A Tri-Cities man has admitted to conspiring with two other people who fraudulently obtained about $265,000 in federal COVID relief loans, including by submitting false payroll and tax records to the federal government.
David “Kurt” Schneider, 54, of Kennewick, and two co-defendants also applied for additional payments or loans of about $563,600, but those applications were rejected.
Schneider pleaded guilty in federal court in Yakima on Wednesday to conspiracy to commit wire fraud and bank fraud.
He was initially awarded a $1,000 low-interest loan, saying his business to make solar-powered wheelchairs, Solar Mobility, had no employees and made no sales in the 12 months before Jan. 31, 2020.
Months later in July 2020 he applied for another loan, falsely claiming that during those 12 months Solar Mobility had five employees and $45,000 in gross revenue.
He had teamed up with Kelly Jo Driver of South Carolina, who created false payroll records for companies and fake Internal Revenue Service payroll tax forms in support of fraudulent loan applications, according to a federal court document.
Schneider was denied the first loan he applied for using documents created by Driver, but with her help was granted a federal loan of $59,300 in August 2020 to use for payroll, according to court documents.
Records show he sent her $5,000 then.
It was a COVID Paycheck Protection Program loan that was eligible to be forgiven if he spent at least 60% of it on payroll and 40% for other business expenses.
His application to have the loan wiped off the books was denied by Community First Bank, which had issued the federally guaranteed loan, and Schneider made no payments on it. The loss was shifted to the federal government.
No payroll records
At the start of 2021, Schneider applied to Community First Bank for another Paycheck Protection Program loan of $123,300.
When the bank asked to see bank records showing payroll payments, Schneider sent Solar Mobility statements from the company’s bank.
They showed the only significant deposit into the Solar Mobility account was from the earlier Paycheck Protection Program loan in August 2020. Money in the account was spent on personal purchases and large cash withdrawals.
Court documents show Schneider withdrew about $30,700 and wrote a check to BMW Tri-Cities in Richland.
Schneider explained why there was no payroll spending from the account in an email to Community First Bank. He falsely said that “due to the uncertainty of the pandemic and banks being closed because of exposure to COVID, my employees wanted to be paid in cash, so we paid in cash and still filed our (IRS) 941s accordingly.”
The Washington state Department of Revenue said Schneider reported no revenue in 2019 or 2020 and that his only wages in those two years were from a Hanford nuclear site job at the vitrification plant, according to the Washington state Employment Security Department.
The loan was denied.
Schneider also filed applications with Driver’s help for loans for his company Tempest Tactical Solutions, which Schneider said had been in operations since Feb. 12, 2020, and had seven employees.
Both applications were denied because the company had not been formed until September 2020.
Schneider was more successful with a third business, RealNZ Water, a company to sell sell water bottled in New Zealand.
He received two loans in the spring of 2020 and defaulted on both in August 2022.
The Washington state Department of Revenue had no records of RealNZ Water existing or reporting revenue and no wages were reported to the Washington state Employment Security Department, according to a court record.
Pasco gun dealer accused
The third man in the case, in addition to Schneider and Driver, is Leif Gerard Larsen, the owner of Larsen Firearms in Pasco.
Schneider told Larsen that he could obtain loans that could be forgiven using false payroll records created by Driver, if he paid her 10% of the money received, according to a court document.
Larsen then obtained a Paycheck Protection Program loan of about $149,000.
He later told the FBI that Driver created false documents for his application, and he had no employees, according to court documents.
Driver and Larsen have pleaded innocent in the case.
Assistant U.S. Attorneys Jeremy Kelley and Frieda Zimmerman plan to ask Judge Stanley Bastian that Schneider be sentenced to prison.
They and Schneider also agreed that he should pay restitution of at least $126,000, which includes the principal of loans, accrued interest and lender fees.
Schneider is scheduled for sentencing Aug. 13.
Attempts to defraud loan programs during the pandemic took “critical funds that were to be used as a lifeline to small and local businesses struggling during the COVID-19 pandemic,” said Eastern Washington U.S. Attorney Vanessa Waldref.
The case was investigated by the Eastern District of Washington COVID-19 Fraud Strike Force and by the FBI and U.S. Small Business Administration Office of Inspector General.
