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McLean man pleads guilty to Covid relief fraud involving casino gambling, real estate

Casino chips (photo via Chris Liverani on Unsplash)

A McLean resident has pleaded guilty to spending federal COVID-19 relief funds intended for his home business on personal expenses, including gambling and real estate payments.

Mehdi Pazouki, 65, pleaded guilty in federal court on Friday (Feb. 23) to defrauding the Small Business Administration of approximately $455,000 in loans created to help businesses survive during the pandemic, according to the U.S. Attorney’s Office for Eastern District of Virginia.

The office says Pazouki applied for funds from the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program between August 2020 and August 2021 that he claimed would be spent on Systems Integration Services Inc., the IT consulting company he ran out of his McLean home.

“He actually intended to, and did, use [the money] to fund his gambling at area casinos, pay down personal debt, and purchase real estate,” the U.S. Attorney’s Office said in a news release.

More from the Department of Justice:

Within days of receiving his first EIDL disbursement, Pazouki spent over $27,000 in EIDL money at Hollywood Casino in Charles Town, West Virginia. Pazouki also used the PPP and EIDL money for down payments on two different real estate properties, to pay off his personal credit card debt, and to fund his personal investment account. Pazouki also falsely represented to the SBA in loan forgiveness applications that the PPP money had been used for legitimate business expenses, which resulted in the complete discharge of the loans.

Pazouki could face up to 20 years in prison when he’s sentenced on May 24, though the press release notes that “actual sentences for federal crimes are typically less than the maximum penalties.”

Attorney General Merrick Garland announced last August that the Justice Department had recovered over $1.4 billion in COVID-19 relief funds that were allegedly obtained through fraud by over 3,000 defendants.

The PPP and EIDL programs were both created by the CARES Act in 2020 to assist small business owners during the lockdowns and stay-at-home orders implemented early in the pandemic. Up to $659 billion was available for PPP loans, and $224 billion in EIDL grants and loans were approved through February 2021, according to the U.S. Government Accountability Office, which found that at least 3,000 loans totaling about $156 million went to ineligible applicants.

The PPP program ended on May 31, 2021, while the Small Business Administration shut down its application portal for EIDL funds in May 2022.

Photo via Chris Liverani on Unsplash

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