Henrico man convicted of defrauding U.S. out of $1.1 million in COVID relief funds through defunct firms

A Henrico County man pleaded guilty Wednesday to defrauding the U.S. Small Business Administration out of $1.1 million in COVID-19 relief funds by filing fraudulent applications for Paycheck Protection Program loans on behalf of two non-operational businesses he formed.

Kortney T. Kelley, 45, spent at least $142,711 of the stolen proceeds at various casinos and for gaming purposes, and transferred at least $834,077 in additional funds to his personal brokerage accounts, according to a statement of facts filed by the U.S. Attorney's Office. The scheme was carried out between April 8, 2020, through Aug. 31, 2021.

"The purpose of the scheme was for the defendant to unlawfully enrich himself by obtaining disaster-related benefits in the form of PPP loan proceeds under false and misleading pretenses; [and] submitting false statements, false certifications and forged documents in connection with four separate PPA loan applications to [the Bank of America] and the SBA," wrote Assistant U.S. Attorney Avi Panth in laying out the government's case.

Authorized by Congress through the CARES Act, the PPP is a federal SBA program that provided forgivable loans through participating financial institutions to small businesses for job retention and other expenses during the pandemic.

During a hearing in U.S. District Court in Richmond, Judge David J. Novak convicted Kelley on his guilty plea to wire fraud and set sentencing for May 31. As part of his plea agreement, Kelley will be required to make restitution in the amount of $1,143,224 to the SBA.

Kelley is the third Richmond-area resident to be convicted of stealing more than $1 million in government funds designated to assist businesses and their employees and unemployed Virginians during the pandemic.

Sadie Mitchell, 30, a state employee, was sentenced in September to nearly seven years in prison for using her position to bilk Virginia and the U.S. out of $1.2 million in coronavirus relief funds. Moe Mathews, 51, a local real estate developer and investor, was sentenced in October to 3.4 years for defrauding the SBA and associated financial institutions out of $1.1 million.

In Kelley's case, the government said Kelley filed at least four fraudulent applications for PPP loans on behalf of two defunct companies-Focused Resources LLC and IntelliNest Solutions LLC-which he formed in October 2018 and January 2019, respectively. Neither business had monthly payroll expenses and were operational enterprises. Kelley was the sole owner of both businesses, which were registered Virginia LLCs.

The loan applications Kelley filed contained numerous false statements and certifications. For example, Kelley falsely certified that IntelliNest had more than 140 workers and paid out more than $220,000 in monthly payroll expenses. He also falsely certified that the loan proceeds would be used exclusively for eligible business expenses, federal prosecutors said in their statement of facts.

In an example cited by the government in how the funds were misused, on Feb. 22, 2021 - 10 days after Kelley received a "second draw" PPP loan for IntelliNest-he spent $9,352 of the proceeds at Mardi Gras Casino in Cross Lanes, W.Va. Then on March 2, Kelley transferred $254,377 in PPP loan funds to his personal brokerage account.

Kelley submitted a separate loan forgiveness application in each of his four PPP loan applications, "resulting in the SBA completely discharging the defendant's PPP loan obligations," prosecutors noted in court documents.

In addition to the PPP loan funds, Kelley filed false unemployment insurance claims with the Virginia Employment Commission throughout 2020 and 2021, claiming he was laid off as a sales manager at Focused Resources, a business the defendant solely owned. He claimed he did not apply for or receive any PPP funds.

Lastly, Kelley also submitted a false application through the Economic Injury Disaster Loan program on behalf of IntelliNest, resulting in the SBA disbursing a $10,000 advance to the bank account designated by Kelley.

<!--BC Bold--><strong>Mark Bowes</strong><!--p:BC TAG Body Copy Tagline--> (804) 649-6450<!--p:BC TAG Body Copy Tagline-->[email protected]<!--p:BC TAG Body Copy Tagline-->@RTDMarkBowes on Twitter<!--p:BC TAG Body Copy Tagline-->