A gay former assistant superintendent and contracting liaison for the Catholic Archdiocese of Washington has been charged with fraudulently obtaining more than $2.1 million in funds for personal use from two federal coronavirus relief programs.
A statement released on Tuesday by the Office of the U.S. Attorney for the District of Columbia says Kenneth P. Gaughan, 41, was arrested and charged in a criminal complaint unsealed on Aug. 11 on one count of bank fraud, one count of theft of government funds, one count of wire fraud, and one count of money laundering.
The statement says Gaughan allegedly obtained the money by submitting loan applications for more than a dozen non-existent companies through the U.S. Small Business Administration’s Paycheck Protection Program (PPP) and the federal Economic Injury Disaster Loans (EIDL) program. The two programs have been used since early spring to help small businesses and their employees cope with the severe economic recession caused by the coronavirus pandemic.
It says Gaughan used the money he obtained through fraud and deception, in part, to purchase a $300,000 yacht, a $1.13 million townhouse in D.C., and a $46,000 luxury sports car.
According to the U.S. Attorney’s office statement, Gaughan was also arrested on an indictment unsealed on Aug. 11 charging him with a separate embezzlement scheme related to his alleged theft of more than $472,000 in funds from the Catholic Archdiocese of Washington, D.C. over a period of eight years from 2010 to 2018.
Court records show that Gaughan was first indicted in September 2018 for allegedly embezzling $45,000 from the Archdiocese’s Catholic schools program by federal prosecutors in Maryland. But a U.S. District Court judge in Maryland dismissed the charges in December 2019, following a five-day trial before a jury reached a verdict, on grounds that the prosecution was incorrectly carried out in Maryland rather than D.C.
The Archdiocese of Washington oversees Catholic churches and Catholic schools in D.C. and in Calvert, Charles, Montgomery, Prince George’s, and St. Mary’s Counties in Maryland. The new indictment against Gaughan for allegedly embezzling money from the Archdiocese unsealed this week says that in his role as an assistant superintendent he was in charge of recruiting contractors to provide, among other things, anti-bullying and crisis intervention services for Catholic schools.
The statement released this week by the U.S. Attorney’s office in D.C. says law enforcement officials found it interesting that Gaughan would attempt to engage in a scheme to defraud the two federal government programs just a few months after his trial in Maryland in January.
“Mr. Gaughan was so emboldened by deceiving a church for eight years he then, allegedly, turned his deception to the government, stealing funds that were meant to be a lifeline for struggling businesses during an unprecedented economic downturn, and greedily using them to satisfy his own materialistic desires,” said FBI Special Agent in Charge Jennifer Boone.
“We will not tolerate exploitation of this national emergency for personal gain,” said Acting U.S. Attorney for D.C. Michael R. Sherwin. “This office will not allow fraudsters to steal taxpayer money intended to help small businesses that are struggling as a result of the COVID-19 pandemic,” Sherwin said.
Court records show that Gaughan pleaded not guilty to all charges during a court hearing on Tuesday. The records show that U.S. District Court Judge Tanya Chutkan agreed to a request by Gaughan’s attorney that he be released on personal recognizance while he awaits trial.
The court records also show that he was assigned by the court a Federal Public Defender attorney to represent him in the case. The website for the D.C. based Federal Public Defender Service says its attorneys are only assigned to represent clients considered to be indigent.
The attorney assigned to represent Gaughan, Jose Alejandro German, did not respond to a call from the Washington Blade seeking comment on the case.
A 22-page Affidavit In Support of Criminal Complaint filed in court against Gaughan on Aug. 10 before it was unsealed the next day provides details of prosecutors’ allegations on how Gaughan carried out schemes to defraud both the Archdiocese of Washington and the two federal coronavirus relief programs.
Among other things, the affidavit says the name of an individual identified in the document only as “Person 1” appears on the fraudulent loan application forms that Gaughan submitted to the Small Business Administration to obtain some of the money he allegedly obtained illegally.
“In May 2018, federal agents obtained a copy of a Washington Blade article about Person 1 stating that Person 1 ‘owns a house in Bloomingdale with his friend Ken Gaughan,’” the affidavit states.
Although it doesn’t specifically accuse Person 1 of wrongdoing or illegal activity, the affidavit says investigators found that 11 of the PPP loans from U.S. Small Business Administration affiliated lenders that Gaughan allegedly applied for and received fraudulently had both Gaughan’s and Person 1’s name on the applications.
“Records show that those PPP loan applications were submitted using the business names of at least eight bogus emotional support animal companies, including Service Animals of America Incorporated, Service Dog of America Incorporated, Certapet Incorporated, Official Service Dogs Incorporated, Therapeutic Solutions Incorporated, Therapy Dog Incorporated, Therapy Dog International Incorporated, and ESA Registry International Incorporated,” the affidavit says.
The affidavit, meanwhile, does not mention that the Blade article to which it referred was one of the Blade’s Queery column profiles of members of the LGBTQ community. The column in question, published on Sept. 27, 2017, profiled D.C. gay food science and nutrition specialist Taylor Wallace.
“Wallace is single but owns a house in Bloomingdale with his friend Ken Gaughan, which they share with Gaughan’s boyfriend and three dogs,” the Blade column states.
The affidavit says that nearly all of the fake companies that Gaughan allegedly created to fraudulently obtain PPP loans, which do not have to be paid back if they are used for employee salaries and certain other business expenses, purported to involve service dogs.
A spokesperson for the U.S. Attorney’s Office did not respond to a request by the Blade for comment on whether Person 1 was under investigation for some or all of the same criminal offenses that Gaughan has been charged with.
Wallace could not immediately be reached for comment. The website for a consulting company he owns called Think Health Group doesn’t have a phone number or email address to reach him in his role as chief operating officer. However, it has an internal message page in which a written message can be sent to the company. The Blade sent him a message through that site but had not heard back from him as of Friday.
At least two people who know Wallace said they thought that Gaughan might have used Wallace’s name on the bogus company loan applications without Wallace’s permission or knowledge.
Published at Fri, 14 Aug 2020 14:13:26 +0000