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-mj-
FILED.
DATED:
1:51 pm, August 10, 2020
ROBERT ZINK
Chief, Fraud Section
BLAKE GOEBEL
Trial Attorney
U.S. Department of Justice
Criminal Division, Fraud Section
1400 New York Ave. NW
Washington, D.C., 20005
Tel: 202.616.5010
[email protected]
NICHOLAS A. TRUTANICH
United States Attorney
District of Nevada
Nevada Bar Number 13644
JESSICA OLIVA
Assistant United States Attorney
501 Las Vegas Blvd. South, Suite 1100
Las Vegas, Nevada 89101
(702) 388-6268
[email protected]
Attorneys for the United States
U.S. MAGISTRATE JUDGE
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
UNITED STATES OF AMERICA,
Plaintiff,
v.
KAREN CHAPON,
aka “Karen Hannafious,”
Defendant.
Case No. 2:20
2:20-mj-664-BNW
SEALED COMPLAINT for violations of:
Bank Fraud
(18 U.S.C. § 1344(2));
False Statements to a Financial Institution
(18 U.S.C. § 1014)
BEFORE the United States Magistrate Judge, Las Vegas, Nevada, the undersigned
complainant, being first duly sworn, states that:
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COUNT ONE
Bank Fraud
(18 U.S.C. § 1344(2))
From at least in or around April 2020 through at least in or around July 2020, in the
District of Nevada, and elsewhere, defendant
KAREN CHAPON,
aka “Karen Hannafious,”
did knowingly and intentionally execute and attempt to execute a scheme and artifice to
obtain any of the moneys, funds, credits, assets, securities, and other property owned by,
and under the custody or control of, a financial institution, to wit, Bank 2, by means of false
and fraudulent pretenses, representations, and promises.
COUNT TWO
False Statements to a Financial Institution
(18 U.S.C. § 1014)
On or around May 19, 2020 in the District of Nevada, and elsewhere, defendant
KAREN CHAPON,
aka “Karen Hannafious,”
knowingly made a false statement with the intent to influence the actions of a financial
institution, the accounts of which are insured by the Federal Deposit Insurance Corporation
(“FDIC”), to wit, Bank 2.
PROBABLE CAUSE
Complainant, Tom Lydiksen, states the following as and for probable cause:
1. I am a Special Agent (SA) of the Federal Bureau of Investigation (FBI)
currently assigned to the white-collar crime squad in the Las Vegas Field Division. I have
been employed as a SA of the FBI since March 2019. To become an FBI SA, I attended
twenty (20) weeks of training at the FBI Academy in Quantico, Virginia where I was trained
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to investigate violations of United States laws, to collect evidence in cases in which the
United States is, or may be, a party in interest, and to perform other duties imposed by law
as well as other specialized federal law enforcement training. I have investigated violations
of federal statutes governing various types of white-collar crime, including wire fraud, bank
fraud, money laundering, and theft of government and public money. I am familiar with,
and have participated in, the normal methods of investigation, including, but not limited to,
visual surveillance, conducting interviews, drafting and executing seizure warrants,
executing search and arrest warrants, and conducting consensually monitored audio and
video recordings.
2. The following information is based upon, among other things, my review of
records and documents obtained during the course of this investigation, information
conveyed to me orally or via written communication by other employees or agents of the
FBI, agents of the Office of Inspector General of the United States Small Business
Administration (SBA), agents of the Department of the United States Treasury Inspector
General for Tax Administration (TIGTA), and witnesses, and my experience and
background as an FBI SA. Since this Affidavit is being submitted for the limited purpose of
securing a criminal complaint, I have not included each and every fact known to me
concerning this investigation. I set forth only the facts that are necessary to establish
probable cause that violations of 18 U.S.C. § 1344(2) (Bank Fraud) and 18 U.S.C. § 1014
(False Statements to a Financial Institution) have occurred.
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Introduction
3. The government is investigating fraud committed by KAREN CHAPON,
also known as “Karen Hannafious.”
