COVID-19 Relief Fraud: The Case of Casie Hynes and the $2 Million+ Scheme – A Deep Dive into Pandemic Loan Abuse

The COVID-19 pandemic brought unprecedented economic challenges, prompting the US government to launch massive relief programs like the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. These initiatives, designed to keep businesses afloat and protect jobs, were unfortunately also targeted by fraudsters. The case of Casie Hynes, a 39-year-old woman from Los Angeles, stands as a stark example of the scale and audacity of some of these schemes.

Hynes was recently sentenced to 60 months in federal prison and ordered to pay over $2.3 million in restitution for orchestrating a complex web of fraud involving both PPP and EIDL loans, as well as fraudulent claims for pandemic-related tax credits. This article delves deep into the Hynes case, exploring the mechanics of her scheme, the legal principles at play, the broader implications for government oversight, and crucial lessons for businesses and individuals seeking to avoid becoming entangled in similar situations, either as perpetrators or victims. We’ll go beyond the headlines to understand the how, the why, and the what now of this significant case of COVID-19 relief fraud. The speed with which these programs were rolled out, while necessary to address the urgent economic crisis, created vulnerabilities that individuals like Hynes were quick to exploit. This case serves as a cautionary tale and a valuable case study for fraud prevention and enforcement.

Deconstructing the Scheme – The Mechanics of Hynes’ Fraud

Casie Hynes’ fraudulent activities were multifaceted, encompassing both loan fraud and tax fraud. Her primary method involved exploiting the PPP and EIDL programs. Let’s break down the key components:

• Shell Companies and Fabricated Applications: Hynes created or utilized approximately 20 companies, some existing and some newly formed, including entities like “Nasty Womxn Project” and “She Suite Collective.” These were often presented as women-owned businesses, potentially leveraging the increased focus on supporting minority-owned businesses during the pandemic. For each company, she submitted fraudulent applications for PPP and EIDL loans.
• Identity Theft and Forgery: A particularly egregious aspect of Hynes’ scheme was her unauthorized use of personal information and signatures of friends, family members, and potentially others. This constitutes identity theft, a serious crime in itself. She essentially fabricated the identities of business owners and employees to make the companies appear legitimate.
• Inflated Employee Numbers and Payroll: The PPP loans were calculated based on a company’s payroll expenses. Hynes systematically inflated the number of purported employees and the average monthly payroll for each company, maximizing the loan amounts she could receive.
• Fake Supporting Documents: To bolster her fraudulent applications, Hynes submitted fabricated tax documents (like IRS Form 941, Employer’s Quarterly Federal Tax Return) and bank statements. This demonstrates a sophisticated understanding of the application requirements and a deliberate attempt to deceive the lenders and the Small Business Administration (SBA).
• Control of Bank Accounts: Once the loans were approved and disbursed, the funds were directed to bank accounts controlled by Hynes. This allowed her to directly access and utilize the money for personal expenses, rather than for the intended purpose of supporting business operations.
• Tax Credit Fraud: In addition to loan fraud, Hynes attempted to defraud the IRS by claiming fraudulent Employee Retention Credits (ERC) and paid sick and family leave credits. These credits were designed to reimburse businesses for wages paid to employees who couldn’t work due to COVID-19-related reasons. Hynes submitted false tax forms, claiming these credits for companies that had little to no actual business activity or employees.

This multi-pronged approach, combining loan fraud and tax fraud, highlights the comprehensive nature of Hynes’ criminal enterprise. It wasn’t a spur-of-the-moment act but a calculated and sustained effort to exploit multiple government programs.

