March 31, 2023
Fraud Friday – CEO of PPP Lender Pleads Guilty, Agrees to Pay $71.7 Million
“In the depths of the COVID-19 pandemic, Martinez lied to get money that was supposed to help people. His abuse of the system during a terrible time has now been brought to light. Martinez took advantage of his employees, a tax preparer, and the public at large — all to fund a lavish lifestyle of cars, jets, and fancy homes. Let me be clear, this Office will not tolerate such conduct and will continue to bring to justice those who put their greed above the law,” says U.S. Attorney Damian Williams.
The primary owner and CEO of MBE Capital Partners helped distribute $823 million in PPP loans to 36,600 businesses. Rafael Martinez earned $71.3 million in lender fees and purchased luxury cars, homes, and a chartered jet service. He will now lose it all after pleading guilty to one count of conspiracy to commit wire fraud.
Early in the pandemic, Martinez applied for a PPP loan for MBE Capital Partners. In the application, he claimed that the company had 15 employees with a monthly payroll of almost $120,000. In reality, MBE Capital Partners had four employees at most with a monthly payroll of $25,000. Martinez provided doctored, fraudulent tax records which included a forged signature of a tax preparer. The company was approved for a $283,000 PPP loan.
Within five days of applying for a PPP loan, Rafael applied to become a non-bank PPP lender. According to the application, MBE originated and serviced more than $3.8 billion in business loans from 2017 to 2019 and had the fraudulent financial statements to support this. The SBA approved MBE as a non-bank PPP lender.
Three weeks later, the same fraudulent financial statements that were submitted to the SBA were provided to a life insurance company. Martinez formed a partnership with the life insurance company to fund PPP loans for minority and women-owned small businesses. After the company provided $100 million to MBE, the money was instead used as collateral to borrow $832 million through the Payment Protection Program Liquidity Facility.
As part of the plea agreement, Martinez will pay more than $71.7 million and forfeit $44.5 million. This includes five luxury vehicles and properties in the Dominican Republic and New Jersey that law enforcement previously seized.
DOJ Press Release