Developer Sentenced for COVID-19 Relief Fraud in Washington

News Summary

Michael James DeFrees, a 63-year-old from Vancouver, was sentenced to 21 months in federal prison for fraudulently acquiring over $2.5 million in COVID-19 relief funds. He falsely claimed eligibility while on probation for a felony conviction. Along with the sentence, DeFrees must forfeit $1.2 million and pay over $1.3 million in restitution to the SBA. Federal investigators actively recovered stolen funds, involving asset seizures including vehicles and boats, to satisfy obligations and maintain the integrity of assistance programs.

Vancouver, Washington – Developer Sentenced for COVID-19 Relief Fraud and Money Laundering

Michael James DeFrees, a 63-year-old real estate developer from Vancouver, Washington, has been sentenced to 21 months in federal prison after being convicted of fraudulently obtaining more than $2.5 million in COVID-19 relief funds. DeFrees also faces obligations to forfeit assets and pay restitution in connection with the scheme.

Details of Fraudulent Activities

Between 2020 and 2022, DeFrees submitted false applications for Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans, misrepresenting his financial and criminal history. Despite being on probation for a 2017 felony involving falsifying records in a bankruptcy process, he falsely claimed in the applications that he had no criminal convictions or that he was not on parole or probation. His fraudulent applications led to him receiving over $2.5 million in relief funds.

DeFrees used some of these funds for personal expenses and concealed part of the proceeds through a business entity not listed on his applications. Authorities identified that he laundered part of the money to hide its origin and ownership, linking it to illicit activities.

Seizure and Asset Recovery

Following the investigation, the U.S. Attorney’s Office’s Asset Recovery Unit filed liens against DeFrees’s properties and seized multiple assets to recover the misappropriated funds. Among the seized items were:

• A 2016 Duckworth boat
• A 2006 Ford F-350 truck
• A 2006 MTI racing boat
• Two Honda Yeti snow bikes
• A 2011 Land Rover

Proceeds from the sale of these seized assets and one piece of real estate were sufficient to fully cover the amount of restitution and forfeiture ordered. The recovered funds will be returned to the Small Business Administration (SBA) to compensate the federal agency for the losses caused by the scheme. The forfeited assets will contribute to the Assets Forfeiture Fund.

Law Enforcement Statements

Officials from the Asset Recovery Unit stressed their commitment to recovering stolen funds and ensuring that taxpayers are protected. The successful reclaiming of the assets and restitution demonstrates ongoing federal efforts to combat COVID-19 relief fraud.

Additional Cases Involving COVID-19 Relief Fraud

Alongside DeFrees’s case, authorities announced the guilty pleas of two Arizona brothers, Eric and Anthony Karnezis, for conspiring to defraud the SBA of nearly $109 million in COVID-19 relief funds. The brothers submitted at least 350 and 140 fraudulent applications respectively, leading to significant lendings.

Eric Karnezis earned approximately $3 million for his role in submitting fraudulent applications, while Anthony received more than $957,000. Both face possible sentences of up to 20 years in prison, fines, and are expected to pay restitution in the millions. They are scheduled for sentencing on June 20, 2025.

Additional Fraudulent Activities and Arrests

Further, Joel Matthew Caswell, aged 30, was arrested for multiple financial crimes relating to the same relief programs. Caswell applied for funds between 2018 and 2022, falsifying data on employee counts and business revenues. He faces charges including wire fraud and tax evasion, having received over $224,000 under false pretenses. He has agreed to surrender assets and his passport as conditions of release.

Caswell’s history includes ongoing allegations, lawsuits exceeding $630,000, and a pattern of financial disputes. His case illustrates ongoing efforts to clamp down on abuse of COVID-19 relief programs.

Background and Broader Context

The federal investigations highlight concerns over widespread misuse of pandemic relief funds meant to aid small businesses and individuals impacted by COVID-19. Authorities continue to pursue cases across the country, aiming to hold perpetrators accountable and recover stolen assistance. The cases involving DeFrees, the Karnezis brothers, and Caswell exemplify the ongoing pursuits to combat financial fraud related to federal relief efforts.

Legal proceedings are ongoing for some individuals, with sentencing scheduled in mid-2025. The Justice Department emphasizes the importance of integrity and accountability in federal aid programs, especially during times of crisis. This series of investigations underscores the federal commitment to ensuring relief funds reach legitimate recipients and deterring future abuse.

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Additional Resources

• KPTV: $25M Recovered from Vancouver Real Estate Developer COVID-19 Loan Fraud
• Oregon Live: Man Pleads Guilty in Oregon to $60 Million COVID Relief Fraud
• KTVZ: Arizona Brothers Plead Guilty in Oregon to $109 Million COVID Relief Fraud
• Wikipedia: COVID-19 Relief Funding in the United States
• Boston 25 News: Maine Woman Fakes Beauty Salon for Pandemic Relief Funds