EXACTLY WHAT DO THE FEDERAL DOCUMENTS ALLEGE AGAINST STATE REP. FRANCISCO PAULINO?
A federal grand jury has indicted Massachusetts State Representative Francisco Paulino (D-Methuen) on eleven felony counts:
- Eight counts of wire fraud and aiding and abetting.
- Three counts of unlawful monetary transactions, commonly described as money laundering.
The indictment alleges that Paulino used false information, fabricated tax documents, another person’s identity and clients’ confidential financial information to obtain pandemic unemployment and business-relief money.
It further alleges that Paulino moved some of that money into accounts he controlled and used it for personal expenses, real-estate investments, private mortgages and transfers to his political campaign.
These are allegations. Paulino is presumed innocent unless and until proven guilty.
ALLEGED SCHEME ONE: USING A 77-YEAR-OLD RELATIVE’S IDENTITY
Federal prosecutors allege that on April 23, 2020, Paulino filed a Pandemic Unemployment Assistance application in the name of a relative who was approximately 77 years old.
According to the indictment, Paulino did this without the relative’s knowledge.
The application allegedly falsely claimed that the relative:
- Was self-employed, an independent contractor or a gig worker.
- Had been prevented from performing normal work because of COVID-19.
- Had worked in Massachusetts during 2019.
- Had earned $4,650 during 2019.
Paulino allegedly directed the unemployment benefits into a Citizens Bank account held solely in his own name.
THE ALLEGEDLY FABRICATED TAX RECORDS
When the Department of Unemployment Assistance later demanded proof that the relative had worked during 2019, prosecutors allege that Paulino submitted fabricated IRS documents in the relative’s name.
Those allegedly false documents included:
- IRS Form 1040 Schedules 1 and 2.
- A Schedule C claiming $12,500 in business income.
- A Schedule SE for self-employment taxes.
- A Form 1099 claiming that Paulino’s company, Madison Tax, had paid the relative $12,500.
The indictment alleges that the relative had not worked during 2019, had earned no income and had not been employed or paid by Madison Tax.
Nevertheless, the allegedly fabricated documents caused the state to conclude that the relative was eligible for the benefits and did not have to repay the money already received.
HOW MUCH UNEMPLOYMENT MONEY WAS PAID?
According to the indictment:
- The state paid approximately $44,160 in unemployment benefits under the relative’s name.
- Approximately $39,330 was deposited directly into Paulino’s personal bank account.
- Paulino allegedly continued filing weekly certifications under the relative’s name from April 2020 through September 2021.
Every weekly certification reportedly warned:
“Claiming unemployment benefits for someone else is against the law.”
Prosecutors allege that Paulino used the money for personal expenses, including real-estate expenses, loan payments and transfers to his campaign account.
ALLEGED SCHEME TWO: A BUSINESS WITH NO REVENUE CLAIMED $426,755
Paulino owned Jackson Enterprise, a company organized in November 2019 as a fast-food restaurant or café.
Jackson Enterprise opened a Heav’nly Donuts location in August 2020. According to the indictment, it had no revenue before then.
The company’s federal tax returns allegedly reported:
- Zero dollars in gross receipts or sales during 2019.
- $116,925 in gross receipts or sales during 2020.
But on June 20, 2020, Paulino allegedly submitted an EIDL application claiming that Jackson Enterprise had earned $426,755 during the twelve-month period ending January 31, 2020.
That would mean claiming more than $426,000 in revenue before the Heav’nly Donuts location had even opened.
The SBA approved a $136,700 loan based upon the information in the application and deposited approximately $136,600 into the company’s account.
$18,000 ALLEGEDLY USED TO BUY PROPERTY
Prosecutors allege that Paulino later transferred approximately $18,000 of the Jackson Enterprise EIDL money into Madison Tax’s business account.
That money was then allegedly applied toward the purchase of real estate in Lawrence.
ALLEGED SCHEME THREE: MADISON TAX’S FEDERAL LOAN
Paulino also applied for an EIDL through Madison Tax.
The SBA initially approved approximately $109,300 and deposited approximately $109,200 into Madison Tax’s business account in May 2020.
Paulino later requested an increase.
