NAPLES, Fla. – A Naples property management company accused in lawsuits of a multimillion-dollar embezzlement scheme may have violated federal law when it applied for $245,000 in federal COVID-19 relief funds, according to legal experts.
American Property Management Services (APMS) allegedly swiped more than $200,000 from Naples’ Eagle Creek community association in fall 2019, according to a complaint the association would later file with state regulators in October 2020. But when APMS sought a loan from the Paycheck Protection Program in April 2020, the application required it to certify that it was not “engaged in any activity that is illegal under federal, state or local law.”
That certification means federal authorities can prosecute companies if they were involved in criminal activity when they applied for a PPP loan, even if – like APMS – they weren’t under investigation at the time, said attorney Jonathan E. Green, a partner at the multinational law firm Arnold & Porter who has tracked cases of fraud in the relief program.
“That’s exactly the type of false certification that could be prosecuted as PPP fraud,” Green said in an interview.
APMS’s loan application was approved on April 15, 2020, and the loan was forgiven in November of that year. An attorney for APMS did not respond to a request for comment.
The company repaid the funds it allegedly took from Eagle Creek and settled with the state Department of Business and Professional Regulation for a $1,000 fine in June 2021, without admitting guilt. APMS has still not paid that fine.
And that was not the end of APMS’s legal problems.
In January, dozens of community associations in Lee and Collier counties sued APMS, accusing the firm of hijacking their bank accounts. The HOAs’ lawyer, Jason Mikes, said last week that APMS took at least $8 million from his clients, based on bank records obtained during the civil suit. The property firm has denied the allegations in legal filings.
The Commodore Club condo association filed a separate $100,000 suit claiming APMS owners Orlando Miserandino Ortiz and Lina Posada facilitated fraud, breach of contract and embezzlement at that community – allegations the company has also denied. A letter to Commodore Club residents provided to this news organization claimed APMS concealed its embezzlement by providing forged bank statements to the community’s board.
“We are in communication with the Secret Service and local authorities,” the letter said. “We are not alone.”
The Secret Service is one of several federal agencies that have investigated PPP fraud cases, Green said, though the focus of their inquiry into APMS is unknown. A spokesperson for the Secret Service said the agency does not comment on the existence or absence of specific investigations.
No criminal charges have been brought against APMS or its owners.
PPP fraud investigators look at firms of all sizes
While federal prosecutors have focused on large-scale fraud, they have also gone after smaller fish. In September 2021, the Department of Justice charged Brighton, Mass., spa owner Aticha Jittaphol with lying on applications for $5,066 in PPP loans and $2,000 in other pandemic relief funds. Her crime, according to prosecutors, was that she made a false statement on her application by certifying that her business was not involved in illegal activity, when it was actually a front for prostitution.
The charge carries a maximum penalty of five years in federal prison. Jittaphol has agreed to plead guilty, serve 36 months of probation and pay back the money, and is scheduled to be formally sentenced in June.
PPP fraud claims in SW Florida
Southwest Florida business owners charged with PPP fraud include a Lehigh Acres couple who allegedly used the funds to buy a home in North Carolina and Fort Myers roofer Casey Crowther, who was sentenced to 37 months in prison.
Amber and Anthony Bruey, the Lehigh Acres couple, pleaded guilty but have not yet been sentenced. Crowther was found guilty at trial but has appealed his conviction, arguing in a court filing that he used the PPP money properly.
Nick Schwellenbach, a senior investigator with the Washington, D.C.-based government accountability nonprofit Project on Government Oversight, said the allegations against APMS should prompt the federal government to review its loan.
“This is sort of the problem when people aren’t truthful and there is no verification on the front end of the process,” Schwellenbach said. “The [Small Business Administration] and its Office of Inspector General should say, ‘Hey, this looks like a red flag. Maybe we should look at this loan recipient more carefully now.’”
In April 2020, the Small Business Administration launched the PPP program following the passage of the Coronavirus Aid, Relief, and Economic Security Act. The program was designed to help businesses stay afloat during the early stages of the pandemic by offering forgivable loans to cover payroll costs.
The federal government automatically audits only those PPP loans that top $2 million but has the right to audit any loan to make sure it was obtained legally. The program relied largely on self-certification by businesses to determine eligibility, Schwellenbach said, meaning that many small loans have not been well vetted.
Companies were not required to keep employees on staff after the loan terms ended, meaning that APMS’s closure this year would not have violated the program’s rules, Schwellenbach said.
The Naples Daily News / The News-Press has filed a Freedom of Information Act request with the federal Small Business Administration for records of APMS’s loan application but has not yet heard back.
$76 billion in PPP loans could be fraud
Researchers at the University of Texas at Austin estimated in an August 2021 paper that 15% of loans given during PPP’s first 13 months – totaling $76 billion – showed indicators of potential fraud. Samuel Kruger, an assistant professor of finance at UT Austin and one of the paper’s co-authors, said the need for an emergency response to the economic damage of the pandemic gave scammers an opportunity to exploit.
“The original PPP, the very first round in April 2020, was inspired by a really panicked state of the economy,” Kruger said in an interview. “Trying to get money out as quick as possible.”
© 2022 Journal Media Group. Breaking news reporter Michael Braun contributed to this report.