Legal Ramifications and Charges – Understanding the Laws Broken

Casie Hynes pleaded guilty to one count of wire fraud and one count of false claims. These are serious federal offenses with significant penalties. Let’s break down these charges and related legal concepts:

• Wire Fraud (18 U.S. Code § 1343): Wire fraud is a broad federal crime that involves using interstate electronic communications (phone, internet, email, etc.) to execute a scheme to defraud someone of money or property. In Hynes’ case, the submission of fraudulent loan applications online and the electronic transfer of funds constituted wire fraud. The penalties for wire fraud can include up to 20 years in prison and substantial fines. If the fraud affects a financial institution, the penalty can be up to 30 years and a fine of up to $1 million.
• False Claims Act (18 U.S. Code § 287): This law prohibits knowingly presenting false or fraudulent claims to the government for payment or approval. Hynes’ submission of fraudulent loan applications and tax forms directly violated this act. The penalties include significant fines and imprisonment.
• Identity Theft (18 U.S. Code § 1028): While not explicitly mentioned in the provided text as a charge Hynes pleaded guilty to, her unauthorized use of other people’s personal information likely constitutes aggravated identity theft. This carries a mandatory minimum sentence of two years in prison, which must be served consecutively to any other sentence.
• Bank Fraud (18 U.S. Code § 1344): Because Hynes’ scheme involved defrauding banks that were administering PPP loans, she could have also faced charges of bank fraud. This carries a penalty of up to 30 years in prison and a fine of up to $1 million.
• Small Business Act Violations: The SBA has its own set of regulations and penalties for fraudulent loan applications. These can include civil penalties and administrative actions.
• Tax Fraud (26 U.S. Code § 7206): Hynes’ submission of false tax forms could also have resulted in charges of tax fraud, which carries penalties of up to three years in prison and substantial fines.

The 60-month prison sentence and the $2.3 million restitution order reflect the severity of Hynes’ crimes and the government’s commitment to prosecuting COVID-19 relief fraud. The restitution is intended to repay the stolen funds to the government and the lenders.

The Broader Context: COVID-19 Relief Fraud and Government Oversight

The Casie Hynes case is not an isolated incident. The Justice Department’s COVID-19 Fraud Enforcement Task Force, established in May 2021, has been actively investigating and prosecuting numerous cases of pandemic-related fraud. The sheer scale of the relief programs, coupled with the urgent need to distribute funds quickly, created opportunities for fraud on an unprecedented level.

Several factors contributed to the vulnerability of these programs:

• Speed of Implementation: The PPP and EIDL programs were rolled out rapidly to address the economic crisis. While this was necessary, it meant that some safeguards and vetting processes were less rigorous than they might have been under normal circumstances.
• Self-Certification: The PPP application process relied heavily on self-certification by borrowers, with limited upfront verification. This made it easier for individuals to submit false information.
• Lack of Coordination: Initially, there was limited coordination between different government agencies (SBA, IRS, Department of Labor) in sharing information and identifying potential red flags.
• Complexity of the Programs: The rules and regulations surrounding the PPP and EIDL programs were complex and evolving, creating confusion and opportunities for exploitation.
• The “Honor System” Under Pressure: The programs relied, to a significant extent, on the honesty of applicants. In a time of economic desperation, some individuals rationalized their fraudulent actions.

The government has taken steps to improve oversight and enforcement, including:

• Increased Funding for Investigations: Congress has allocated additional resources to the Justice Department, the SBA Inspector General, and other agencies to investigate and prosecute fraud.
• Data Analytics: Government agencies are using data analytics to identify patterns of suspicious activity and flag potentially fraudulent applications.
• Interagency Collaboration: The COVID-19 Fraud Enforcement Task Force has improved coordination between different agencies.
• Public Awareness Campaigns: The Justice Department and other agencies have launched public awareness campaigns to encourage people to report suspected fraud.
• Longer Statute of Limitations: The statute of limitations for certain COVID-19 fraud offenses has been extended, giving investigators more time to build cases.

However, the challenge remains significant. The government is essentially playing a game of “catch-up,” trying to recover stolen funds and hold perpetrators accountable while also preventing future fraud. The long-term impact of this widespread fraud will likely be felt for years to come, both in terms of financial losses and the erosion of public trust in government programs.

