A Chittenden County man allegedly used false documents to obtain a loan through a federal Covid-19 aid program for businesses, then used $380,000 of the money to buy a house in Milton.
Dennis Duffy II, 38, of Winooski pleaded not guilty Monday in U.S. District Court in Burlington to three federal counts.
The charges accuse him of submitting false information to obtain a $416,093 Paycheck Protection Program loan, then engaging in a fraudulent financial transaction in which he used most of the loan not to meet his business’ payroll, but to buy a house.
Duffy also pleaded not guilty to a separate charge alleging that, in 2017, he engaged in a scheme to defraud American Express of $125,000.
Duffy was released on conditions while awaiting trial.
Michael Desautels, a federal public defender representing Duffy, declined comment on the charges Monday, as did Assistant U.S. Attorney Gregory Waples, the prosecutor.
A 11-page indictment lays out the scheme Duffy allegedly used to cash in for himself, rather than his cleaning business, through the federal Paycheck Protection Program. Duffy is accused of submitting false documents June 30, 2020, to NorthCountry Federal Credit Union when he applied for $416,093 in PPP funds.
Among the false documents, the indictment stated, was a purported corporate tax filing for 2019 showing gross receipts of more than $7.2 million and taxable income of $382,000. However, in his actual returns to the U.S. Internal Revenue Service that year, he reported that the cleaning business had only $77,669 in gross receipts and net profit of $15,785.
Duffy had also submitted invoices showing that the cleaning business paid monthly rent of $11,416 for May and June 2020 to a real estate entity. “In truth and in fact,” the indictment stated, “both invoices were forgeries and Night Owl Cleaning never paid any rent” to the real estate company.
NorthCountry Federal Credit Union approved the loan and deposited $416,093 into Night Owl’s account at the credit union on July 1, 2020, the indictment stated.
A few days later, on July 9, 2020, the charges allege Duffy signed a contract to buy a home on East Road in Milton for $385,000, using proceeds from the PPP loan to make a $7,700 down payment.
About a month later, on Aug. 17, 2020, Duffy used proceeds from the PPP loan to obtain an official check from the credit union for $383,616, the indictment stated. The check was made payable to Duffy’s attorney representing him in the home purchase, the court documents say, and the money was then used to buy the East Road home in Milton the next day.
During Duffy’s arraignment Monday, Judge William K. Sessions III questioned whether Duffy qualified for public defender services, since his gross income totaled roughly $100,000 a year. Duffy told the judge his monthly take-home pay is between $6,000 and $7,000 a month, and expenses eat up almost all of that, including costs for housing, insurance and child support.
Sessions agreed to continue having a public defender represent him, but told Duffy that, when his case comes to an end, the judge may decide to make Duffy “contribute” some money to cover that expense.
Julie Longfellow, NorthCountry Federal Credit Union public information officer, stated Monday in an email that the institution is “proud of the work our business team did to help deserving businesses access the PPP funds.” She added that, while the credit union doesn’t comment on pending litigation, “NorthCountry fully cooperates with law enforcement and any investigations.”
Prosecutors allege Duffy also committed an unrelated fraud in 2017 against American Express. According to the indictment, Duffy applied for and obtained an American Express credit card for his company, and between May and August of 2017 made three fraudulent purchases totaling $125,000 from a business purportedly called Vermont Aerial.
However, prosecutors allege those transactions were fraudulent transfers to another company Duffy owned, Pet Stop. Then, court documents allege, Duffy retransferred that money to a Night Owl Cleaning account, and used it to buy two trucks and a car.
If convicted of all the charges, Duffy faces up 30 years in prison.
The government is also pressing to have Duffy return all of the $561,093 he allegedly obtained through the Paycheck Protection Program and American Express scams.