Feds: Liberty County duo lived it up in funds scheme
A Liberty County pair faces federal prosecution in Texarkana for a COVID-19 relief scam, allegedly filing hundreds of fake loan applications for customers and pilfering $1.3 million from government coffers.
Clifton Pape and Sally Jung, of My Buddy Loan, then went on a spending spree with their illegal earnings, including a go cart excursion in Conroe and glitzy vacation at a San Antonio resort, according to court documents filed in the Eastern District of Texas.
Pape and Jung, whose business was registered to an address in Houston, are accused of charging applicants more than $1,000 to fill out their paperwork for a $10,000 agricultural grant through the Small Business Administration’s CARES Act funding, aimed at businesses harmed by the coronavirus epidemic. Instead, their loan enterprise created cookie cutter applications for each of the small business applicants that were fraudulent, officials said.
Investigators say the couple filed 222 Economic Injury Disaster Loan applications in June and July for businesses that all happened to have exactly 10 employees — the amount required to unlock the maximum $10,000 through the program. The SBA granted $10,000 advance funds to 130 of those applicants for a total of $1.3 million.
Pape, 45, and Jung, 58, both of Cleveland, are charged with committing a major fraud. A federal magistrate found there was probable cause to proceed. They waived their right to a preliminary
hearing on Jan. 20 and are free on $20,000 unsecured bond.
Attorneys for Pape and Jung did not respond to requests for comment. Pape and Jung also could not be reached for comment Tuesday. Messages left at several numbers under their names were not returned. At a Houston address referenced in court documents, there was no apparent trace of Jung or Pape — or their business. A security guard let a reporter check a digital inventory in the lobby of the building in West Oaks, which did not show any matches.
Personnel with the U.S. Secret Service built their case against the pair after having an undercover official file for an application through their business.
Investigators pulled bank records and matched them to an Aug. 1, 2020, photograph from Pape's Google records that showed him with Jung wearing bracelets from La Cantera Resort, according to court documents. Four days later, Pape is accused of spending $3,696.77 he collected from applicants for fraudulent COVID relief funds at La Cantera Resort in San Antonio.
Former U.S. Attorney Stephen J. Cox, who stepped down from his post last week, said in a statement this month that the case should prompt the public and banking community to remain vigilant for fraud as another round of COVID relief begins.
“At a time when small businesses—the engines of our economy in East Texas—most needed the help that the Small Business Administration was rushing to provide, these individuals took advantage of members of the public, depleting the available resources for small businesses and lining their own pockets with fraudulent gain,” he said. “It is a priority of the Department of Justice to deter and prosecute this type of fraud.”
Sharon Johnson, special agent in charge for the loan program for the central region of the Business Administration’s Office of the Inspector General, said her agency is on the lookout for fraudsters: “Those responsible for committing fraud against SBA for personal gain will be identified and brought to justice.”