1
There is probable cause to believe KAREN
CHAPON, through her corporate entities Heavenly Tahoe Properties, Desert Sun Events,
and Tahoe Weddings and Events, submitted at least six false and fraudulent applications to
three different banks to obtain loans through the Paycheck Protection Program (PPP)
guaranteed by the Small Business Administration (SBA). In total, KAREN CHAPON
successfully obtained at least four of the loans totaling approximately $596,231.
2
4. The loan applications contained a number of false statements. First, evidence
obtained in the investigation shows that the monthly payroll figures on which the loan
amounts were based were false, and the purported IRS filings supporting the payroll figures
were fraudulent. In support of each of the six loan applications, KAREN CHAPON
submitted purported IRS filings that she represented had been filed for the 2019 tax year on
behalf of the purported companies or herself individually. These filings supported the
monthly payroll figures that KAREN CHAPON submitted in the PPP loan applications by
documenting that her purported companies were generating significant amounts of revenue,
were paying a number of employees, or both. A search of IRS records confirmed that: i) the
IRS has no record of any of the three purported entities filing tax returns for 2019, and ii)
KAREN CHAPON’s individual 2019 federal tax return does not contain the purported
1
Karen Chapon also uses the name Karen Hannafious. “Hannafious” is likely Chapon’s
maiden name, subject to confirmation.
2
As described in more detail below, for one of the four loans Bank 3 issued the $20,000 in
loan proceeds to an account that KAREN CHAPON controlled at Bank 1 on or about May
13, 2020. Bank 1 then closed the account on or about May 28, 2020 with a $19,808.48
closing balance. It later returned $19,808.48 to Bank 3.
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schedules she provided to the banks that she claimed were from her individual return.
Further, publicly available state incorporation records show that while each of the three
entities was legitimately incorporated at one time, none of those corporate registrations are
currently valid.
5. Second, as part of the PPP loan applications, KAREN CHAPON had to
certify that she had not been convicted of a felony or been placed on parole in the last five
(5) years. These certifications were false. KAREN CHAPON pled guilty to several felony
fraud offenses in Nevada state court in 2016 and remained on parole until January 2020.
Finally, the PPP loan applications contained other false statements, including KAREN
CHAPON’s certifications that her entities would only use PPP loan proceeds to “retain
workers and maintain payroll” or to make other payments “as specified under the Paycheck
Protection Program Rule,” and her certification that Desert Sun Events only received one
PPP loan— when it received two.
The Paycheck Protection Program
6. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a
federal law enacted in or around March 2020 and is designed to provide emergency
financial assistance to the millions of Americans who are suffering the economic effects
caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was
the authorization of up to $349 billion in forgivable loans to small businesses for job
retention and certain other expenses, through a program referred to as the PPP. In or
around April 2020, Congress authorized over $300 billion in additional PPP funding.
7. In order to obtain a PPP loan, a qualifying business must submit a PPP loan
application, which is signed by an authorized representative of the business. The PPP loan
application requires the business (through its authorized representative) to acknowledge the
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program rules and make certain affirmative certifications in order to be eligible to obtain the
PPP loan. In the PPP loan application, the small business (through its authorized
representative) must state, among other things, its: (a) average monthly payroll expenses;
and (b) number of employees. These figures are used to calculate the amount of money the
small business is eligible to receive under the PPP. In addition, businesses applying for a
PPP loan must provide documentation showing their payroll expenses.
8. A participating financial institution (the lender) must process a PPP loan
application. If the lender approves a PPP loan application, it funds the PPP loan using its
own monies, which the SBA guarantees 100%. The lender transmits information to the
SBA in the course of processing the loan data from the application, including information
about the borrower, the total amount of the loan, and the listed number of employees. The
SBA oversees the PPP, which has authority over all loans. To date, over 5,000 lending
institutions, mostly banks and credit unions, have participated in the PPP.
9. The business receiving the PPP loan proceeds must spend the funds on certain
permissible expenses: payroll costs, interest on mortgages, rent, and utilities. The PPP
allows the interest and principal on the PPP loan to be entirely forgiven if the business
spends the loan proceeds on these expense items within a designated period of time and uses
a specified portion of the PPP loan proceeds on payroll expenses.
