MOBILE, Ala. – The recent federal charges against a half-dozen people in an alleged $1 million fraud scheme involving COVID relief funds are part of an increase in corruption prosecutions in the United States within the past six months, a Syracuse University analysis reports.
The U.S. District Court for the Southern District of Alabama is credited with having the third most federal corruption prosecutions on a per capita basis during the first six months of fiscal year 2021 starting on October 1, according to an report from the Transactional Records Access Clearinghouse (TRAC) at Syracuse University. Only federal courthouses in Washington, D.C., and the East District of Louisiana ranked higher.
Six prosecutions arose from a single case investigated by the U.S. Small Business Administration and was the sole contributor to the increase in Mobile. All six individuals involved have entered into plea agreements with the federal government and are awaiting to be sentenced.
The case involved multiple offenses from a former SBA contact employee who was indicted in January on charges of bilking taxpayers by heading up a scheme in which he used his position to help friends and relatives to obtain fraudulent loans through the Coronavirus, Aid, Relief, and Economic Security (CARES) Act.
Assistant U.S. Attorney George Martin, deputy chief of the criminal division, said the overall fraud was “just shy of $1 million.” All six defendants will be sentenced this summer.
According to court documents the conspiracy was led by Karderrius Phelion, who began his job with the SBA on May 9, 2020, as an assistant with the government’s small business loan program intended to provide relief to small businesses affected by the COVID-19 pandemic.
From the time he was hired to August 2020, Phelion utilized his knowledge of the SBA’s Economic Injury Disaster Loan (EIDL) program to coach friends and family how to obtain SBA funds through false and fraudulent load applications, according to a plea agreement filed in March. Phelion used his position as a loan specialist and an official SBA email to access SBA information and send communications about false loan applications that were submitted by family and friends, court records show.
Five other defendants also pleaded guilty.
Phelion began the job May 9. 2020 as a loan specialist with the SBA as part of the agency’s small business loan programs intended to provide relief to small businesses adversely impacted by the COVID- l9 pandemic, according to his plea agreement. Phelion worked remotely from an apartment in Mobile. In some instances, Phelion and other defendants created fake businesses or charitable organizations to funnel SBA money into accounts.
An attorney for Phelion had not responded to an email from AL.com requesting comment prior to publication of this story.
The six plea agreements in Mobile were among the 236 new official corruption prosecutions the Department of Justice showed for the first six months of the fiscal year. If the activity continues at the same pace, according to the TRAC report, the annual total prosecutions will be at 472 for the fiscal year, representing a 38% increase over last fiscal year when the overall prosecutions totaled 342.
Official corruption prosecution include bribery, graft, conflicts of interest and other violations by federal, state and local officials and law enforcement personnel.
As a TRAC report noted, the increase in prosecutions “does not necessarily imply” that public corruption is increasing. The report says there are no reliable figures on the extent of public corruption across the country. But as the report shows, there has been an increase in investigations that have been “referred to and acted upon by federal prosecutors” since during the Trump Administration, when federal prosecutions reached their lowest levels. There was an exacerbated decline of prosecutions during the last fiscal year because of the coronavirus pandemic, TRAC reports.
The high-water mark in federal-type corruption cases peaked in fiscal year 1998. They have fallen ever since though the number of state and local corruption cases have held relatively steady.
