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Hot Springs man admits in court virus-relief fraud topping $500,000

April 11, 2021 at 4:00 a.m.

HOT SPRINGS -- A Hot Springs man pleaded guilty Friday in U.S. District Court to federal felony charges for attempts to unlawfully obtain more than $500,000 in covid-19 relief funds using a fabricated business.

James Heritage, 38, pleaded guilty to one count of making a false statement on a loan application to obtain money through the Small Business Administration's Paycheck Protection Program and one count of mail fraud, in connection with a scheme to collect Pandemic Unemployment Assistance, a form of supplemental unemployment insurance, from various state administrators.

According to the plea agreement, Heritage received a PPP loan of approximately $180,000 by representing to the Small Business Administration he was the owner of a Hot Springs business in need of financial assistance.

Law enforcement discovered the represented business did not exist, and the information in Heritage's loan application was false. Agents also discovered Heritage had applied for, and in many cases received, Pandemic Unemployment Assistance benefits from state administrators in at least 40 states and the District of Columbia, resulting in Heritage receiving approximately $350,000 in benefits.

Heritage's sentencing will be determined by the court at a later date, following the U.S. Probation Office's completion of a pre-sentence investigation, acting U.S. Attorney David Clay Fowlkes said in a news release.

Based on his guilty plea, the maximum penalty on the first count includes imprisonment up to five years and a fine of up to $250,000, and the maximum on the second count includes up to 30 years imprisonment and a fine of $1 million, the release said.

The Paycheck Protection Program allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1%. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal on the PPP loan to be forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses at least a certain percentage of the PPP loan proceeds on payroll expenses, the release said.

The case was investigated by the Department of Labor's Office of the Inspector General, the FBI, the U.S. Postal Inspection Service, and the Small Business Administration's Office of the Inspector General.

Assistant U.S. Attorney Hunter Bridges is prosecuting the case, the release said.

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