California CPA pleads guilty in PPP loan fraud scheme
A CPA in San Fernando Valley, Calif., pleaded guilty July 15 to one count of wire fraud for helping a longtime client fraudulently obtain a $1.2 million COVID-19 business loan in preparing a false corporate income tax return on behalf of the client.
If convicted on the wire fraud charge, Bernard Turk, 73, of Tarzana faces a maximum sentence of 20 years in federal prison.
In February 2021, Turk, who runs a tax preparation business in Tarzana, helped his client, Mustafa Qadiri, 39, of Irvine, submit a bogus Paycheck Protection Program (PPP) loan application. on behalf of Qadiri’s company, Agence 126, an alleged marketing and video production agency, according to authorities.
Qadiri was arrested in May 2021 after being indicted by a federal grand jury on four counts of bank fraud, four counts of wire fraud, one count of aggravated identity theft and six counts of money laundering. Authorities say Qadiri fraudulently obtained around $5 million in PPP loans for his shell businesses and then used the money for himself, including buying Ferrari, Bentley and Lamborghini sports cars. Qadiri pleaded guilty in July 2021 and is awaiting trial.
According to federal prosecutors, Turk prepared a false federal corporate income tax return, claiming that Agency 126 paid employees $5,383,401 in wages during the 2019 tax year. Turk gave the false statement income from 2019 to Qadiri to submit to a bank to back the PPP loan. To hide his involvement, Turk marked the false tax return “self-prepared”.
Turk admitted that he and Qadiri knew that Agency 126 had no employees, paid no salaries, and had never filed a tax return with the IRS.
Qadiri electronically submitted the false tax return that Turk prepared to the Small Business Administration (SBA) and the bank in support of Agency 126’s fraudulent PPP loan application. On the false tax return of 2019 submitted to the bank, Qadiri removed the “self-prepared” designation and replaced it with Turk as the preparer, prosecutors said.
Relying in part on the misrepresentation of income, the bank and the SBA approved and funded Agency 126’s PPP loan and wired $1.2 million to a bank account controlled by Qadiri. For his role in the scheme, Turk was to receive a percentage of the loan proceeds when the bank canceled the loan.
Turk’s sentencing hearing is scheduled for October 7.