Lessons Learned and Prevention Strategies – For Businesses and Individuals

The Casie Hynes case and the broader issue of COVID-19 relief fraud offer valuable lessons for businesses, individuals, and the government. Here are some key takeaways and prevention strategies:

For Businesses:

• Know Your Customers and Employees: Thoroughly vet any individuals or entities you are doing business with, especially if they are involved in applying for government assistance. Be wary of unsolicited offers or schemes that seem too good to be true.
• Maintain Accurate Records: Keep meticulous records of all financial transactions, payroll information, and communications related to government relief programs. This documentation is crucial for demonstrating compliance and defending against potential accusations of fraud.
• Implement Strong Internal Controls: Establish robust internal controls to prevent and detect fraud, including segregation of duties, regular audits, and whistleblower protections.
• Consult with Professionals: Seek advice from legal and financial professionals to ensure you are complying with all applicable regulations and requirements.
• Be Skeptical of “Easy Money”: Be wary of any consultants or advisors who promise guaranteed approval for government loans or credits with minimal effort or documentation.
• Report Suspicious Activity: If a business suspects that it may have been the victim of fraud, by having its identity used by a third party, the business should report to the proper authorities.

For Individuals:

• Protect Your Personal Information: Be vigilant about protecting your Social Security number, bank account information, and other personal data. Shred sensitive documents and be cautious about sharing information online.
• Don’t Be a “Straw Borrower”: Never agree to apply for a loan or grant on behalf of someone else, especially if you don’t fully understand the purpose or if you are being pressured to do so.
• Verify Information: If you are involved in a business that is applying for government assistance, independently verify all information submitted on the application.
• Report Suspected Fraud: If you have information about potential COVID-19 relief fraud, report it to the Justice Department’s National Center for Disaster Fraud (NCDF) or the SBA’s Office of Inspector General.

For the Government:

• Strengthen Vetting Processes: Implement more robust upfront verification procedures for government relief programs, even in times of crisis.
• Enhance Data Analytics: Continue to invest in data analytics and artificial intelligence to identify and flag potentially fraudulent applications in real-time.
• Improve Interagency Coordination: Foster seamless information sharing and collaboration between different government agencies involved in administering and overseeing relief programs.
• Simplify Regulations: Strive to make program rules and regulations as clear and straightforward as possible to reduce confusion and minimize opportunities for exploitation.
• Increase Transparency: Provide clear and accessible information to the public about the requirements and eligibility criteria for relief programs.
• Increase Penalties: The penalties are high but when the pot of gold is large, even 30 years may not deter certain criminals.

Conclusion

The Casie Hynes case serves as a powerful reminder of the vulnerabilities inherent in large-scale government relief programs and the importance of robust oversight and enforcement. While the vast majority of businesses and individuals used these programs appropriately, the actions of a few fraudsters like Hynes have undermined public trust and diverted crucial resources from those who truly needed them. By understanding the mechanics of these schemes, the legal consequences, and the broader context of COVID-19 relief fraud, we can learn valuable lessons and implement strategies to prevent similar abuses in the future. This is not just about recovering stolen funds; it’s about safeguarding the integrity of government programs and ensuring that aid reaches its intended recipients during times of crisis. The ongoing efforts of the Justice Department’s COVID-19 Fraud Enforcement Task Force are crucial, but prevention through education, vigilance, and strong internal controls is equally vital. This case, and others like it, will shape the future of disaster relief programs, forcing a greater emphasis on balancing speed with security. The long-term goal should be to create systems that are both responsive to urgent needs and resilient to fraud.

For more information on the department’s response to the pandemic, please visit www.justice.gov/coronavirus.

Tips and complains from all sources about potential fraud affecting COVID-19 government relief programs can be reported by visiting the webpage of the Civil Division’s Fraud Section, which can be found here. Anyone with information about allegations of attempted fraud involving COVID-19 can also report it by calling the Justice Department’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint From at www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

Contact

Connor Williams
Public Affairs Officer
connor.williams@usdoj.gov
(213) 894-6965