Florida TD Bank manager masterminded $30 million COVID loan fraud and kickback scheme

Jay Weaver
Fri, January 6, 2023

Daniel Hernandez held a key position at TD Bank, overseeing 80 employees at 27 branches in Miami-Dade County.

But the regional manager’s job also gave him the opportunity to fleece a massive U.S. government loan program meant to help struggling businesses survive the COVID-19 pandemic — by exploiting his bank from the inside, federal authorities say.

In less than a year, authorities say, Hernandez lined his pockets with kickback-like “commissions” as he collaborated with TD Bank customers, a former bank employee and other associates to submit falsified paperwork for more than 80 loans worth $30 million under the Paycheck Protection Program — all guaranteed by the Small Business Administration. Hernandez also directed others to apply for another $7 million in pandemic benefits from the Small Business Administration under its Economic Injury Disaster Loan program.

In total, Hernandez and his illicit network received more than $17 million in fraudulent loans approved by TD Bank and one of his previous employers, Bank of America, as well as by the SBA itself — in one of the most brazen pandemic relief cases involving two major U.S. banks, authorities say.

The 50-year-old Hernandez, who was fired from his TD Bank job before his arrest in August, pleaded guilty to a wire fraud conspiracy charge in December and now faces up to 10 years in prison at his sentencing in March. He is among dozens of pandemic hustlers in South Florida and thousands nationwide who have been convicted of fraud since Congress approved the $813 billion loan programs just after the coronavirus swept the country in March 2020.

In a report released last year, the SBA’s inspector general found there were about 70,000 fraudulent PPP loans totaling $4.6 billion nationwide, calling the trend “unprecedented” — but that those figures were based on an analysis in August 2020. The level of COVID-19 relief fraud in the SBA’s loan programs is now believed to be much higher.

In Hernandez’s case, a federal criminal affidavit accused the former TD Bank manager of masterminding an inside job to recruit bank customers to apply for PPP loans and to help them fill out their applications with fabricated information about the number of employees, payroll expenses and gross revenues. He allegedly used his position at TD Bank to try to ensure that their business loan applications were processed by his employer, though he was not directly involved in approving them.

“In return, Hernandez received a commission on every loan issued,” according to the affidavit filed by the Federal Deposit Insurance Corp.’s Office of Inspector General.

New Jersey-based TD Bank, which is in the process of acquiring First Horizon Bank, said it investigated Hernandez’s misconduct and assisted federal investigators and the U.S. Attorney’s Office in Miami.

“To protect our customers and the bank, TD has strong processes in place to identify, investigate, and deter potential fraud,” the bank said in a statement provided to the Miami Herald on Friday. “In this matter, we initiated an internal investigation, cooperated with law enforcement, and terminated Mr. Hernandez prior to his arrest.”

Hernandez’s defense attorney, Henry Bell, said that his client had never been in trouble with the law before his fraud offense and accepted responsibility early in the process by pleading guilty just months after his arrest. “You can rest assured he will never again involve himself in anything like this again,” Bell told the Herald.

Three of Hernandez’s co-conspirators in the TD Bank fraud case have also been charged by prosecutor Eli Rubin in the U.S. Attorney’s Office:

▪ Armando Ariel De Leon, a former TD Bank employee in Miami-Dade, admitted in his plea agreement that he conspired with Hernandez to help customers open accounts at TD Bank and apply for phony PPP loans from the bank as well as other benefits from the Small Business Administration. De Leon received kickbacks from customers and Hernandez, court record shows. De Leon, 51, who was fired from TD Bank in 2021, pleaded guilty to a wire fraud conspiracy in October.

▪ William Alexander Posada Sandrea, president of Autenticos Auto Sales Corp. in Miami-Dade, also collaborated with Hernandez and others to file falsified PPP loan applications for his company and other businesses. Posada, 43, pleaded guilty to a bank fraud conspiracy in July but failed to show up for his sentencing in November, court records show. He’s at large.

▪ Erich Javier Alfonso Barata, the president of two Miami-Dade companies, Black Hookah Inc. and EJ Networking & Security Service, is accused of collaborating with Hernandez and submitting bogus PPP loan applications. According to court records, Barata, 49, is expected to plead guilty to a wire fraud conspiracy.

The Paycheck Protection Program approved by Congress in 2020 was designed to help businesses following shutdowns caused by the rapid spread of the coronavirus. The program, under the CARES Act, allowed for the loans to be forgiven, as long as borrowers followed criteria laid out by the SBA to use the funds for payroll and other overhead.

Determined to inject money quickly in the faltering economy, the U.S. government waived many traditional requirements that lenders normally check before issuing business loans — and that policy, according to the SBA’s inspector general, led to an “unprecedented level of fraud activity” because of the lack of controls.

As the nation’s No. 1 fraud capital, South Florida has led the financial crime wave that followed the passage of the CARES Act, according to the U.S. Attorney’s Office.

After losing billions of dollars in COVID-19 relief funds due to phony claims, the U.S. government in September started deploying investigative teams in South Florida, California and Maryland to zero in on criminal organizations that are suspected of stealing from public programs offering small business loans and unemployment insurance. The strike forces are working out of U.S. attorney’s offices.

Valesky Barosy, 28, pictured here on his Instagram page, was convicted of fraudulently obtaining pandemic-relief loans to buy a Lamborghini, among other luxury goods.

Meanwhile, federal prosecutions of individuals and their businesses continue unabated in South Florida.

This week, Derek James Acree, an attorney in Palm Beach County, was sentenced to nearly 3 1/2 years in prison for submitting fraudulent loan applications seeking more than $1.6 million under the SBA’s pandemic relief programs. Acree, 47, who pleaded guilty to a wire fraud conspiracy in October, filed the bogus loans for companies he owned: National Financial Holdings Inc., NFH Florida LLC, DBA Finova Financial LLC, and National Financial Holding Technology LLC. The loans misrepresented the number of employees, payroll and revenues, authorities said.

After obtaining the loan proceeds, Acree transferred some of the money to others and used another portion to make a down payment on his home and repairs on his boat.

Also this week, Alexander Blaise of Plantation and his brother, Dumarais Blaise of Georgia, pleaded guilty to wire fraud conspiracy charges in Fort Lauderdale federal court stemming from a bogus $356,000 PPP loan application for a South Florida business, Acute Care Coordinating Systems PA. Alexander Blaise admitted that he was assisted by his brother, Dumarais Blaise, a tax preparer, in obtaining the pandemic loan and that the proceeds were deposited into another business, Blaise Podiatry, court records show. The brothers then split the illicit funds.

Last month, a Miami man charged with swindling millions from the government’s PPP loan program was found guilty of nine counts of wire fraud, money laundering and aggravated identity theft. Now, Valesky Barosy, 28, faces 20 years or more in prison at his sentencing in February.

Barosy was not shy about showing off his exploits while ripping off the SBA’s pandemic program, posting social media shots of himself driving an exotic Lamborghini and flying on a private jet.

OLDE FASHION CRIMINAL CAPITALI$M