Evanston CEO accused of bank fraud over PPP loan application

EVANSTON, IL – The founder of a pair of software companies in Evanston is accused of falsifying a loan application for an economic coronavirus relief program. Federal prosecutors say the local CEO dramatically overstated the payroll of a holding company in an attempt to fraudulently obtain more than $ 440,000 from the Paycheck Protection Program, or PPP.

Rahul Shah, 51, of the 200 block of Davis Street, Evanston, was charged Monday with one count of bank fraud and one count of misrepresenting a financial institution. He did not respond to requests for comment on the matter.

Shah is the founder and CEO of Katalyst Technologies, Inc. and Boardshare LLC. Both companies have offices at 500 Davis St. in downtown Evanston. According to an online resume, Shah founded Katalyst in 2000, and the company has since grown at an annual rate of 25 percent per year. In addition to its head office in Evanston, the company has offices in Atlanta, London and several cities in India, according to a press release.

“When I started Katalyst 19 years ago, the core values ​​focused on our people and the community we operate,” Shah said last month in a statement announcing the company’s inclusion in a ranking of. Chicago area workplaces. “Today we are a global company with associates [across] the world.”

According to an affidavit from James Sams, an agent of the Inspector General of the Treasury for the Tax Administration, in support of Shah’s two-count indictment, Katalyst’s April 15 request for a PPP loan from a Texas bank showed that Shah owned 42% of the company. and that he had $ 845,285 in monthly salary expenses.

Loans under the PPP program are fully guaranteed by the US Small Business Administration, but are processed by participating local banks. Loans can be fully forgiven if they are used on qualifying costs such as payroll, mortgage interest, rent, and utilities within 24 weeks of receiving the money.

On April 30, Shah applied for another loan on behalf of N2N Holdings LLC, which operates under the name Boardshare, according to the affidavit. The federal agent said the loan application was signed by Shobha Shah, wife of Rahul Shah and chief operating officer of Katalyst, who has been identified as the sole owner of N2N.

The request included several IRS forms that falsely described the company’s expenses, according to the affidavit. He claimed the company spent nearly $ 426,000 on wages in the last three quarters of 2019. But actual IRS statements show the company said it paid its employees less than $ 10,000 in the past. during the same period, according to the federal agent.

Investigators interviewed at least three people whose identities were used to falsely inflate Boardshare’s payroll, according to Sams’ affidavit. The agent alleged that the three employees listed said they worked for Katalyst before 2017, but never worked for the Shahs’ other company.

Boardshare makes portable projectors and software marketed to educational institutions as “interactive whiteboards,” according to its website. A representative did not immediately respond to inquiries regarding the number of employees, if any, at the company on Tuesday.

FBI and Treasury agents spoke to Mr. Shah on May 29 in a taped interview, according to Sams. He said he knew there were “errors” in the request and blamed the employees in India at first, but when officers challenged his claim that the India-based staff provided fake IRS documents via email, Shah admitted he had no supporting evidence. .

Mr. Shah admitted that the fake 1099 forms were “probably” prepared in the United States, according to the affidavit.

“You all prepare [them,] not someone in India, and submitted it thinking ‘this will keep our business alive’, “agents reportedly asked.”[I]Is this a precise way of presenting it? “

“I would say yes,” replied Mr. Shah, according to Sams Affidavit.

If convicted on both counts, Shah could face a sentence ranging from probation to 60 years in federal prison, but sentencing guidelines make a long prison term unlikely if the case is resolved with a pre-trial guilty plea. The date for Shah’s initial appearance in the case had not been set for Tuesday afternoon.

“The Paycheck Protection Program was designed as a lifeline for small businesses struggling to survive the COVID-19 pandemic,” Chicago U.S. Attorney John Lausch said on Tuesday in a statement announcing the accusations. “My office is working closely with our law enforcement partners to hold accountable anyone who seeks to commit fraud under this important program. “