Yakima Resident Pleads Guilty to Fraudulently Obtaining More Than $59,000 in COVID-19 Relief Funds

Yakima, Washington – Vanessa R. Waldref, the United States Attorney for the Eastern District of Washington, announced today that Karla Padilla, age 48, of Yakima, Washington, has pleaded guilty to felony charges of fraudulently obtaining more than $59,000 in COVID-19 relief funds. The plea announced today is the most recent conviction obtained by the Eastern Washington COVID-19 Strike Force, which has brought criminal charges against numerous individuals and recovered millions of dollars in fraudulently obtained COVID relief funding.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act provided a number of programs through which eligible small businesses could request and obtain relief funding intended to mitigate the economic impacts of the pandemic for small and local businesses. One such program, the Paycheck Protection Program (PPP), provided government-backed loans to small businesses which could be forgiven so long as the proceeds were used for payroll and other eligible expenses. Another program, the Economic Injury Disaster Loan (EIDL) program, provided low interest loans that could be deferred until the conclusion of the pandemic to provide “bridge” funding for small businesses to maintain their operations during shutdowns and other economic circumstances caused by the pandemic. The PPP and EIDL programs have provided billions of dollars in aid, the vast majority of which have not been paid back, including hundreds of millions of dollars disbursed within Eastern Washington.

“COVID-19 relief programs were designed to lift up our community during crisis, and due to the number of people and businesses that requested funding, some deserving small businesses were not able to obtain funding to keep their businesses in operation,” said U.S. Attorney Waldref. “We created the Eastern Washington COVID-19 Fraud Strike Force because combatting pandemic-related fraud and holding those accountable who abused these programs is critical to the strength and safety of our community in Eastern Washington. The Strike Force works to ensure that limited resources are used to protect our local small businesses and the critical jobs and services that they provide for the community.”

In February 2022, U.S. Attorney Waldref and the U.S. Attorney’s Office began working with federal law enforcement agencies to create and launch a COVID-19 Fraud Strike Force that would leverage partnerships between different agencies to aggressively investigate and prosecute fraud against COVID-19 relief programs in Eastern Washington. The Strike Force consists of agency representatives from the U.S. Attorney’s Office, Small Business Administration (SBA) Office of Inspector General (OIG), Federal Bureau of Investigation (FBI), U.S. Department of the Treasury Inspector General for Tax Administration (TIGTA), U.S. Secret Service, U.S. Homeland Security Investigations (HSI), U.S. Department of Veterans Affairs OIG, General Services Administration OIG, Internal Revenue Service, Department of Energy OIG, Department of Homeland Security OIG, and others. Cases investigated and prosecuted by the Strike Force have resulted in numerous indictments, criminal prosecutions, convictions, and civil penalties.

During the plea hearing and in the written plea agreement, Padilla acknowledged that she fraudulently obtained more than $59,000 in PPP and EIDL funding for her purported collectible car business, Queen B Collectibles, using false information about the business, and that she unsuccessfully attempted to obtain an additional nearly $200,000 in additional funding in additional applications that she made that were not approved. Padilla further admitted that her PPP and EIDL applications were false and fraudulent in that Queen B Collectibles was not an active business, and that, therefore, neither Padilla nor Queen B Collectibles were eligible for any federal EIDL or PPP funding.

“I commend the stellar investigative work on these cases performed by the Strike Force and especially in this case by SBA OIG and TIGTA” said U.S. Attorney Waldref. “We will continue to work together with our law enforcement partners to vigorously prosecute those who abuse and misuse COVID-19 relief funding, and to strengthen our communities by protecting our small and local businesses.”

Judge Mary K. Dimke accepted Padilla’s guilty plea and set sentencing for December 20, 2022, in Yakima.

Special Assistant United States Attorney Frieda K. Zimmerman, Assistant United States Attorney Dan Fruchter, and Assistant United States Attorney Tyler H.L. Tornabene are prosecuting this case on behalf of the United States.