SCV man pleads guilty to creating sham companies to acquire over $1M in COVID relief loans

FILE
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A Santa Clarita Valley man pleaded guilty in federal court Tuesday to charges that he created sham companies to fraudulently acquire more than $1 million in COVID-19 relief loans. 

Raymond Magana, 40, of Santa Clarita, pleaded guilty to one count of fraud in connection with major disaster or emergency benefits in connection to a scam that took place between May and June 2020. 

The plea agreement Magana signed said that, during the two-month time frame last year, he falsified documents and payroll expenses to show a large number of employees that he could be reimbursed for by the federal government’s PPP loan program. The only issue was, investigators later discovered, that the payroll expenses and financial statements were entirely fabricated.

Even the address that Magana’s company, The Building Circle LLC,  was supposed to be headquartered at and house 40 workers, was found to be imaginary: What was listed at the Pico Rivera address was in reality a 980-square-foot, single-family home that appeared to be a residence, not a business. 

In total, Magana admitted to submitting fraudulent tax documents that reported $4,402,000 in annual wages paid to 40 employees in 2019 and $852,000 paid in employee wages during the first quarter of 2020, according to federal prosecutors. The Building Circle LLC loan was eventually approved for $940,416, and Magana received the funds June 4.

In addition to The Building Circle LLC Loan, Magana also admitted to using fake tax documents and employee information to falsely claim $1.73 million in employee wages, the plea agreement reads. 

He received a $360,415 PPP loan for this second shell company, Forward Builders LLC. 

The manager of the bank Magana used to hold the loan money was the first to inform him that his account had been frozen due to “suspicious activity,” prosecutors said. The bank was able to freeze $940,416 in the defendant’s account, but $360,415 of taxpayer money was still lost in the scam, Magana admitted. 

Magana is scheduled to return to court May 11 for a sentencing hearing, at which time Magana will face a possible maximum sentence of 30 years in federal prison. 

Steven Goldstein, 36, of Northridge, Magana’s business partner, pleaded guilty in December to the same charge as his Santa Clarita-based partner. His sentencing hearing is scheduled for May 30.

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