COVID Feature: The Wages of Fraud is Prison

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Raymond Magana, 40, of Santa Clarita, Ca., pleaded guilty to one count of fraud in connection with major disaster or emergency benefits. Magana admitted that he fraudulently obtained more than $1 million in Paycheck Protection Program (PPP) loans by submitting fake tax documents and fraudulent employee information for companies that did not exist. Steven R. Goldstein, 36, also pleaded guilty to fraud in connection with major disaster or emergency benefits. (It turns out that Goldstein and Magana were partners in crime.)

In May and June 2020, Magana submitted a fraudulent PPP loan application to Customer’s Bank in California. The application was for $940,416 in funds for The Building Circle LLC, which was registered in Magana’s name. (Actually, his “business” was a 980-square-foot, single-family home.) Magana falsely claimed that the company employed 40 workers and had a monthly payroll of $376,167.   

Magana admitted that he submitted fraudulent tax documents with his application to further his illegal scheme. The bogus tax documents reported $4,402,000 in annual wages paid to 40 employees in 2019 and $852,000 in employee wages paid during the first quarter of 2020. (The only wages Magana was trying to pay was for himself, and perhaps his shady business partner.)

The loan application for The Building Circle was approved in June 2020. Subsequently, $940,416 was transferred to Magana’s shell company. Shortly after receiving the first loan, Magana applied for and received a second PPP loan of $360,415 for Forward Builders LLC. He obtained this loan by also using fake tax documents and falsely claiming $1.73 million in employee wages. (Otherwise known as a “rinse and repeat” scheme.)  

Customer’s Bank placed a hold on one of Magana’s business accounts after it was flagged for suspicious activity. (They got that right. Very suspicious indeed.) The hold prevented Magana from accessing the remaining $940,416 in the bank account. (Unfortunately, he had already withdrawn or spent $360,415 of the fraudulently obtained loans.)

When sentenced in May 2021, Magana faces a maximum of 30 years in federal prison. Business partner Goldstein is scheduled for sentencing on March 30, 2021.

Today’s Fraud of the Day comes from a Department of Justice press release, “Santa Clarita Man Pleads Guilty to Fraudulently Obtaining Over $1 Million in COVID-19 Relief PPP Loans for His Sham Companies,” dated January 26, 2021.

LOS ANGELES – A Santa Clarita Valley man pleaded guilty today to a federal criminal charge that he fraudulently obtained more than $1 million in Paycheck Protection Program (PPP) loans for his sham companies by submitting fake tax documents and fraudulent employee information.

Raymond Magana, 40, of Santa Clarita, pleaded guilty to one count of fraud in connection with major disaster or emergency benefits.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.