'Criminally reprehensible’: Two charged in R.I. with defrauding loan program for businesses hit by coronavirus

Staveley and Butziger allegedly claimed in loan documents to have dozens of workers earning wages at four different businesses, when no one was actually employed at the outfits, according to prosecutors.

“What we allege these men did is wrong and just plain selfish,” Weisman said during a video news conference. “It is unconscionable that anyone would try to steal from a program set up to help hardworking Americans.”

The men were each charged with with conspiracy to make false statement to influence the federal Small Business Administration and conspiracy to commit bank fraud, prosecutors said. Staveley is also charged with aggravated identity theft, while Butziger was charged with bank fraud, according to authorities.

The pair, who never received any of the federal money, were released on unsecured bonds Tuesday, authorities said.

Staveley, prosecutors said, allegedly claimed in loan applications seeking more than $438,500 that he employed dozens of people at two restaurants in Rhode Island and one in Berlin, Mass.

But investigators discovered that one Warwick restaurant, the former Remington House, and the Berlin eatery, On The Trax, weren’t open for business before the pandemic, at the time the applications were submitted, or any time thereafter, the statement said.

In addition, Staveley didn’t own or have any role in the second Rhode Island restaurant, Top of the Bay, according to prosecutors. Weisman’s office said On The Trax in Berlin had closed by March 10, after the town revoked its liquor license for several reasons including “that ‘Sanborn’ allegedly misrepresented that his brother owned the restaurant.”

Prosecutors also said “Staveley/Sanborn” allegedly used his sibling’s identifying information in other real estate transactions.

Staveley has two prior federal fraud convictions in New Hampshire, Vilker said.

Butziger also allegedly tried to submit a fraudulent loan application.

Court documents allege he submitted a request for a $105,381 loan as the owner of an unincorporated business called Dock Wireless. He allegedly claimed in paperwork and during a phone call with an undercover FBI agent posing as a bank compliance officer that Dock Wireless employed seven people full time, including himself, Weisman’s office said.

Butziger falsely told the agent he brought on the employees full time on Jan. 1, 2020, and laid them off at the end of March, according to prosecutors. He also allegedly claimed his purported staff continued to work through April for nothing, and that he would use the loan funds to pay them, according to the statement.

But when asked about their altruism, the supposed employees told a different story, records show.

“Agents interviewed several of the supposed Dock Wireless employees who reported that they never worked for Butziger or Dock Wireless,” the statement said.

In addition, prosecutors said, the Rhode Island Department of Revenue told the IRS it had no records of wages being paid in 2020 by Dock Wireless or Butziger.

Authorities said Staveley and Butziger had discussed their alleged loan scheme via e-mail.

“We believe both men lied, cheated, and carried out this scheme so they could line their pockets — at the expense of hardworking small businesses that are teetering on the edge of financial ruin as a result of this pandemic,” FBI Special Agent in Charge Joseph R. Bonavolonta of the bureau’s Boston Field Office said during the news conference.

Bonavolonta’s words were echoed by Special Agent in Charge Kristina O’Connell of IRS-Criminal Investigation, or IRS-CI.

“At a time when this country should be coming together, Staveley and Butziger decided to take advantage of the pandemic for their own personal benefit,” O’Connell said during the news conference.

"The alleged actions of defendants Staveley and Butziger are criminally reprehensible,” O’Connell said. “Defrauding a government program designed to provide financial assistance to small business owners during the Coronavirus pandemic is tantamount to taking money directly out of the pockets of those who need it most.”

Hannibal “Mike” Ware, the SBA’s Inspector General, also weighed in, noting that fraudsters often rear their heads during times of crisis.

“This is a critical time for our nation’s small businesses. It is well known that fraudsters prey upon those in vulnerable positions,” Ware said in the statement. “As this result shows, SBA-[Office of the Inspector General] and its law enforcement partners are actively working together to root out fraud in SBA’s programs and bring those responsible to justice.”

In a separate statement, US Senator Jack Reed, a Rhode Island Democrat, condemned the alleged scammers for “trying to illegally profit from this pandemic.”

“We knew attempted fraud was coming and included tough rules in the law to help law enforcement crack down on scammers and go after anyone who tries to abuse the system,” Reed said. “Those who seek to steal from taxpayers are going to get caught and should pay a heavy price.”

Globe correspondent Jeremy C. Fox contributed to this report.

Travis Andersen can be reached at travis.andersen@globe.com.