Fraud Friday – Software Development CEO Sentenced for PPP Fraud & Failure to Pay Employment Taxes

September 22, 2023

Delaney Sexton
Contributing Editor

Fraud Friday – Software Development CEO Sentenced for PPP Fraud & Failure to Pay Employment Taxes

A CEO of multiple software development and IT services companies received a 2 year prison sentence after pleading guilty earlier this year to one count of conspiracy to commit bank fraud and one count of failure to pay over employment tax. Along with the prison sentence, Kishore Kethineni was ordered to pay nearly $3.3 million in restitution, forfeit almost $3.2 million, pay a $15,000 fine, and serve two years of supervised release.

Kishore Kethineni conspired with his two brothers to take advantage of the Paycheck Protection Program and obtain more than $3.1 million in loans. Kethineni was the sole owner of four companies involved in the scheme while his brothers owned the other three companies in the scheme. Altogether, they submitted at least 12 PPP applications containing fraudulent representations and falsified payroll records on behalf of their companies. The Justice Department reported that some of the PPP applications were virtually identical with one another. Of the applications, nine were approved. After he received the loan proceeds, significant portions were directed to himself and his family members instead of for payroll and authorized business expenses.

In addition to his PPP fraud scheme, Kethineni admitted to failing to account for and pay over employment taxes that his company, Neelinfo, Inc., withheld from its employees. Over the span of five years, this amounted to a tax liability of more than $2 million. He used a payroll service company to process the company’s employee payroll and track its employment tax obligations. Every quarter, the payroll service company provided a prepared Form 941 which reflected the taxes withheld from his employees that must be paid to the IRS. Even though he received the prepared tax forms, he never bothered to file them with the IRS. Further, he did not pay any employment taxes on behalf of the company.

At the end of the year, the payroll service company also provided Neelinfo with its employees’ W-2s so they could file their personal income taxes. Due to Kethineni failing to file any of the tax forms or pay employment taxes, some of his employees ended up being subjected to audits and inspections by the IRS.

His brothers remained unnamed in the press release, and the press release did not report if they had been indicted.

Source:
U.S. Attorney’s Office