Vancouver Developer Sentenced for Fraudulent COVID-19 Relief

The legal implications of fraudulent activities involving COVID-19 relief funds.

News Summary

Michael James DeFrees, a 63-year-old from Vancouver, was sentenced to 21 months in federal prison for fraudulently acquiring over $2.5 million in COVID-19 relief funds. He falsely claimed eligibility while on probation for a felony conviction. Along with the sentence, DeFrees must forfeit $1.2 million and pay over $1.3 million in restitution to the SBA. Federal investigators actively recovered stolen funds, involving asset seizures including vehicles and boats, to satisfy obligations and maintain the integrity of assistance programs.

Vancouver, Washington — Major Fraudulent Activities Involving COVID-19 Relief Funds Lead to Criminal Sentences

Michael James DeFrees, a 63-year-old real estate developer from Vancouver, Washington, has been sentenced to 21 months in prison for unlawfully obtaining more than $2.5 million in COVID-19 relief funds. The sentencing comes after a federal investigation revealed that DeFrees fraudulently acquired loans through government programs intended to support small businesses and individual economic stability during the pandemic.

Details of the Fraudulent Activities

Between the years 2020 and 2022, DeFrees applied for and received Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans. In his applications, he provided false information, including claims that he had no disqualifying criminal convictions or that he was not on parole or probation. However, at the time of his applications, DeFrees was on probation for a felony conviction in 2017 related to falsifying records during a bankruptcy proceeding.

The investigation revealed that DeFrees intentionally lied on his loan applications to qualify for funds. He then proceeded to misuse the money, using part of it for personal expenses and laundering a portion through an unlisted business entity. The total amount fraudulently obtained exceeds $2.5 million.

Asset Recovery and Restitution

The U.S. Attorney’s Office’s Asset Recovery Unit took significant steps to recover the funds, seizing various assets and filing liens against DeFrees’s properties. Assets seized include a 2016 Duckworth boat, a 2006 Ford F-350 truck, a 2006 MTI racing boat, two Honda Yeti snow bikes, and a 2011 Land Rover.

Through the sale of these seized assets and one property, authorities successfully reclaimed the full amount of restitution—amounting to $1,346,481—which will be returned to the Small Business Administration (SBA). Additionally, DeFrees was ordered to forfeit $1.2 million. Funds recovered are designated for victims and the government, with forfeiture proceeds allocated to the Assets Forfeiture Fund.

Officials emphasized ongoing efforts to recover stolen funds meant to support struggling businesses and individuals during the pandemic, framing these actions as crucial for safeguarding taxpayer money.

Other Notable Cases Involving COVID-19 Relief Fraud

Arizona Brothers’ Large-Scale Fraud Scheme

Two brothers from Arizona, Eric and Anthony Karnezis, pleaded guilty to conspiring to commit wire fraud and defrauding the SBA out of nearly $109 million in COVID-19 relief funds. Eric Karnezis submitted at least 350 fraudulent PPP applications, while Anthony submitted over 140 applications. Their actions resulted in more than $105 million in funded loans.

Eric earned approximately $3 million for his role, and Anthony received over $957,000; both face maximum sentences of 20 years in prison. They have agreed to pay restitution, amounting to millions of dollars, and are scheduled for sentencing on June 20, 2025.

Recent Arrest of Financial Crime Perpetrator

Another individual, Joel Matthew Caswell, aged 30, was recently arrested for multiple financial crimes, including fraud related to PPP and EIDL programs. Between 2018 and 2022, Caswell applied for funds under false pretenses, misrepresenting employment and revenue figures, and received over $224,000 illicitly.

Caswell is facing charges such as wire fraud and tax evasion. As part of his release conditions, he must surrender his passport and adhere to asset restrictions. Court records also reveal that Caswell has a history of legal disputes and unpaid debts totaling over $630,000.

Background and Broader Context

The cases involving DeFrees, the Karnezis brothers, and Caswell highlight ongoing efforts to combat misuse of COVID-19 relief funds. Federal authorities have prioritized investigating and prosecuting individuals who exploited pandemic relief programs intended for small businesses and unemployed individuals. The enforcement actions also serve as deterrents to prevent future misconduct and to recover funds for taxpayers and eligible recipients.

Federal agencies involved include the U.S. Small Business Administration and the Department of Justice, which continue to monitor and pursue cases related to relief fraud. The Justice Department has emphasized the importance of accountability and the unwavering commitment to uphold the integrity of federal assistance programs.