An employee of the National Aeronautics and Space Administration (NASA) pleaded guilty to using COVID relief designed for small businesses to fund an illegal cannabis operation.
A NASA-Jet Propulsion Laboratory (JPL) employee agreed to plead guilty to defrauding a government loan program developed during the COVID-19 pandemic. He admitted that he used part of the proceeds to fund an illegal cannabis grow operation, the Justice Department announced on July 24.
“Armen Hovanesian, 32, of Glendale, a cost-control and budget-planning resource analyst for the JPL, a federally funded research and development center operated by the California Institute of Technology for NASA, agreed to plead guilty to a single-count information charging him with wire fraud,” the Justice department wrote. “Both the information and a plea agreement were filed Thursday in United States District Court. Hovanesian is expected to make his initial court appearance on August 11.”
Per the plea agreement, between June 2020 to October 2020, Hovanesian applied for three loans, using the names of business entities under his control to the Economic Injury Disaster Loan Program (EIDL), a program administered by the Small Business Administration (SBA) that provided low-interest financing to small businesses, renters, and homeowners, in this case, for businesses impacted by the COVID-19 pandemic.
“Hovanesian admitted to making false and fraudulent statements in the loan applications concerning the gross revenues each of the businesses had generated in the preceding year as well as false and fraudulent statements concerning his intended use of loan proceeds.”
The SBA requires—under penalty of perjury—that grantees “use all the proceeds” of the loans for which he applied and caused others to apply for “solely as working capital to alleviate economic injury caused by disaster” consistent with the terms and limitations of the EIDL program.
But instead of using it for COVID relief, Hovanesian used the proceeds for his own benefit, repaying a personal real-estate debt and funding his illegal cannabis cultivation operation.
The Justice Department says Hovanesian fraudulently used the SBA to transfer via interstate wire EIDL proceeds amounting to $151,900.
The punishment is serious: After Hovanesian pleads guilty, he will face a statutory maximum sentence of 20 years in federal prison.
Fraudsters Take Advantage of COVID Relief
Abusing COVID relief funding is commonplace. To combat this, the United States Attorney General established the COVID-19 Fraud Enforcement Task Force in May 2021, and hundreds of alleged criminals have been charged as part of the task force’s work.
COVID relief programs including SBA funding and Paycheck Protection Program, or PPP, were commonly abused. COVID relief loan schemes dominated the years following the pandemic.
Justice Department Inspector General Michael Horowitz, who oversees COVID relief spending, told NBC anchor Lester Holt that COVID relief programs were structured in ways that made them especially easy to take advantage of, and businesspeople were caught buying expensive sports cars and other luxuries using the money.
“The Small Business Administration, in sending that money out, basically said to people, ‘Apply and sign and tell us that you’re really entitled to the money,’” said Horowitz, the chair of the Pandemic Response Accountability Committee. “And, of course, for fraudsters, that’s an invitation. … What didn’t happen was even minimal checks to make sure that the money was getting to the right people at the right time.”
“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney. “It is the biggest fraud in a generation.”