A Chili man received $277,500 in loans through the Paycheck Protect Program by claiming he had employees to help when he was the sole employee, according to the United States Attorney’s Office.
Michael Rech, 49, applied for and received three separate loans between April 2020 and February for his nonprofit Guardian of Humanity Inc. and Eclipse LLC. In each instance, Rech, who is charged with wire fraud and money laundering, claimed he was paying wages to employees to qualify for the PPP loans. But investigators learned he didn’t have any employees.
“Once he received the loans, the defendant took the money out of the bank in amounts less than $10,000 to avoid federal reporting requirements,” prosecutors said.
According to its website, Guardian of Humanity existsto “protect human and civil rights; advocate for the vulnerable; inspire and empower humanity.” It doesn’t indicate how it actually helps people, however. The resource center section of the website states, “Page currently being developed. Will include useful links, resources, library, and news feed.”
Rech applied for the loans through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted into federal law on March 29, 2020. It was designed to help small businesses retain employees and pay other expenses through forgivable loans.
The loans have an interest rate of 1%. They are forgivable if a certain percentage is spent on payroll, interest on mortgages, rent, and utilities.
“Rech misrepresented the number of employees, amount of payroll, and ownership and/or management on the applications,” according to an affidavit filed by Internal Revenue Service Criminal Investigations special agent Alan Roth.
Rech allegedly obtained two PPP loans for Guardian and Eclipse in April 2020 for $127,500. A third loan for $150,000 was disbursed on Feb. 18, 2021.
Records indicated, through Guardian, Rech falsely claimed on the PPP loan application that his monthly payroll expenses were $60,000. Investigators determined that claim was untrue.
On his 2019 federal income tax return, Rech claimed $0 in wages, tips, and salary, Roth wrote in the affidavit.
Roth concluded, “The fact that Rech immediately withdrew the entire amount of the PPP loan proceeds in cash further supports your affiant’s belief that Guardian is a non-operational company and Rech obtained the PPP loan proceeds under false pretenses.”
After the indictment was unsealed Friday, Rech made an initial appearance in U.S. District Court in Rochester in front of Magistrate Judge Marian W. Payson and was released on conditions.
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