A Marina del Rey man pleaded not guilty to submitting fraudulent loan applications to obtain nearly $3.2 million in COVID-19 loans for businesses that prosecutors say were shell companies, officials said Tuesday.
Mark Farag Shehata, 70, was arrested Monday by federal agents and arraigned the same day in Los Angeles federal court, according to the U.S. Department of Justice.
Shehata pleaded not guilty to seven counts of wire fraud. A July 24 trial date was scheduled, and a $500,000 bond was set in the case.
According to a federal grand jury indictment unsealed Monday, Shehata organized and registered four limited liability companies that purportedly operated in Marina del Rey: Shirmak Group, Cynergy Group, Global Network Investments, and Alpha and Omega Group.
From May 2020 to May 2021, Shehata allegedly submitted at least seven phony loan applications under the Paycheck Protection Program, a financial aid plan Congress enacted to support businesses harmed by the pandemic’s economic impact. The PPP loans were to be used by recipients to pay only certain authorized business expenses, such as payroll, mortgage interest, lease and utilities.
According to federal prosecutors, Shehata’s businesses were nothing more than shell companies. None of the loan proceeds Shehata allegedly fraudulently obtained were used to make payments to employees for payroll or any business expenses, the DOJ alleges.
Shehata submitted to the Small Business Administration and several lenders false applications requesting a total of $5.42 million in PPP loans, and fraudulently obtained about $3.15 million, the indictment alleges.
If convicted, Shehata could face up to 20 years in federal prison for each wire fraud count, prosecutors said.