Defendant Karen Chapon
10. KAREN CHAPON is a citizen of the United States and has a California
Driver License issued in November 2019, with a listed address in San Diego, California.
According to information obtained in the investigation, during the relevant conduct in April
through July 2020, KAREN CHAPON was living in San Diego, California, and Las Vegas,
Nevada.
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11. According to records obtained from Douglas County District Court in
Nevada and the State of Nevada Division of Parole and Probation, KAREN CHAPON
pled guilty to three felony counts in Nevada state court in August 2016: one count each of
insurance fraud, mortgage lending fraud, and theft. In January 2017, the court sentenced
KAREN CHAPON to concurrent terms of imprisonment on each of the three counts with
the longest sentence imposed on the theft count: a minimum of twenty-four (24) months and
a maximum of seventy-two (72) months imprisonment. KAREN CHAPON was placed on
parole in April 2019 and was honorably discharged from parole in January 2020.
The Lending Banks
12. Bank 1 is a federally insured financial institution. It is an SBA approved
lender and participates as a PPP lender to small businesses.
13. Bank 2 is a federally insured financial institution. It is an SBA approved
lender, participates as a PPP lender to small businesses, and accepts loan applications
directly, as well as through online portals that allow borrowers to submit a single application
to access loans from a variety of different lenders.
14. Bank 3 is a federally insured financial institution. It is an SBA approved
lender, participates as a PPP lender to small businesses, and accepts loan applications
directly, as well as through online portals that allow borrowers to submit a single application
to access loans from a variety of different lenders.
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The SBA PPP Loans
15. The investigation has revealed evidence that KAREN CHAPON applied for
at least six fraudulent loans on behalf of three entities. She successfully obtained loan
proceeds for four of the applications totaling approximately $596,931
3
:
Business Name
Lending
Bank
Loan Amount
Applied For
Amount
Disbursed
Desert Sun Events
Bank 1
$19,715
$19,715
Desert Sun Events
Bank 2
$19,716
$19,716
Tahoe Weddings
and Events
Bank 3 $20,000 $20,000 May 6, 2020
Heavenly Tahoe
Properties
Heavenly Tahoe
Properties
Tahoe Weddings
and Events
Bank 3
Bank 2
Bank 2
$500,000
$537,500
N/A
$0
$537,500
$0
May 15, 2020
May 19, 2020
June 30, 2020
Bank 1 Account 6121
16. As described in more detail below, the FBI’s investigation has revealed that
KAREN CHAPON directed that the proceeds of three of her entities’ four PPP loans be
deposited into a Bank 1 account (Bank 1 6121) in the name of Desert Sun Events. This
included the proceeds from the two Desert Sun Events loans, as well as the Heavenly Tahoe
Properties Bank 2 loan, totaling approximately $576,931. The FBI obtained records from
Bank 1 for this account, including account opening documentation and monthly account
statements. According to these records, KAREN CHAPON opened Bank 1 6121 on behalf
of Desert Sun Events on or about August 14, 2019. In the account opening documentation,
she listed herself as the “President” of Desert Sun Events and did not list any other officers
or employees. KAREN CHAPON is the only authorized signatory on the account. On
3
As described above in note 2 and below in paragraph 39, it appears that Bank 1 returned
approximately $19,808 of the $20,000 Tahoe Weddings and Events’ Bank 3 loan proceeds
to Bank 3.
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July 13, 2020, the government obtained a civil forfeiture seizure warrant for this account
from the Hon. Brenda N. Weksler, United States Magistrate Judge, in this District.
Pursuant to the warrant, the government seized the approximately $504,385.19 that
remained in the account as of that date.
PPP Loan Applications for Heavenly Tahoe Properties
Heavenly Tahoe Properties Bank 2 Loan Application
17. Starting first with the PPP loan application for Heavenly Tahoe Properties to
Bank 2, the FBI obtained documentation from the bank for this loan. According to the
records provided by Bank 2, on or about May 19, 2020, KAREN CHAPON submitted an
application in support of a $537,500 PPP loan for Heavenly Tahoe Properties. The records
indicate KAREN CHAPON made the application through an online portal, and Bank 2
issued the loan. On the application, KAREN CHAPON identified herself as Karen
“Hannafious,” and stated that “Hannafious” was the 100% owner of Heavenly Tahoe
Properties, listing her social security number (x2386).
