Conway woman given probation for federal fraud

She must repay over $40,000 in pandemic paycheck money

“Cynthia was tempted by the financial security she had never experienced before.” — Abigail Obana, Banks’ attorney

A Faulkner County woman who admitted to defrauding two lenders out of more than $40,000 in Paycheck Protection Plan money during the covid-19 pandemic was sentenced to serve three years’ probation — with the first four months to be served on home detention — and to repay the funds to the Small Business Administration.

Cynthia Banks, 44, of Conway, was indicted on July 6, 2022, by a federal grand jury in Little Rock on two counts of wire fraud after an investigation revealed that she had submitted two applications seeking funds from the Paycheck Protection Program, an SBA-back forgivable loan program implemented during the global pandemic as part of the CARES Act to assist small businesses in keeping their employees on the job during the economic upheaval that resulted from covid-related shutdowns. She pleaded guilty last April to one count of wire fraud in exchange for the dismissal of the other count.

Banks admitted to prosecutors that she had applied for two loans for $20,693 each from two lenders — Harvest Small Business Finance LLC of Laguna Hills, Calif., and Benworth Capital Partners of Miami — by fraudulently claiming she owned a hair styling and braiding business. The two lenders, court documents said, relied on false statements from Banks regarding the existence of the business, prior gross receipts and other false information that resulted in the funds being deposited into Banks’ bank account that she later admitted to using for personal expenses.

In court Thursday before Chief U.S. District Judge Kristine G. Baker, Banks’ attorney, Assistant Federal Public Defender Abigail Obana, asked the judge to sentence Banks to a term of probation with no restrictions due to her client’s lack of criminal history, remorse for the crime and the circumstances that led up to it. In a sentencing memorandum filed Tuesday, Obana said that Banks, who separated from her husband in 2015 over the couple’s drug use, began working at Walmart and was getting back on her feet when the pandemic began.

The document said in 2020, Banks was told by a friend that she could get “some quick money” to help pay bills, take care of her family — including a daughter who is now 16 — and attend a cousin’s wedding.

“Cynthia was tempted by the financial security she had never experienced before,” Obana said in the memorandum.

In court on Thursday, Obana noted that Banks had brought a money order for $1,600 as partial payment of her restitution of $41,386 to the SBA.

Under U.S. sentencing statutes, the maximum penalty for Banks’ offense is 20 years in prison, a $250,000 fine and up to three years on supervised release.

Under U.S. sentencing guidelines, Banks faced a range of punishment from 4 to 10 months imprisonment, 1 to 3 years on supervised release and a fine ranging from $2,000 to $20,000. Baker said under the guidelines, Banks was also eligible for a term of probation ranging from 1 to 5 years to be accompanied by a fine, restitution or community service.

Assistant U.S. Attorney Amanda Jegley objected strenuously to a probationary sentence, arguing that the guidelines had taken all factors into consideration and that to deter others from similar behavior would require a more severe sentence than probation.

“The guidelines provide an adequate way to punish this case and to achieve justice,” Jegley said. “To put it simply, Ms. Banks saw an opportunity for easy money. She was employed … she was able to make ends meet but like a lot of Americans at the time, it was difficult but that was not unusual.”

An appropriate thing to do during that time, Jegley said, “was not to make false assertions to the federal government for a PPP loan.”

“Not only did she do it once,” Jegley said, “she did it twice and she received a significant amount of money.”

According to the SBA, over the course of the pandemic, approximately $1.2 trillion was pumped into the economy through the Paycheck Protection Program and a companion program — the Economic Injury Disaster Loan program — and that to swiftly disburse the funds, oversight controls that would have created delays were weakened. But, according to the SBA website, “the allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters,” resulting in an estimated $200 billion in losses, of which only about $30 billion had been recovered by last July.

After considering the matter during a brief recess, Baker told Banks that there had to be consequences for such an offense. Although she stopped short of sentencing Banks to prison, she did order her to spend the first four months of the three-year probation sentence on home detention, which requires Banks to remain at home except to go to work, to the doctor, to consult with her attorney, or other activities approved by the U.S. Probation Office.

“Everybody’s world fell apart during covid, right?” Baker said. “So the government enacted these programs to assist people who really needed assistance. If you applied and didn’t really need assistance that sets just a bad tone for ever doing something like that again.”

Baker also ordered Banks to pay the restitution at the rate of 10% of her gross monthly income until the judgment is satisfied.