In July 2021, the SBA increased the Madison Tax loan by $292,600, bringing the total authorized loan to $401,800. Approximately $292,500 in additional proceeds was deposited into Madison Tax’s account.
Before receiving that money, Paulino allegedly certified that:
- The proceeds would be used solely as working capital to alleviate economic injury caused by COVID-19.
- None of the money would be used primarily for personal, family or household purposes.
Prosecutors allege that Paulino did not intend to use all the money for those permitted purposes.
$220,000 MOVED INTO HIS MORTGAGE COMPANY
The indictment alleges that Paulino transferred a total of approximately $220,000 in Madison Tax EIDL money into his other company, Madison Mortgage:
- Approximately $100,000 on October 29, 2021.
- Approximately $120,000 on December 2, 2021.
He allegedly used the money to help finance private mortgages through Madison Mortgage.
THE FIRST MORTGAGE
The alleged $100,000 transfer became part of a $600,000 mortgage used by two individuals to purchase property in Methuen.
According to the indictment:
- The mortgage carried 5.5% interest.
- Paulino charged a $15,750 loan-origination fee.
THE SECOND MORTGAGE
The alleged $120,000 transfer became part of a $460,000 mortgage issued to a limited-liability company purchasing property in Lawrence.
According to the indictment:
- The mortgage carried 7.94% interest.
- Paulino charged a $9,200 loan-origination fee.
In plain language, prosecutors allege that Paulino obtained low-interest federal disaster money intended to keep Madison Tax operating and then used part of it in a separate mortgage-lending business that charged borrowers interest and origination fees.
ALLEGED SCHEME FOUR: THE CLIENT WHO TRUSTED PAULINO
The indictment’s most troubling allegations may involve an unnamed Madison Tax client identified only as “Client 1.”
Client 1 is described as:
- Originally from the Dominican Republic.
- Having a sixth-grade education.
- Unable to read English.
- Able to speak very little English.
- A longtime friend of Paulino who trusted him.
Client 1 owned a coin-operated laundry in Lawrence and had hired Paulino to handle the company’s accounting and taxes.
Because Client 1 reportedly did not know how to use online banking, he gave Paulino access to:
- His Social Security number.
- His date of birth.
- His telephone number.
- His email address.
- Other personal identifying information.
- The usernames and passwords for his business bank accounts.
WHAT PAULINO ALLEGEDLY TOLD THE CLIENT
Paulino allegedly told Client 1 that the government was lending money to small businesses because of COVID-19.
But prosecutors say Paulino falsely told the client that:
- The loan carried an interest rate of only 0.1%.
- The client could use the money for anything he wanted.
The actual EIDL interest rate was 3.75%, and the money was restricted to permitted business purposes.
Paulino allegedly told Client 1 that he would handle everything and that the client would not have to do anything.
USING AN EMAIL ACCOUNT THE CLIENT DID NOT USE
Paulino allegedly submitted the client’s initial EIDL application in June 2020.
Although Paulino knew Client 1’s actual email address, the indictment says he used a different email account that:
- Paulino could access.
- Client 1 never used.
Paulino then allegedly placed the client’s digital signature on the federal loan documents without showing or explaining those documents to him.
The SBA approved approximately $104,300 and deposited approximately $104,200 into the client’s business account.
THE SECRET $243,200 LOAN INCREASE
The indictment alleges that Paulino later requested an additional $243,200 in EIDL money without Client 1’s knowledge.
On September 6, 2021, Paulino allegedly used the client’s digital signature to submit amended loan documents.
Those documents increased the client’s total federal loan obligation to approximately $347,500.
Prosecutors say Paulino never showed the documents to Client 1 or explained their terms.
Approximately $243,200 was deposited into the client’s business account on September 13, 2021.
THE IMMEDIATE $7,798 TRANSFER
On the same day that the additional federal money arrived, Paulino allegedly used Client 1’s online-banking credentials to transfer $7,798.47 into Madison Tax’s account.
The indictment says this was done without Client 1’s knowledge or permission.
THE $200,000 “LOAN” TO PAULINO
Paulino then allegedly told Client 1 that he had obtained additional government loan money for the laundry business and instructed him to leave the money in the account because Paulino wanted to propose a business deal.
Prosecutors allege that Paulino subsequently asked Client 1 to lend him $200,000.
