A North Carolina business owner pleaded guilty in a Western District of New York federal case involving false pandemic tax-credit and loan applications.
The plea covers false, fictitious or fraudulent claims against the government, a charge carrying a maximum of five years in prison and a $250,000 fine, according to the U.S. Attorney's Office.
Kareem Highsmith, 51, of Charlotte, pleaded guilty before U.S. Magistrate Judge Michael Roemer, U.S. Attorney Michael DiGiacomo announced.
Prosecutors said Highsmith sought money through employee tax credits and federal pandemic business-loan programs, including claims for a company that had no business operations or employees during the period covered by its first filing.
The Employee Retention Credit, established under the CARES Act, offered eligible employers a refundable credit for qualified employee wages. A separate paid sick and family leave credit applied to qualifying businesses with fewer than 500 employees whose workers needed leave for covered health or family reasons.
On July 3, 2022, Highsmith filed an amended employer tax return for CMK Transportation and Delivery Service LLC, a business he owned, for the quarter ending June 30, 2020.
That Form 941 claimed four employees and requested $84,395.96, prosecutors said. The IRS paid $77,743.97, although the business had no operations or employees during that quarter, according to the U.S. Attorney's Office.
Highsmith filed 10 additional Forms 941 for quarters running from Sept. 30, 2020, through Dec. 31, 2022, claiming three or four employees, prosecutors said.
Those filings requested $799,623.15 and resulted in payments of $324,636.81, according to the release.
Prosecutors also said Highsmith helped other people file false Forms 941 requesting $2,452,360.19. Those claims generated $603,572.21 in payments, and Highsmith received $78,700 in fees for his assistance.
From May 8, 2020, through Dec. 28, 2021, Highsmith submitted three Paycheck Protection Program applications and four Economic Injury Disaster Loan applications containing false information about employees, revenue and cost of goods sold, prosecutors said.
Those applications sought $443,672.57 and generated $197,839.57 in payments, according to the U.S. Attorney's Office.
Prosecutors valued the overall fraud at $3,780,051.87, while itemizing requests and actual payments separately.
The case was prosecuted by Assistant U.S. Attorney Douglas Penrose following an IRS Criminal Investigation inquiry led by Special Agent in Charge Harry Chavis.
A sentencing date will be set later.
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