Indian American CEO sentenced to two years in jail for bank fraud

Last week, US District Judge Edward J. Davila sentenced Kishore Kethineni from Dublin, who had pleaded guilty to the charges on February 21.

New York: An Indian-American CEO of multiple software development and IT services companies in California has been sentenced to two years in prison for committing bank fraud and failing to pay over more than $2 million in employment taxes.

Kishore Kethineni from Dublin was handed down the sentence by US District Judge Edward J. Davila last week after he pleaded guilty to the charges on February 21.

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Kethineni admitted that he conspired with his two brothers to engage in a scheme in which they fraudulently obtained over $3.1 million in loans under the Paycheck Protection Program (PPP).

The PPP is a Covid-19 pandemic relief program administered by the Small Business Administration (SBA) that provided forgivable loans through third-party lenders to small businesses for payroll and certain other expenses.

While Kethineni was the sole owner and CEO of four of the companies involved in the scheme — BiteGate, Inc, Dinenamics, Inc, Neelinfo, Inc, TechPMC, Inc — his brothers were owners of three other companies — Boxstertech, Inc, Hiretechforce, Inc, and TechGlobalSystems, Inc.

From April 2020 through May 2021, Kethineni and his brothers submitted multiple PPP loan applications on behalf of their various respective companies, a release from US Attorney’s Office, Northern District of California, stated.

Via these applications, they made fraudulent representations and provided falsified payroll data and records to obtain loans and loan forgiveness under the program.

Collectively, Kethineni and his brothers submitted at least 12 PPP loan applications, which were sometimes virtually identical, on behalf of their seven companies.

The applications resulted in the approval and funding of nine loans totaling over $3.1 million in PPP funds.

Upon receipt of the PPP loan funds, Kethineni redirected significant amounts to himself and his family members instead of using the funds for payroll and other authorised business expenses under the program.

He also admitted to willfully failing to account for and pay over employment taxes that his company, Neelinfo, Inc, had withheld from the pay of its employees, incurring an employment tax liability of over $2 million over the course of five years — from 2014 through 2018.

Kethineni acknowledged that he used a payroll service company to process Neelinfo’s employee payroll and track its employment tax obligations.

Every quarter, the payroll service company provided Neelinfo with a prepared Form 941 that reflected the taxes withheld from Neelinfo’s employees, which Neelinfo was required to pay over to the Internal Revenue Service (IRS).

Despite receiving these prepared tax forms each quarter, Kethineni did not file them with the IRS, nor did he pay over any employment taxes on behalf of Neelinfo, while still causing the company to make thousands of dollars in other expenditures.

At the end of each year, the payroll service also provided Neelinfo with its employees’ Forms W-2, which were used by the employees to file their personal income taxes.

However, due to Kethineni’s failure to file any employment tax forms or pay over Neelinfo’s employment taxes as required, some of the company’s employees were subject to audits and inspection by the IRS after filing income tax returns based on income that the firm never reported.

On February 15, Kethineni was charged by Superseding Information with one count of failure to pay over employment tax and one count of conspiracy to commit bank fraud.

He pleaded guilty to both counts.

In addition to the prison term, Kethineni has been ordered to serve two years of supervised release — to begin after the prison term — to pay $3,295,514.25 in restitution, and to pay a $15,000 fine.

The court also ordered entry of a money forfeiture in the amount of $3,186,315.00.