On December 3, 2021, Paulino and Client 1 went to a Citizens Bank branch and transferred $200,000 from the client’s business account into Madison Tax’s account.
Three days later, Paulino allegedly used the $200,000 to help fund a $680,000 mortgage through Madison Mortgage for another person’s purchase of Lawrence property.
According to the indictment:
- The mortgage carried 6.25% interest.
- Paulino charged the borrower a $17,000 loan-origination fee.
WHAT THE EIGHT WIRE-FRAUD COUNTS REPRESENT
Each wire-fraud count is tied to a specific electronic submission or transfer.
Count One
The June 20, 2020 electronic submission of Jackson Enterprise’s EIDL application, which allegedly falsely claimed $426,755 in revenue.
Count Two
The July 20, 2020 electronic transfer of $136,600 from the SBA into Jackson Enterprise’s account.
Count Three
The July 12, 2021 electronic submission of amended Madison Tax loan documents.
Count Four
The July 16, 2021 electronic transfer of $292,500 into Madison Tax’s account.
Count Five
The September 6, 2021 electronic submission of amended loan documents bearing Client 1’s digital signature.
Count Six
A September 9, 2021 weekly unemployment certification allegedly submitted under the 77-year-old relative’s identity.
Count Seven
A September 13, 2021 unemployment payment of $482 deposited into Paulino’s personal account.
Count Eight
The September 13, 2021 SBA transfer of $243,200 into Client 1’s business account.
WHAT THE THREE MONEY-LAUNDERING COUNTS REPRESENT
The three unlawful-monetary-transaction counts concern transfers exceeding $10,000 that prosecutors allege involved proceeds derived from wire fraud.
Count Nine
The October 29, 2021 transfer of $100,000 from Madison Tax’s account into Madison Mortgage’s account.
Count Ten
The December 2, 2021 transfer of another $120,000 from Madison Tax into Madison Mortgage.
Count Eleven
The December 3, 2021 transfer of $200,000 from Client 1’s business savings account into Madison Tax’s account.
THE GOVERNMENT MAY SEEK FORFEITURE
The indictment also gives notice that, if Paulino is convicted, federal prosecutors intend to seek forfeiture of property constituting, derived from or involved in the alleged offenses.
If the original money or property cannot be located, has been transferred to someone else, placed beyond the court’s jurisdiction, substantially reduced in value or mixed with other property, prosecutors say they may seek other property belonging to Paulino up to the corresponding value.
WHAT THIS INDICTMENT DOES NOT SAY
The attached indictment:
- Does not name Lawrence Mayor Brian DePeña.
- Does not charge Paulino and DePeña together.
- Does not charge Paulino with conspiracy.
- Does not formally identify Paulino as DePeña’s accomplice.
- Does not allege that City of Lawrence or Commonwealth of Massachusetts money was stolen.
- Does not allege that Paulino committed these offenses through his position as a state representative.
The alleged conduct occurred primarily in 2020 and 2021, before Paulino became a state representative.
A FACTUAL ERROR IN THE FEDERAL INDICTMENT
Footnote 2 of the indictment says Paulino won election to the Massachusetts House in November 2021.
That is incorrect.
Official Massachusetts election records show that Paulino defeated incumbent Marcos Devers in the September 6, 2022 Democratic primary and won the November 8, 2022 general election. He took office in January 2023. Massachusetts election records.
That error does not change the criminal counts, but it should not be repeated in your story.
THE BOTTOM LINE
Federal prosecutors allege that Paulino did not merely submit false applications for his own businesses.
They allege that he:
- Used a 77-year-old relative’s identity without permission.
- Fabricated federal tax records in that relative’s name.
- Directed unemployment payments into his personal bank account.
- Claimed that a business had earned $426,755 before it had opened.
- Used federal relief money to invest in real estate.
- Moved federal business-relief money into his mortgage company.
- Used the confidential information and digital signature of a vulnerable client.
- Obtained a $243,200 loan increase without that client’s knowledge.
- Accessed the client’s bank account without permission.
- Received $200,000 from that client.
- Used the money to fund a private mortgage on which his company charged interest and a $17,000 origination fee.
Paulino now faces eleven federal felony counts. The U.S. Attorney’s Office describes them as eight counts of wire fraud and three counts of money laundering.