18. I know KAREN CHAPON and Karen Hannafious are the same person for a
number of reasons. First, the social security number she listed for Karen Hannafious,
x2386, on the application matches the social security number x2386 listed in other PPP
applications and supporting documentation submitted in the name of “Chapon” described
below. This social security number is the same listed for “Karen Hannafious” in the IRS
records of her 2019 federal tax filing. Further, that tax filing listed the same home address
for Hannafious found on KAREN CHAPON’s California Driver License. Finally, Bank 2
and Bank 1 6121 records show that KAREN CHAPON directed that the proceeds of this
loan be deposited into Bank 1 6121. Since KAREN CHAPON is the sole signatory on that
account, that also confirms that “Chapon” and “Hannafious” are the same person.
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19. Bank 1 6121 records indicate KAREN CHAPON was in the District of
Nevada when she electronically submitted this loan application. The Bank 1 6121 May
2020 account statement shows purchases were made in the District of Nevada on the date
the loan application was submitted as well as several days before and after.
20. In order to obtain the loan from Bank 2, KAREN CHAPON provided the
bank with a substantial amount of fraudulent information. First, in order to support the
requested loan amount of $537,500, she represented Heavenly Tahoe Properties made over
$2.4 million in employee payments in 2019.
4
KAREN CHAPON provided this information
in a purported IRS Form 940 Federal Unemployment Tax Return (IRS Form 940) for 2019
for Heavenly Tahoe Properties that KAREN CHAPON submitted to the bank in support of
the application. The purported IRS Form 940 showed that she signed it on January 6, 2020.
21. A search of IRS records confirmed the IRS has no record of Heavenly Tahoe
Properties filing any tax returns for 2019, including the purported IRS Form 940. In fact,
IRS records show the Heavenly Tahoe Properties’ EIN listed on the purported IRS Form
940 was only issued on or about May 11, 2020, more than four months after the date of
KAREN CHAPON’s signature on the purported filing and just one week before KAREN
CHAPON applied for the PPP loan on behalf of the company. Further, a search of publicly
available corporation records in the State of Nevada showed Heavenly Tahoe Properties
was incorporated in Nevada in 2011 with KAREN CHAPON as the Director, but its
operating status is currently “revoked.”
22. Additionally, at the time of KAREN CHAPON’s PPP loan applications, an
applicant had to certify that the applicant, if an individual, or any owner of the applicant
4
The maximum allowable PPP loan amount is calculated by taking the company’s average
monthly payroll and multiplying that figure by 2.5.
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business had not been convicted of a felony or been placed on parole in the prior 5 years.
As part of the Heavenly Tahoe Properties PPP loan application, KAREN CHAPON falsely
answered “No” to this question, which read: “Within the last five (5) years, for any felony,
has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2)
pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been
placed on any form of parole or probation (including probation before judgment)?” The
application further warned that if that question was answered “Yes,” that “the loan will not
be approved.” As described above, KAREN CHAPON knew this answer was false.
5
The
Nevada state records show KAREN CHAPON pled guilty to several felony fraud offenses
in 2016, was sentenced to several years of imprisonment in 2017, and remained on parole
until January 2020.
23. According to Bank 2’s records on or about May 19, 2020, it approved the PPP
loan for Heavenly Tahoe Properties and issued the loan. Records from Bank 1 show the
PPP loan proceeds of $537,500 were received in Bank 1 6121 on or about May 20, 2020.
Heavenly Tahoe Properties Bank 3 Loan Application
24. The FBI obtained records from Bank 3 for an earlier Heavenly Tahoe
Properties PPP loan application that Bank 3 denied. The records obtained from Bank 3
5
Since the time of KAREN CHAPON’s PPP loan application, the SBA has eased its
restrictions for applicants with criminal histories. For most felonies, the relevant look-back
period for PPP loan disqualification is now 1 year rather than 5 years. The relevant time
period remains 5 years, however, for felonies “involving fraud, bribery, embezzlement, or a
false statement in a loan application or an application for federal financial assistance.”
