Dennis Duffy II, 40, of South Burlington, was sentenced today in United States District Court in Burlington to 12 months and one day of imprisonment following his guilty plea to loan fraud and money laundering.
Judge William K. Sessions III also ordered that Duffy serve two years of supervised release following completion of his prison term, pay restitution in the amount of $191,000 and forfeit a Ford truck that he purchased with fraud proceeds. The court ordered that Duffy surrender to the Federal Bureau of Prisons on May 16 to begin serving his sentence.
On July 8, 2021, a federal grand jury returned a three-count indictment that charged Duffy with fraud and money laundering. The first fraud charge accused Duffy of making false statements and providing forged documents to North Country Federal Credit Union in the summer of 2020 in connection with Duffy’s application for a $416,000 Paycheck Protection Plan (PPP) loan for his commercial cleaning business, Night Owl Cleaning, Inc.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act contained many provisions that were intended to address the medical, economic, and social impacts of the COVID-19 pandemic, including the PPP loan program established by Congress in the spring of 2020. The PPP loan program was an economic stimulus program intended to help small businesses keep employees on payroll during the pandemic. It provided billions of dollars in low-interest, unsecured loans that were to be administered through and guaranteed by the U.S. Small Business Administration. Applicants had to certify that the loan proceeds would be used to maintain payroll and pay other business-related expenses. If applicants were able to demonstrate that proceeds were used to keep workers employed, some or all of a loan could be forgiven. Applicants had to provide the lending financial institution with certain documentation demonstrating their entitlement to and qualifications for a PPP loan.
According to the indictment, in late June 2020, Duffy applied for and received a $416,000 loan for Night Owl Cleaning from North Country Federal Credit Union. As part of the application process, Duffy gave NCFCU tax records, rent invoices and utility bills that purported to be for Night Owl. For example, Duffy gave the credit union what purported to be a federal corporate tax return for 2019 that indicated Night Owl had gross revenues that year that exceeded $7.3 million and had taxable income of about $382,000.
In fact, the actual returns Duffy filed with the IRS that year reported gross revenues of $79,000 and taxable income of only $15,700. According to the indictment, other Night Owl financial information that Duffy submitted to North Country in support of the loan application was similarly fraudulent.
In early July 2020, NCFCU funded the PPP loan by depositing the $416,000 into a Night Owl Cleaning account. Instead of using those funds for Night Owl payroll, however, Duffy used more than $390,000 to buy a house in Milton. In connection with the PPP loan fraud, Duffy pled guilty to credit union fraud and money laundering.
The indictment accused Duffy of committing an unrelated fraud against American Express in 2017. In April 2017, Duffy applied for and obtained an American Express credit card for Night Owl Cleaning. Between May and August 2017, Duffy used the AMEX card to make three fraudulent purchases, totaling $125,000, from a business purportedly named Vermont Aerial.
In fact, the transactions were fraudulent transfers of AMEX funds to another company Duffy owned named Pet Stop. Immediately after the AMEX funds were deposited into the Pet Stop account, Duffy retransferred the money to a Night Owl Cleaning account, then used those monies for his own benefit. Among other things, Duffy purchased a truck with proceeds of the AMEX fraud.
Although the charge of wire fraud was dismissed as part of Duffy’s plea agreement, Duffy agreed to forfeit the truck, to pay full restitution to American Express, and that the fraud against AMEX would be included in the loss calculation under the Federal Sentencing Guidelines.
Duffy’s case was the first pandemic-related fraud prosecution to be filed in Vermont federal court. This case was investigated by the Burlington office of the Federal Bureau of Investigation.