An East Granby woman was sentenced Thursday to three years of probation for defrauding pandemic-relief programs of more than $1.1 million through fraudulent loan applications submitted to multiple lenders.
Karen Gaston, 45, must serve four weekends in jail, 10 months of home detention and 500 hours of community service under the sentence handed down by U.S. District Judge Sarah F. Russell in New Haven. Gaston also was ordered to pay full restitution and forfeited a $39,521 ring she purchased from jeweler Harry Winston in July 2020.
U.S. Attorney David X. Sullivan announced the sentencing following Gaston’s guilty plea in June to wire fraud and making illegal monetary transactions.
According to court documents, Gaston controlled several entities including LNK, Elegant Clinical, Ruby Red LLC and Diamond Shine LLC. Beginning in April 2020, she submitted applications to the Paycheck Protection Program and Economic Injury Disaster Loan program that misrepresented the operational status, resources and employee counts of these businesses.
LNK and Diamond Shine LLC were operational, but shared resources and employees, while Ruby Red LLC had only one client with Gaston as its sole employee. Elegant Clinical was no longer operating, according to prosecutors.
Gaston’s applications included fraudulent tax returns and tax-related documents, falsely represented the number of employees and wages paid, and misrepresented that a family member was a part owner of one entity. She filed applications at separate financial institutions to disguise her activities. At least one application was submitted after Gaston was arrested for state offenses related to a Medicaid fraud scheme.
Rather than using the nearly $1.2 million she received for legitimate payroll or operating expenses, Gaston spent the funds on personal expenditures including cars, travel, food, luxury home goods, expensive jewelry and paying off her home mortgage, prosecutors said.
The PPP and EIDL programs were created under the Coronavirus Aid, Relief and Economic Security Act to provide emergency financial assistance to businesses affected by the COVID-19 pandemic. The PPP provided forgivable loans for job retention and certain expenses, while EIDL loans offered working capital for operating expenses.
The Internal Revenue Service Criminal Investigation Division conducted the investigation.
