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San Diego Woman Faked Employees to Scam Small Business Loan: Prosecutors

The U.S. Attorney's office said the local business owner even included fake addresses and Social Security numbers in her loan applications

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A San Diego business owner pleaded guilty Tuesday to federal fraud charges for claiming she had employees when she, in fact, had none, in order to obtain a nearly $20,000 loan meant for businesses struggling during the coronavirus pandemic, the U.S. Attorney's Office said.

Nikole Edwards, the founder of Social Savvy Marketing, pleaded guilty to making false statements to the Small Business Administration for falsifying tax records and payroll information to secure a loan under the SBA's Paycheck Protection Program (PPP).

Prosecutors said in April and May 2020, Edwards applied with three different financial institutions to secure tens of thousands of dollars worth of PPP loans. On those applications, she claimed that she had two employees with salaries of $75,000 and $50,000. She even included fake addresses, W-2 forms, and Social Security numbers, the U.S. Attorney's Office said, but the truth was that the employees didn't exist.

Financial institutions use the information a business provides to determine the amount of money the company is eligible to receive under the PPP.

The PPP loan was meant to give small businesses an incentive to keep their employees on the payroll by providing the funds to keep their workforce employed, though it received some criticism for giving large loans to big-name companies.

The SBA forgives loans if certain criteria are met, like using at least 75% of the funds to pay employees. Some argued that the criteria was too difficult to meet amid the ever-changing pandemic.

Despite the false information, Edwards was at first denied one loan. But she convinced the financial institution that the loan "is a lifeline for my employees and my business and we won't survive without it."

She was granted a loan for $19,583.

U.S. Attorney Robert Brewer said Edwards engaged in "outright fraud."

Edwards entered her plea Tuesday in San Diego federal court and is slated to be sentenced Nov. 18. The charge of making false statements to the Small Business Administration carries a maximum penalty of two years imprisonment and a $5,000 fine, according to the U.S. Attorney's Office. She must also pay back all of the loan she was granted.

"The PPP is designed to help struggling businesses meet legitimate payroll obligations, not to enrich sole proprietors engaging in outright fraud," said U.S. Attorney Robert Brewer.  ``We are working diligently with our law enforcement partners to investigate and prosecute those who abuse this critical lifeline for the nation's businesses, workers and economy."

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