In a stark reminder of the importance of integrity in business, Raymond and Jennifer Hilderbrand of Spokane Valley, Washington, have been sentenced for their roles in a fraudulent scheme that exploited COVID-19 relief funds. The couple’s actions have not only resulted in federal prison time but also serve as a cautionary tale for small business owners navigating the complexities of federal relief programs.
In a recent ruling, United States District Judge Thomas O. Rice sentenced Raymond Hilderbrand to 30 months in federal prison, while Jennifer Hilderbrand received time served. Both are required to pay a combined restitution of $363,000 and will be under supervised release for three years following their prison terms. Their convictions stem from a jury trial earlier this year that found them guilty of multiple fraud charges related to the Economic Injury Disaster Loan (EIDL) program.
The EIDL program, part of the broader Coronavirus Aid, Relief, and Economic Security (CARES) Act, was designed to support small businesses facing economic hardship due to the pandemic by providing low-interest loans with flexible repayment options. Billions of dollars have been disbursed through this program, significantly benefiting countless small enterprises during difficult times.
However, the Hilderbrands exploited this safety net. After a previous loan application for their entertainment business, Powerline Enterprise LLC, was denied by the Small Business Administration (SBA) in September 2021, Raymond Hilderbrand submitted a new EIDL application for Hilderbrand Auto Services, an automotive repair shop he owned. Claiming the funds would be used solely for working capital at that business, the couple diverted $311,000 of the received $320,000 loan to support Powerline instead.
In addition, the EIDL funds were used to purchase property for the entertainment business, under Jennifer Hilderbrand’s name. They continued to make false claims about Powerline’s revenue in a bid to secure further funding, which prompted an official SBA denial in May 2022.
U.S. Attorney S. Peter Serrano emphasized the broader implications of the case: "Their actions denied other small businesses the help they needed during the COVID-19 pandemic." The investigations into their fraudulent actions were driven by a coalition of agencies, including the Treasury Inspector General for Tax Administration (TIGTA) and the SBA’s Office of Inspector General (OIG).
Small business owners should take away several key points from this case. First, the consequences of fraudulent actions can extend beyond legal repercussions and taint a brand’s reputation. Even in desperate times, transparency and honesty in dealings can build trust between businesses and funding agencies.
Moreover, understanding the application process for federal relief programs is critical. Small business owners are encouraged to consult with financial advisors or legal experts when considering applying for such funds. The application requirements can be stringent and misleading claims not only jeopardize funding but can also lead to severe penalties.
While the EIDL program provided essential support for businesses struggling during the COVID-19 pandemic, this incident underscores the need for a vigilant and responsible approach to government aid. Businesses should remain aware of their narratives and ensure that funds are used strictly for their intended purposes.
TIGTA Special Agent-in-Charge Krystofor Proev noted the commitment of federal investigators to pursue fraudulent activities: "The investigative efforts…demonstrate the commitment to pursuing, capturing, and prosecuting those who try to defraud the American people."
In the end, the Hilderbrands’ case stands as a warning to all small business owners: navigating the landscape of federal assistance should be done with integrity. It’s imperative to learn from such events and foster a business environment that prioritizes honesty, particularly during challenging times.
For further information, the original U.S. Department of Justice press release can be found here, along with insights from the SBA blog here.
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