Business Loan Program Temporary Changes; Paycheck Protection Program—Additional
Revisions to First Interim Final Rule, 85 Fed. Reg. 36,718 (June 18, 2020). Accordingly,
even under the SBA’s revised guidance, KAREN CHAPON and the purported entities she
owned were not eligible for the PPP loans because she was convicted of two felony fraud
offenses within the 5-year time period.
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show KAREN CHAPON submitted two applications for a $500,000 PPP loan on behalf of
Heavenly Tahoe Properties on or about May 15, 2020 approximately seven (7) minutes
apart. She submitted one application in the name of “Karen Hannafious” and the second
application in the name of “Karen Chapon,” and used the same (x2386) social security
number for both.
25. KAREN CHAPON submitted two purported IRS filings to Bank 3 that
appear to be fraudulent. The first appears to be the same purported 2019 IRS Form 940 for
Heavenly Tahoe Properties that she submitted to Bank 2. As described above, a search of
IRS records confirmed the IRS has no record of Heavenly Tahoe Properties filing any tax
returns for 2019, including the purported IRS Form 940. Additionally, KAREN CHAPON
submitted her purported 2019 IRS Schedule C (Form 1040) Profit or Loss from Business
that showed Heavenly Tahoe Properties made over $6 million in revenue in 2019 and over
$900,000 in profit. A search of IRS records confirmed that the IRS does not have any
record of that filing. The IRS does have a record of KAREN CHAPON filing a 2019 IRS
Form 1040 income tax return, but it only listed income of approximately $5,766 from a
rental property. That Form 1040 also did not include a Schedule C.
PPP Loan Applications for Desert Sun Events
Desert Sun Events Bank 1 Loan Application
26. As part of its investigation, the FBI obtained loan documentation for the
Desert Sun Events PPP loan from Bank 1 that show KAREN CHAPON applied for the
loan on behalf of Desert Sun Events using the name “Karen Chapon” on or about April 22,
2020. She listed herself as the authorized representative of the company and in the
supporting documentation provided the same San Diego, California, address listed on her
California Driver License.
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27. The investigation shows that KAREN CHAPON submitted a purported IRS
filing in support of her application that appears to be fraudulent. The purported filing is a
2019 IRS Schedule C (Form 1040) Profit or Loss from Business made by KAREN
CHAPON that showed Desert Sun Events made approximately $295,496 in revenue in
2019 and approximately $94,638 in profit. As discussed above in paragraph 25, a search of
IRS records confirmed that the IRS does not have any record of that filing. The IRS does
have a record of KAREN CHAPON filing a 2019 IRS Form 1040 income tax return, but it
only listed income of approximately $5,766 from a rental property, and did not include a
Schedule C. Further, according to publicly available records obtained from the State of
Wyoming, Desert Sun Events was only established as a Profit Corporation in Wyoming on
or about August 14, 2019 with KAREN CHAPON listed as the “Incorporator.” It was
administratively dissolved on or about November 20, 2019.
28. As part of an addendum to the Desert Sun Events Bank 1 application,
KAREN CHAPON also falsely answered “No” to the criminal history question, which
read: “Within the last 5 years, for any felony, has the Applicant (if an individual) or any
owner of the business; 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4)
been placed on pretrial diversion; or 5) been placed on any form of parole or probation
(including probation before judgment)?” As described above in paragraph 22, KAREN
CHAPON knew that this answer was false.
29. The Bank 1 records show KAREN CHAPON received her PPP loan
proceeds for Desert Sun Events on or about May 4, 2020, in Bank 1 6121. The May 2020
Account Statement for Bank 1 6121 showed on May 4, 2020, Bank 1 6121 received a
$19,715 deposit with the Description: “CARES ACT PAYCHECK PROTECTION
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PROGRAM DEPOSIT.” That amount matched the PPP loan amount for Desert Sun
Events in the records obtained from Bank 1.
