Former Virginia state employee gets 6-plus years for swindling $1.2 million in COVID relief funds

A former state employee who used her position to defraud Virginia and the U.S. out of $1.2 million in COVID-19 relief funds was sentenced Tuesday to nearly 7 years in prison. Sadie Mitchell submitted bogus applications using the identities of state prison inmates and exploited the personal information of Virginians she obtained from a government database.

Mitchell, 30, and a co-conspirator identified in court Tuesday as Lamar Jones, 31 — who was fatally shot in Shockoe Bottom in December — used the diverted funds to line their own pockets. Mitchell used a portion to buy luxury goods that included gold and diamonds for herself, federal prosecutors said.

"It is striking and egregious that the defendant indulged in luxuries with the fraud proceeds, while unemployed workers and their families suffered and struggled during the pandemic," Assistant U.S. Attorney Kashan Pathan said. "By looting the unemployment program, the defendant stole funds from those who needed it most during the pandemic."

Pathan noted that Mitchell had attempted to steal $1.8 million, and that she "reaffirmed" the fraud 200 times monthly by re-certifying each week the 50 bogus unemployment claims she filed.

"It became a routine, normal part of her life," Pathan told the court.

Following a two-hour sentencing hearing in U.S. District Court in Richmond, Judge M. Hannah Lauck sentenced Mitchell to 70 months in prison on her earlier guilty pleas to conspiracy to commit mail fraud and wire fraud. The judge noted that Mitchell's actions over 15 months resulted in one of the largest COVID fraud cases in Virginia in terms of total funds diverted.

The punishment was at the low end of discretionary sentencing guidelines, which for Mitchell was calculated at a range of 70 to 87 months. Her attorney, Edwin Brooks, sought a significant downward departure of 36 months.

Brooks argued that Jones, Mitchell's boyfriend, received the bulk of the stolen funds and "she couldn't really escape the person who came up with the scheme" during the pandemic lock down — which triggered mental health problems for his client. "If not for Jones, she would not have been involved," he said.

But Lauck responded that Mitchell's role was an important one, and "this wouldn't have been possible if your client didn't participate."

In addition, the judge told Mitchell that she couldn't giver her credit for "being undone" by the pandemic, "because that was the source of your crime."

Prosecutors noted that Mitchell not only used the personal identifying information of state inmates to file at least 20 fraudulent unemployment claims, but also accessed a government database and used similar information "of unsuspecting and unaware identity theft victims" to file at least 30 additional bogus claims.

At the time, Mitchell was a program support technician with the Virginia Motor Vehicle Dealer Board earning $39,864 annually. Her employment gave her to access a government database that she exploited, prosecutors said.

"Instead of safeguarding the sensitive and confidential information she had access to by virtue of her employment, the defendant monetized this information to defraud the VEC and to enrich herself and her co-conspirator," Pathan said.

During a 15-month period, they obtained $1,278,636 in pandemic unemployment insurance, unemployment insurance, paycheck loan fund and economic injury disaster loan payments in two separate fraud schemes that ran from May 19, 2020, to Aug. 9, 2021, according to federal prosecutors' summary of evidence.

The conspiracy involved Mitchell's accomplice obtaining the names, dates of birth and social security numbers of inmates serving sentences at state prisons. Mitchell then used that information to electronically file at least 20 fraudulent claims.

The applications listed a physical address rather than the state prison at which the inmates were housed and included a bogus "last employer" since the inmates were incarcerated and not employed. The VEC would then mail "Way 2 Go" debit cards loaded with benefit funds to the addresses listed by Mitchell in the applications. In some cases, Mitchell and her accomplice requested the benefits be directly deposited into bank accounts they controlled.

On a weekly basis, Mitchell and her accomplice would submit recertifications for unemployment status, resulting in VEC disbursing additional funds.

In addition, after Mitchell and her accomplice obtained the names of Virginians from the government database, Mitchell would query the database for the dates of birth and social security numbers for those individuals, and then use that information to electronically submit at least 30 false and misleading applications.

Prosecutors said the vast majority of those individuals had no knowledge that their personal identifying information had been compromised and used by Mitchell and Jones.

In addition to pandemic-related unemployment assistance, Mitchell and Jones filed five fraudulent applications for money through the federal Paycheck Protection Program, a Small Business Administration initiative that provided forgivable loans through participating financial institutions to small businesses for job retention and other expenses.

Mitchell submitted three applications for businesses that she claimed she owned and operated, and two more that Mitchell claimed were owned and operated by other people.

Lastly, Mitchell submitted six applications for federal Economic Injury Disaster Loans for businesses she claimed to own and operate, and two additional applications for businesses purportedly owned by Jones.

As part of her plea agreement, Mitchell is required to make restitution to the VEC in the amount of $1,158,674; to the Small Business Administration in the amount of $64,166; and to Prestamos CDFI, LLC, a financial institution in Phoenix, Arizona, in the amount of $55,796.

Judge Lauck had earlier granted a defense motion to seal Mitchell's sentencing position filed by her attorney because it contained "sensitive personal matters regarding Ms. Mitchell that are not in the public domain." Making those details public "would make Ms. Mitchell's difficult situation even worse," Brooks wrote.

Prosecutors noted in court papers that Mitchell, who is the mother of two young girls, ages 4 and 9, experienced a "harsh and difficult upbringing" in Church Hill in a neighborhood with "an abundance of crime." She was abused as a child and left home at age 15.

She has suffered from depression and anxiety since 2019 and has been undergoing individual mental health counseling.

When given a chance to speak, Mitchell apologized for her crimes, saying she had no father figure in her life. And in a reference to Jones, said, "My significant other clouded my judgment."