The United States government has filed a civil complaint against two brothers from San Diego County, alleging they fraudulently secured over $8 million in pandemic-related loans by providing false information on their applications. The loans were part of the Paycheck Protection Program (PPP), established under the CARES Act to support small businesses during the COVID-19 pandemic.
According to the complaint, Duraid A. Zaia and Kusay Karana obtained four PPP loans between March 25, 2021, and April 28, 2021, for businesses that either did not exist or were significantly misrepresented in size. The allegations include claims that Zaia applied for a loan for "Ramona Egg Ranch," falsely certifying it employed 75 people with annual payroll costs exceeding $9.5 million. However, submitted tax returns indicated much lower payroll costs.
Another application involved "The Duriad A. Zaia Sole Proprietorship," which was claimed to employ 137 people but lacked an Employer Identification Number until March 30, 2021, making it impossible to legally operate in 2020.
The complaint further alleges that both brothers fabricated employee lists to bolster their loan applications. These lists reportedly showed numerous employees working full-time at multiple businesses simultaneously.
After being denied loan forgiveness and defaulting on their loans, the Small Business Administration repaid the lenders, resulting in a loss of over $8.6 million to the United States.
The government asserts that Zaia and Karana violated the False Claims Act (FCA). This legal action follows a private citizen's lawsuit against Zaia and Ramona Egg Ranch under FCA's qui tam provisions.
U.S. Attorney Adam Gordon stated: “COVID-relief programs were designed to help people and businesses under extreme financial stress during the pandemic... My office will continue to pursue those who knowingly cheat taxpayers by abusing the Paycheck Protection Program and other pandemic-related programs.”
Jonathan Huang from SBA OIG’s Western Region emphasized: “Intentional misrepresentation to gain access to SBA program funds intended for the nation’s small businesses will not be tolerated... Our Office will remain relentless in the pursuit of wrongdoers who seek to exploit SBA’s vital economic programs.”
Assistant U.S. Attorney Stephen H. Wong is handling this case for the Southern District of California. Individuals with information about attempted COVID-19 fraud can report it via the Department of Justice’s National Center for Disaster Fraud Hotline or web form.
It is important to note that these allegations are yet to be proven in federal court.