A Massachusetts state lawmaker was arrested Wednesday on federal charges accusing him of fraudulently obtaining COVID-19 relief funds and funneling money into personal and business accounts.
State Rep. Francisco Paulino, a Democrat who represents portions of Lawrence and Methuen, was indicted on charges of wire fraud and money laundering, according to court documents.
Federal prosecutors allege Paulino used his tax preparation company, Madison Tax, to carry out a scheme from approximately April 2020 through December 2021 involving unemployment benefits and Economic Injury Disaster Loans, a federal program expanded during the pandemic to help struggling businesses, according to court documents.
Paulino’s charges come less than two weeks after Lawrence Mayor Brian DePena was arrested in a separate pandemic-relief fraud case. DePena is accused of fraudulently obtaining more than $1.5 million in COVID-19 small-business loans and diverting the money to his political campaign and personal debts. His arraignment date has not yet been released.
U.S. District Attorney for Massachusetts Leah Foley alleged Paulino fraudulently obtained over $700,000 in federal benefits to “line his own pockets.” She also noted the similarity to DePena’s case, as they abused similar programs.
“I think it should be clear now that we are taking fraud seriously in Massachusetts, from SNAP and housing fraud to voter fraud to pandemic relief fraud,” Foley said at a press conference on Wednesday. “We are dialed in and laser-focused on rooting out every bit we find. We will continue to hold fraudsters accountable until the stealing stops. It is never a proud moment when we arrest a public official, but we will continue to do it until the message is received.”
The indictment alleges Paulino filed a fraudulent unemployment claim in a 77-year-old relative’s name that resulted in approximately $44,000 in benefits. Prosecutors also allege he submitted or altered applications for federal disaster loans involving his business and clients.
In one instance, prosecutors allege a Lawrence laundry business owner who spoke limited English entrusted Paulino with personal information, tax matters, and access to online banking. Paulino allegedly secured an increase in the business owner’s federal disaster loan without the owner’s knowledge, then later asked him for a $200,000 loan. The money was then transferred to Madison Tax and allegedly used toward a mortgage on a Lawrence property, according to the indictment.
Foley said Paulino used the money he allegedly fraudulently obtained to loan out to individuals through his business at a high interest rate.
“Whether if it was his own money, he could have loaned it out at whatever rate he wanted,” she said. “It’s illegal because he signed documents attesting that that money was going to be used for working capital in a business, not to profit off the backs of other people.”
Prosecutors also accuse Paulino of overstating the revenue of Jackson Enterprise, which operated a Heav’nly Donuts location in Lawrence, to secure relief funds.
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While separate cases, special agent in charge of the FBI’s Boston Field Office Ted Docks said the two public officials both abused COVID-19 programs intended to help everyday citizens and business owners.
“Simply put, both men are accused of treating the COVID-19 pandemic as their own personal cash cows,” Docks said. “At a time when job losses were fast and furious, and so many people get help quickly, these relief programs were intended to assist workers, families, and businesses suffering massive economic upheaval. We believe every dollar these men fraudulently obtained was $1 denied to someone who genuinely needed that assistance.”
Docks said both cases started from a “variety of sources we have in the community.”