David X. Sullivan, United States Attorney for the District of Connecticut, and Harry Chavis, Special Agent in Charge of IRS Criminal Investigation in New England, have announced that Karen Gaston from East Granby has pleaded guilty to charges related to a scheme defrauding COVID-19 pandemic relief programs of over $1.1 million.
In March 2020, the CARES Act was enacted to provide emergency financial assistance to those affected by the economic impact of the COVID-19 pandemic. Part of this relief included forgivable loans through the Paycheck Protection Program (PPP) for small businesses’ job retention and other expenses. The PPP was managed by the U.S. Small Business Administration (SBA), with loans issued by private lenders using their funds guaranteed by the SBA. Additionally, Economic Injury Disaster Loans (EIDLs) were authorized to help small businesses meet operating expenses.
Court documents reveal that in 2020, Gaston controlled several entities including LNK, Elegant Clinical, Ruby Red LLC, and Diamond Shine LLC. Although LNK and Diamond Shine LLC were operational and shared resources and employees, Ruby Red LLC had only one client with Gaston as its sole employee while Elegant Clinical was no longer active. Starting around April 2020, Gaston submitted false loan applications under these entities to both PPP and EIDL programs.
The applications misrepresented business operations status, number of employees, wages paid, included fraudulent tax documents, and falsely claimed a family member as part owner on an application. Through this scheme, Gaston received $1,163,910 in loan funds which she used for personal expenditures such as travel and luxury goods instead of legitimate business expenses.
Gaston has pleaded guilty to wire fraud carrying a maximum sentence of 20 years imprisonment and making illegal monetary transactions with a potential 10-year sentence. She agreed to full restitution and forfeiture of a ring purchased from Harry Winston valued at $39,521.63.
Currently released on a $100,000 bond pending sentencing without a set date yet scheduled.
This investigation is conducted by the IRS Criminal Investigation Division with prosecution led by Assistant U.S. Attorney Michael S. McGarry.
The public is encouraged to report any COVID-19 fraud allegations via the Department of Justice’s National Center for Disaster Fraud Hotline or online complaint form.