Desert Sun Events Bank 2 Loan Application
30. The FBI obtained loan documentation for the Desert Sun Events PPP loan
from Bank 2. As described above, Bank 2 accepts loan applications directly, as well as
through online portals that allow borrowers to submit a single application to access loans
from a variety of different lenders.
31. The records show KAREN CHAPON also applied for this second loan on
behalf of Desert Sun Events using the name “Karen Chapon.” In the application, KAREN
CHAPON listed herself as the “100%” owner of Desert Sun Events and provided the same
San Diego, California, address from her California Driver License. KAREN CHAPON
applied for the loan through an online portal, and Bank 2 ultimately issued the loan.
32. The Bank 2 records show KAREN CHAPON signed this loan application on
May 5, 2020. Importantly, as part of the SBA PPP loan application process, each applicant
must certify that it has not and will not receive another PPP loan during the 2020 calendar
year. For example, KAREN CHAPON certified in this application that: “During the
period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant
has not and will not receive another loan under the Paycheck Protection Program.” Here,
the “Applicant” was Desert Sun Events. The evidence shows KAREN CHAPON knew
this certification to be false because as described above, on May 4, 2020, just the day before
KAREN CHAPON signed this application Desert Sun Events received its disbursement of
$19,715 from the Bank 1 PPP loan to Bank 1 6121.
33. Additionally, Bank 2 records show that KAREN CHAPON submitted her
same purported 2019 IRS Schedule C (Form 1040) Profit or Loss from Business that she
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submitted to Bank 1. As discussed above, this filing showed Desert Sun Events made
approximately $295,496 in revenue in 2019 and appears to be fraudulent.
34. Finally, as part of the application, KAREN CHAPON again answered “No”
to the question: “Within the last 5 years, for any felony, has the Applicant (if an individual)
or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo
contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or
probation (including probation before judgment)?” The application again further warned
that if that question was answered “Yes,” that “the loan will not be approved.” As
described above, the evidence shows KAREN CHAPON knew that this answer was false.
35. The documentation from Bank 2 showed the bank approved the loan and
disbursed the funds to Bank 1 6121. The Bank 1 6121 May 2020 account statement
similarly shows Bank 1 6121 received a deposit of $19,716 on May 7, 2020, corresponding
with this loan.
PPP Loan Applications for Tahoe Weddings and Events
Tahoe Weddings and Events Bank 3 Loan Application
36. The FBI obtained records for a PPP loan for Tahoe Weddings and Events
from Bank 3. The records show KAREN CHAPON applied for this loan on behalf of
Tahoe Weddings and Events using the name “Karen Hannafious” on or about May 5, 2020.
In the application, KAREN CHAPON listed herself as the “100%” owner of Tahoe
Weddings and Events and provided the same San Diego, California, address from her
California Driver License.
37. In support of her application, KAREN CHAPON again submitted a
purported IRS filing that appears to be fraudulent. The purported filing is her 2019 IRS
Schedule C (Form 1040) Profit or Loss from Business that showed Tahoe Weddings and
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Events made approximately $594,741 in revenue in 2019 and approximately $165,967 in
profit. A search of IRS records confirmed that the IRS does not have any record of that
filing. As stated above in paragraph 25, the IRS does have a record of KAREN CHAPON
filing a 2019 IRS Form 1040 income tax return, but it only listed income of approximately
$5,766 from a rental property, and did not include a Schedule C. Further, a search of
publicly available corporation records in the State of Nevada showed Tahoe Weddings and
Events was incorporated in Nevada in 2014 with KAREN CHAPON as the President, but
its operating status is currently “revoked.”
38. Finally, as part of the Tahoe Weddings and Events PPP loan application,
KAREN CHAPON again answered “No” to the criminal history question, which read:
“Within the last five (5) years, for any felony, has the Applicant (if an individual) or any
owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4)
been placed on pretrial diversion; or 5) been placed on any form of parole or probation
(including probation before judgment)?” The application further warned that if that
question was answered “Yes,” that “the loan will not be approved.” As described above in
paragraph 22, KAREN CHAPON knew this answer was false.
