What did he do?
Brian Meidell, the CEO of a Dublin-based tech company called The Server Labs, has been sentenced to two years in federal prison for fraudulently obtaining more than $1.5 million in Paycheck Protection Program (PPP) loans. He pleaded guilty to one count of bank fraud and one count of money laundering in May.
According to the U.S. Attorney’s Office for the Northern District of California, Meidell submitted false and misleading information to two banks in order to obtain the PPP loans, which were intended to help small businesses affected by the Covid-19 pandemic. He claimed that his company had 37 employees and an average monthly payroll of $640,000, when in fact it had only 10 employees and a payroll of less than $200,000.
Meidell also used a fake Social Security number and a forged driver’s license to apply for the loans, and submitted fabricated tax returns and payroll reports. He then transferred the funds to his personal bank accounts and used them for his own benefit, including buying a Tesla car and paying off his mortgage.
How was he caught?
Meidell’s scheme was uncovered by the FBI and the IRS after they received a tip from one of his former employees, who suspected that he was lying about the number of workers and the payroll. The investigators also found that Meidell had a prior conviction for fraud in Spain, where he was sentenced to two years in prison in 2017 for embezzling funds from a previous employer.
Meidell was arrested in October 2020 and has been in custody since then. He faced a maximum penalty of 30 years in prison and a $1 million fine for each count of bank fraud and money laundering. However, as part of his plea agreement, he agreed to forfeit the Tesla car and pay restitution of $1,556,988 to the banks and the Small Business Administration (SBA), which administered the PPP loans.
What did the judge say?
U.S. District Judge Jon S. Tigar sentenced Meidell to 24 months in prison on August 27, 2023, followed by three years of supervised release. He also ordered him to pay a $100 special assessment fee.
In his sentencing remarks, Judge Tigar said that Meidell’s conduct was “brazen” and “egregious”, and that he showed “no remorse” for his actions. He said that Meidell took advantage of a program that was designed to help struggling businesses during a public health crisis, and that he deprived other deserving applicants of the funds they needed.
Judge Tigar also noted that Meidell had a history of fraud and dishonesty, and that he had not learned from his previous conviction in Spain. He said that Meidell posed a risk of recidivism and that a prison sentence was necessary to deter him and others from committing similar crimes.
What is the PPP loan program?
The PPP loan program was established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, as part of the federal government’s response to the Covid-19 pandemic. It provided low-interest loans to small businesses that could be forgiven if they used at least 60% of the funds for payroll expenses and maintained their employee headcount.
The program was initially funded with $349 billion, but it ran out of money within two weeks due to high demand. Congress then authorized another $310 billion for the program in April 2020, followed by another $284 billion in December 2020. The program ended on May 31, 2021, after disbursing more than $800 billion to over 11 million businesses.
However, the program also attracted fraudsters who tried to exploit its relaxed eligibility criteria and limited oversight. According to the SBA’s Office of Inspector General, as of June 30, 2021, there were more than 3,000 investigations involving potential fraud or abuse of PPP loans, involving more than $12 billion.
