Harrisburg restaurateur faces fines, jail for pandemic-related fraud charges

A Dauphin County restaurant owner faces $2.6 million in fines and up to 90 years in prison after allegedly defrauding the federal government out of $237,500 in loans from the Small Business Administration.

Scott Levy, owner of the Hershey Road Family Restaurant in Harrisburg, applied for $227,500 in loans through the SBA Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP) before spending a majority of the money on personal expenses and transferring $125,000 to his mother in Florida, according to federal prosecutors.

Levy, 58, was charged with bank fraud, wire fraud and money laundering, the U.S. Attorney’s Office announced on Tuesday.

According to allegations filed by the U.S. Attorney’s Office for the Middle District of Pennsylvania, Levy was approved for $159,900 in EIDL proceeds in June 2020 and a $77,600 PPP loan in May 2020 on behalf of his Harrisburg restaurant.

The court alleges that Levy did not use the funds for their intended purpose when he gave half the funds to his mother to place in safe deposit boxes and spent the rest on personal expenditures.

His business, Hershey Road Family Restaurant, closed last July.

The case is to be consolidated with another tax fraud case that Levy plead guilty to last November.

Levy admitted late last year to tax fraud and related offenses after he failed to pay more than $230,000 in federal income and payroll taxes from Jan. 1, 2014 to Dec. 31, 2018.

Levy’s attorney, Joshua Lock of Harrisburg-based Law Offices of Joshua D. Lock, said that the firm will not be commenting on the case at this time.

Three loan opportunities that could help small businesses survive COVID-19

Financial experts agree that an economic rebound from the COVID-19-induced recession won’t happen until public health officials lift social distancing orders and allow companies to resume business operations.

Until then, federal officials are working with local lenders to help small businesses pay the bills and keep workers on furloughed status — a kind of induced economic freeze — so they are positioned to make a successful economic rebound on the other side of the COVID-19 pandemic.

“Preserving the flows of credit and capital in our economy – to businesses and individuals alike — will help us better fight COVID-19, as well as speed and strengthen our recovery,” said Securities and Exchange Commission Chairman Jay Clayton, in a statement issued earlier in March.

Here are some of the loan opportunities small businesses can use to access funding during the COVID-19 event.

Paycheck Protection Program (PPP)

  • Fixed interest rate: 1%

Available through June 30, the Paycheck Protection Program allocates $350 billion, some 15% of the overall CARES Act package, in federally-backed loans for businesses to stay afloat and keep employees on their payroll while the economy recovers from the coronavirus pandemic.

Employers can apply with any lender certified with the Small Business Administration. Sole proprietors and independent contractors are required to wait until April 10 to apply with SBA-certified lenders, according to SBA guidelines. The latest SBA guidelines say minimum loan amounts are equal to two-and-a-half times a company’s monthly payroll expenses, capping off at $10 million. All payments are deferred for six months.

“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” said SBA Administrator Jovita Carranza in a statement. “We urge every struggling small business to take advantage of this unprecedented federal resource – their viability is critically important to their employees, their community and the country.”

Carranza said the administration will forgive all loans if employees are kept on the payroll for eight weeks following the date of the loan and the money is used for payroll, payroll tax expenses, rent, mortgage interest or utility payments. SBA guidelines dictate at least 75% of the forgiven amount be used for payroll expenses.

Forgiveness is based on the employer maintaining or quickly rehiring recently furloughed employees and maintaining salary levels, SBA guidelines say. The latest guidelines say forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease. Employee compensation in excess of $100,000 in annual salary is not eligible for forgiveness, but that doesn’t include non-cash benefits.

Employers can apply through any certified SBA-certified lender. Non-SBA-certified lenders can apply to enter the PPP system via the SBA’s online portal.

Lenders are expected to perform a good-faith review of a borrower’s calculations in their application, said Patti Husic, president and CEO of Centric Bank, one of the many SBA-certified lenders facilitating the program in central Pennsylvania.

Economic Injury Disaster Loans (EIDL)

  • Interest rate for businesses: 3.75%
  • Interest rate for nonprofits: 2.75%
  • Loan term: up to 30 years.

The Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million for providing “vital economic support to small businesses to help overcome the temporary loss of revenue,” according to SBA guidelines. Loans can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the disaster’s impact.

The agency normally reserves these types of loans for specific geographic areas under emergency declarations. But with nationwide emergency declarations due to the COVID-19 pandemic, administrators have made EIDL loans available across all 50 states and U.S. territories.

In contrast to the Paycheck Protection Program loan program, which is facilitated by local financial institutions, businesses can apply directly to the SBA for EIDL funds on the administration’s website portal.

Small business owners experiencing a temporary loss in revenue due to the pandemic are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. Loan advances, which will be made available following a successful application with the SBA, do not need to be repaid.

EIDL advance funds will be made available “within days” of a successful application, according to the latest SBA guidelines.

Express Bridge Loan (EBL) Pilot Program

  • Loan term: up to 7 years.
  • Interest: up to 6.5% over prime rate, regardless of maturity.

Small businesses with a pre-existing business relationship with an SBA Express Lender can access up to $25,000 quickly via the Express Bridge Loan Pilot Program, SBA guidelines say. Loans are intended to help sustain businesses in the interim between when their EIDL loan is submitted, approved and disbursed.

Companies can apply for emergency bridge loans through certified SBA express lenders. Certified lenders are required to document that the EBL applicant had an operating business as of March 13, 2020, and has demonstrated the business was adversely impacted by the COVID-19 emergency.

Emergency bridge loans are normally made for up to six months after the date of the Presidential Disaster Declaration, but SBA officials expanded the program’s eligibility through March 13, 2021.

Although EBL loans won’t count toward the maximum limitation of the amount of express loans that can be outstanding to any borrower, SBA guidelines say an EBL loan will count toward the maximum amount of SBA loans that can be outstanding to any borrower.

In contrast to Paycheck Protection Program loans, credit scores can be taken into account by lenders deciding whether or not to approve an express loan. The minimum FICO Small Business Scoring Service (SBSS) Score acceptable for the EBL program is 130.