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Long Island resident Konstantino Zarkadas, a Nassau County-based medical doctor in Glen Cove, pleaded guilty to disaster relief fraud and wire fraud in connection with his receipt of millions of dollars in small business loans under the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program (EIDLP) on Friday, Nov. 12 in Central Islip.
When sentenced, Zarkadas faces up to 30 years in prison, as well as forfeiture of $3,796,849.50 and a fine of up to $250,000.
“The defendant, a medical professional, admits to diverting millions of dollars in COVID-19 disaster relief funds to finance an extravagant lifestyle, including the purchase of luxury watches and vehicles, and the down payment on a yacht,” stated Breon Peace, United States Attorney for the Eastern District of New York. “This office will vigorously prosecute those who steal from government programs that are designed to help struggling small businesses and families stay afloat during the pandemic.”
According to the court filings:
- Between March 2020 and July 2020, amid the COVID pandemic, Zarkadas fraudulently applied for, and received, at least 11 PPP and EIDLP loans totaling approximately $3.7 million, on behalf of corporate entities he controlled.
- Zarkadas laundered the loan proceeds through various bank accounts he controlled, ultimately using the funds for extravagant personal purchases and other impermissible purposes. For example, in July 2020, Zarkadas used approximately $194,915.42 in PPP funds intended for distressed small businesses affected by the pandemic to finance the down payment on a $1.75 million yacht.
- To conceal the fraudulent nature of the purchase, Zarkadas made the check payable to a family member who was not the ultimate beneficiary of the funds and, in the check’s memo line, falsely indicated that the funds were “repayment for payroll.”
- Zarkadas also withdrew tens of thousands of dollars’ worth of loan proceeds in cash and used some of the proceeds to satisfy more than $1 million in judgments against him, to lease luxury vehicles, and to make personal purchases, including several Rolex and Cartier wristwatches which he has agreed to forfeit in today’s proceeding.
One source of relief provided by the CARES Act was the allocation of funds for the issuance of forgivable loans to small businesses for job retention and certain other expenses through the PPP.
The PPP allowed qualifying small businesses to receive unsecured loans on favorable terms, which they were required to use for specified expenses, including payroll costs, interest on mortgages, rent, and utilities.
The PPP provided for forgiveness of the loan if the recipient businesses spent the proceeds on these specified expenses within a limited time period and used a certain percentage for payroll costs.
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