The reputation of independent dealerships took another hit recently when the Department of Justice revealed unscrupulous allegations against a former Maryland operator that included using the Paycheck Protection Program (PPP) to purchase nearly 40 luxury vehicles, acquire real estate and pay other personal expenses.
The Justice Department said a criminal complaint has been filed charging Rudolph Brooks, Jr., of Cheltenham, Md., on the federal charge of wire fraud.
In addition, law enforcement obtained warrants authorizing the seizure of more than $2.2 million held in various bank accounts, as well as a 2018 Tesla Model 3.
According to a news release, the criminal complaint was filed on March 29 and was unsealed following Brooks’s arrest on April 2.
As detailed in the affidavit filed in support of the criminal complaint, Brooks is the owner of Cars Direct by Gavawn, which was incorporated with the Maryland State Department of Assessments and Taxation (SDAT) on Oct. 29, 2010. Officials said Cars Direct was forfeited on Oct. 1, 2012 and subsequently revived on May 28, 2020.
The affidavit alleges that, on May 9, 2020, Brooks applied for a PPP loan on behalf of Cars Direct in the amount of $1,556,589. In support of the Cars Direct PPP loan application, Brooks allegedly submitted fraudulent tax forms that allegedly reported $724,469 in payments via Forms 1099-MISC and $7,471,630 in total unemployment payments to employees from Cars Direct.
However, as detailed in the affidavit, officials said IRS records do not reflect any tax filings made by Cars Direct for any tax period, indicating that Cars Direct has not hired employees or paid unemployment taxes.
Additionally, the Maryland Department of Labor has no record of Cars Direct paying wages or of Brooks receiving wages, according to the Justice Department.
On April 7, 2020, Brooks allegedly submitted an Economic Injury Disaster Loan application on behalf of Cars Direct that contradicted the information and supporting documentation Brooks submitted for Cars Directs’ PPP loan application.
The EIDL application on behalf of Cars Direct allegedly stated that the company’s gross revenue was $148,000 and the cost of goods sold was $82,293 in the year period prior to COVID-19 being declared a disaster, which is inconsistent with a business that can support average monthly payroll costs of $622,635 or annual payments of $7,471,630 as Brooks reported on the PPP loan application and supporting fraudulent tax documents.
On May 9, 2020, officials said Cars Directs’ PPP loan was approved and $1,556,589 was subsequently deposited into a bank account, which has Brooks listed as the sole signer on the account. Prior to the deposit of the PPP loan funds, payroll payments or payroll taxes were absent from this account, according to the Justice Department.
According to the affidavit, Brooks allegedly opened another bank account in the name of Payroll by BJM, into which he transferred $500,000 of PPP loan funds. Brooks also then registered Payroll by BJM with SDAT, listing himself as resident agent.
“Although the name Payroll by BJM creates the appearance that the account is associated with a payroll company, there has been no payroll or payroll-related expenses paid from this account. Brooks also opened additional accounts in the name of Cars Direct, into which he transferred PPP loan funds,” officials said.
After the deposit of PPP loan funds, the Justice Department alleged Brooks initiated numerous transfers of PPP loan funds from the Cars Direct accounts to his personal bank accounts. Records revealed that Brooks used the PPP loan funds for personal expenditures including credit card bills, purchases at restaurants, retail stores, grocery stores, and auto auctioneers and mortgage payments for Brooks’ Cheltenham residence.
Beginning May 22, 2020, officials said Brooks used PPP loan funds from the Cars Direct account and his own personal account to purchase of 39 used automobiles, including:
—A 2017 Mercedes Benz S Class
—Two 2017 Infinity Q50s
—A 2015 Cadillac Escalade
—A 2005 Bentley Continental
—A 2018 Tesla Model 3
—A 2014 GMC Yukon XL
—Several older luxury model vehicles
“Under the terms of the PPP loan program, the purchase of these vehicles is not an appropriate use of loan funds,” officials said.
According to the affidavit, on July 30, 2020, Brooks initiated a wire transfer from his personal account to Tesla Motors for $60,407, which was used to purchase a 2018 Tesla Model 3. “Rudolph Brooks” was listed as the customer for this vehicle, and a District of Columbia driver’s license was on file for a close relative of Brooks.
Records from the state of Maryland reflect that the Tesla Model 3 was registered in Brooks’s name at Brooks’s Cheltenham residence.
Finally, on August 13, 2020, officials said Brooks initiated two wire transfers from one of the Cars Direct accounts for $144,343 and $2,165 to a title company regarding a property in Baltimore. At the time of the wire transfers, officials indicated $133,669.54 in funds from the Cars Direct PPP loan remained in the Cars Direct account.
Real estate deeds filed with the State of Maryland show that the Baltimore property was purchased by Madaro, LLC for $148,500. Madaro was registered with the District of Columbia on Aug. 8, 2019 and Brooks was listed as the resident agent of the company.
Officials said Brooks executed an auction contract of sale on June 18, 2020 to purchase the Baltimore property.
In addition, warrants authorized the seizure of up to $2,296,136.86 from 11 bank accounts and the 2018 Tesla Model 3.
“The affidavit in support of the seizure warrants alleges that these funds and vehicle constitute or are derived from the proceeds traceable to false statements made on bank loan applications,” officials said.
If convicted, the Justice Department indicated Brooks faces a maximum sentence of 20 years in federal prison for wire fraud followed by three years of supervised release. Officials said actual sentences for federal crimes are typically less than the maximum penalties.
Law enforcement added a federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.
“A criminal complaint is not a finding of guilt. An individual charged by criminal complaint is presumed innocent unless and until proven guilty at some later criminal proceedings,” officials said.