39. Bank 3 issued the loan in the amount of $20,000 on or about May 13, 2020.
As part of its investigation, the FBI obtained records from Bank 1 for an account in the
name of Tahoe Weddings and Events (Bank 1 9449). The account opening documentation
showed that KAREN CHAPON opened the account just the day before on May 12, 2020
and is the sole signatory on the account. The Bank 1 9449 May 2020 account statement
shows that after receiving the loan proceeds, KAREN CHAPON made several purchases
before Bank 1 closed the account on or about May 28, 2020 with a $19,808.48 closing
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balance. As part of the FBI’s investigation, it spoke with an employee of Bank 3 who
confirmed that Bank 1 later returned $19,808.48 to Bank 3.
Tahoe Weddings and Events Bank 2 Loan Application
40. Finally, the FBI obtained records from online portal BV for an additional
Tahoe Weddings and Events PPP loan application submitted by KAREN CHAPON, which
was denied. The records obtained from online portal BV show KAREN CHAPON
submitted an application through BV to Bank 2 on or about June 30, 2020 for a PPP loan on
behalf of Tahoe Weddings and Events. She submitted the application in the name of
“Karen Hannafious,” and used the same (x2386) social security number she used on other
filings described in this affidavit. The BV records obtained by the FBI do not show the
specific amount of the PPP loan that KAREN CHAPON requested, but she represented
that Tahoe Weddings and Events’ average monthly payroll was approximately $90,000.
Using the formula on the standard PPP loan application,
6
that monthly payroll figure would
entitle Tahoe Weddings and Events to apply for a maximum loan amount of $225,000.
41. In support of the application, KAREN CHAPON again submitted a
purported IRS filing that appears to be fraudulent. The purported filing was an IRS Form
940 Federal Unemployment Tax Return (IRS Form 940) for 2019 that showed Tahoe
Weddings and Events made slightly more than $1 million in employee payments in 2019.
Importantly, the information in this filing appears to contradict the information in the
purported IRS filing that KAREN CHAPON submitted in support of Tahoe Weddings and
Events’ application to Bank 3 described above. That filing listed the total expenses for the
company in 2019 as approximately $427,274—significantly less than the more than $1
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This formula is: (Average Monthly Payroll x 2.5).
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million in employee payments listed on the purported 2019 IRS Form 940 submitted in
support of this application to Bank 2. Additionally, a search of IRS records confirmed that
the IRS does not have any record of Tahoe Weddings and Events making any tax filings for
2019.
Use of PPP Loan Proceeds
42. As stated above, KAREN CHAPON directed that the proceeds of three of the
loans be deposited into Bank 1 6121 in the name of Desert Sun Events, which she
controlled. KAREN CHAPON is the only authorized signatory on the account.
43. The Bank 1 6121 May 2020 account statement obtained from Bank 1 showed
that as of May 1, 2020, it had a balance of $462.77. Over the course of the month, Bank 1
6121 received the $576,931 in total PPP loan proceeds with the third and final PPP loan
deposit of $537,500 occurring on May 20, 2020. These were the only deposits into Bank 1
6121 that month. During May, approximately $10,133 was withdrawn or spent from the
account. Accordingly, all of these withdrawals except the first $462.77 necessarily came
from the PPP loan proceeds pursuant to the Lowest Intermediate Balance Rule (LIBR)
accounting method.
44. The Bank 1 6121 June 2020 account statement from Bank 1 showed no
additional funds were deposited. Over the course of the month, approximately $61,618 was
withdrawn or spent from the account. These withdrawals also necessarily came from the
PPP loan proceeds pursuant to LIBR. As described above, PPP loan proceeds must be used
by the business on certain permissible expenses—payroll costs, interest on mortgages, rent,
and utilities. To obtain each of the three PPP loans deposited in Bank 1 6121, KAREN
CHAPON certified that the proceeds would only be used for permissible expenses. She
stated specifically in two of those certifications that “[t]he funds will be used to retain
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