziger were arraigned Tuesday and released on bond.

During her daily news conference on Monday, Rhode Island Gov. Gina Raimondo confirmed that the Federal Bureau of Investigation, Rhode Island State Police and Attorney General's Office were investigating reported fraudulent unemployment claims at the Department of Labor and Training. It's unclear if this investigation is related to Butziger and Staveley's arrests.