Manhattan man’s PPP scheme defrauded Wichita bank of $127K in business COVID aid: Feds

Federal prosecutors say a Manhattan man defrauded a Wichita bank of $127,100 in COVID-19 aid meant to help small businesses affected by the pandemic.

The man allegedly lied on his Paycheck Protection Program application, claiming his business had 15 employees. In reality, the company had zero.

Clifford Townsend is charged in U.S. District Court in Topeka with two counts of bank fraud, two counts of making a false statement to a federally insured bank and two counts of money laundering.

If convicted, each bank fraud and false statement charge carries a maximum penalty of 30 years in prison and a fine of up to $1 million. The money laundering charges have maximum penalties of up to 20 years in prison and fines of up to $250,000.

The grand jury indictment was filed April 28. In it, the U.S. Attorney’s Office states that Townsend, a resident of Manhattan, is the registered agent and CEO of Global Network Corp.

Business records from the Kansas Secretary of State’s office show Townsend incorporated the business in May 2019, using a Hays address as the registered office. He listed himself as the sole owner, using a Manhattan apartment unit as his mailing address.

The business never filed an annual report and was thus listed as forfeited in October 2020.

The Small Business Administration of the U.S. government provided COVID-19 aid under the CARES Act by offering forgivable loans through the Paycheck Protection Program. Also known as PPP loans, the financial assistance was intended to be used for job retention and certain other expenses during the coronavirus pandemic.

Businesses were required to list their number of employees and average monthly payroll expenses, among other details, on their applications. Lenders funded approved PPP loans using their own funds, which were then guaranteed by the SBA.

The standard PPP calculation was 2.5 times the average 2019 monthly payroll costs.

Prosecutors said that in his loan application with a Wichita-based bank, Townsend claimed the business had 15 employees and an average monthly payroll of $50,857. FederalPay PPP records show Global Network Corporation was listed in the janitorial services industry with a $127,100 loan through Intrust Bank, retaining 15 jobs.

It was all a lie, prosecutors claim. In fact, Global Network Corporation had zero salaried employees and no monthly payroll. Townsend allegedly sent fake monthly payroll reports and tax forms to the bank, which is insured by the Federal Deposit Insurance Corporation, or FDIC.

The money laundering charges come from allegedly using about $27,000 of the money to buy a BMW car and wiring $80,000 into a brokerage account in the name of the business.

Attorneys are asking for a money forfeiture equivalent to the proceeds of the alleged crimes. They have already seized about $25 from the business’s bank account and about $1,273 from the brokerage account.

Townsend’s initial court appearance is scheduled for May 24.

This story was originally published May 18, 2021 at 8:21 PM.