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A Vermont business owner will be heading to federal prison in May for fraudulently obtaining a Paycheck Protection Program (PPP) loan from a credit union and using most of the funds to buy a new house, according to the U.S. Attorney's Office in Burlington.
Federal Judge William K. Sessions III sentenced Dennis Duffy II, 40, of South Burlington, to 12 months and one day in prison on March 13. Duffy pleaded guilty to one felony count of credit union loan fraud and one felony count of money laundering. His case was the first pandemic-related fraud prosecution to be filed in Vermont federal court, federal prosecutors said.
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Duffy made false statements and provided forged documents to the $903 million North Country Federal Credit Union in South Burlington in June 2020 when he applied for a $416,000 PPP loan for his commercial cleaning business, Night Owl Cleaning Inc., according to court documents.
Duffy gave the credit union a 2019 federal corporate tax return that showed Night Owl made gross revenue of $7.3 million and paid taxable income of $382,000. In fact, the actual returns Duffy filed with the IRS that year reported gross revenues of $79,000 and taxable income of $15,700. Other Night Owl financial information that Duffy submitted to the credit union was similarly fraudulent, court documents showed.
NCFCU funded the PPP loan by depositing $416,000 into Night Owl Cleaning's account. However, instead of using those funds for Night Owl's payroll, Duffy used approximately $390,000 to buy a house in Milton.
Prosecutors charged Duffy with money laundering because he engaged in a monetary transaction affecting interstate commerce by using an official check with funds from the fraudulently obtained PPP loan.
Duffy also was ordered to pay NCFCU $66,748 in restitution and to complete two years of supervised released following his prison term.
His attorney did not respond to CU Times for a request for comment.
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Peter Strozniak
Credit Union Times reporter covering credit union operations, fraud, M&As, leagues, business continuity, and breaking news.
