In the three-year COVID-19 pandemic that started in 2020, the U.S. federal government distributed a significant amount of relief funds to help struggling small businesses. Recently, a disbarred former lawyer was sentenced to 9 years in prison for orchestrating a scheme to defraud the U.S. Small Business Administration (SBA) of up to $1.4 million.
According to the Southern District of New York’s federal prosecutor’s office, 45-year-old former lawyer Douglas Raymond Arntsen of Staten Island planned a scheme between June and August 2020. He submitted fraudulent applications for federal Economic Injury Disaster Loans (EIDL), successfully deceiving the U.S. government into providing over $1.4 million in relief funds. Some accomplices trusted him due to Arntsen’s previous lawyer status, although he had already been disbarred.
Arntsen requested his associates to provide personal information, including social security numbers and driver’s license numbers, which he used to submit fraudulent loan applications for the EIDL program.
The applications Arntsen submitted falsely claimed that the applicants owned businesses with substantial income, when in fact, the individuals named as business owners often had no legitimate connection to the businesses. After submitting the loan applications, Arntsen instructed his associates to lie to the SBA during the loan investigation process.
Arntsen also instructed his co-conspirators to recruit more people for his fraudulent scheme. When one accomplice successfully obtained a fraudulent loan, Arntsen directed them to “find another person.” The accomplice then provided Arntsen with a relative’s personal information, which was used to secure another fraudulent loan.
Arntsen and his accomplices collectively obtained at least $1.4 million in fraudulent loans and attempted to obtain additional loans totaling hundreds of thousands of dollars from the SBA, which were ultimately denied. After one fraudulent loan was approved by the SBA, Arntsen texted an associate summarizing, “Now need to know how to get the check, your tank arrived this morning.”
Arntsen had a prior criminal record dating back to 2012 when he was convicted for embezzling over $10 million in client funds while working for Crowell & Moring, resulting in a sentence of 4 to 12 years in prison. His law license was revoked, and he was terminated by the company.
Arntsen had earlier pleaded guilty to U.S. District Judge P. Kevin Castel, who sentenced him to 9 years in prison on May 21. In addition to the prison term, he was ordered to serve three years of supervised release, pay restitution of $1,432,000, and forfeit an equal amount in fines.
“Arntsen is a repeat offender fraudster who had his law license revoked, exploiting the national state of emergency for personal gain,” said U.S. Attorney for the Southern District of New York Damian Williams in a statement. “Thanks to the hard work of this office and our law enforcement partners, Arntsen is being held accountable for his fraudulent actions.”