DETROIT – Two people are facing federal charges for their alleged involvement in pandemic unemployment insurance fraud and tax refund fraud.
Michael Davis and Rachelle Pritchard face multiple federal charges -- including wire fraud and identity theft.
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An affidavit was submitted on Nov. 20, 2024. The investigation began in March 2023 when the U.S. Department of Labor, Office of Inspector General (DOL-OIG) received a report that Davis and Pritchard allegedly conspired together to file fraudulent unemployment insurance claims in over 100 different names, resulting in about $1.9 million in unemployment insurance benefits.
The investigation also revealed Davis obtained about $1 million in Employee Retention Credits, a credit offered to eligible businesses and tax-exempt organizations affected during the COVID-19 pandemic. Davis allegedly gave fake journals and tax records to a return preparer to submit false tax returns to the IRS.
Background
As a result of the COVID-19 pandemic, the U.S. Government provided federal funds to the states, including Michigan, to help fund unemployment benefits through multiple benefit programs from March 2020 through September 2021.
The IRS offered the Employee Retention Credit and the Family and Medical Leave Act Credit to qualified employers and businesses for tax periods in 2020 and 2021.
Details
Between March 2020 and June 2020, about 122 unemployment insurance claims were filed under the same IP address. According to the federal agent investigating the case, this large volume of claims from a single AP address is a strong indicator that the claims are fake.
Most of the claims submitted listed the same sources of income, which investigators said is another indicator of fraud. Some of the named sources of income were businesses Davis owned.
Davis and Pritchard were seen on ATM footage withdrawing money and checking account balances on debit cards in other people’s names to which unemployment benefits were loaded.
Federal agents interviewed most of the people whose names were filed in the unemployment insurance claims, and each of them confirmed they did not file for unemployment benefits nor gave anyone permission to file it on their behalf.
For example, investigators found an unemployment insurance claim on May 6, 2020, using a name -- the affidavit referred to as M.L. -- listing Corktown Hospitality LLC as a source of income.
Federal Agents interviewed M.L. and learned he did not file an unemployment insurance claim and has never worked at, or heard of, Corktown Hospitality LLC.
Investigators saw ATM footage for transactions made on the Bank of American debit card to which unemployment benefits were loaded for the claim filed in M.L.’s name. Davis was seen on the ATM footage on July 6, 2020, just before midnight, withdrawing $1,000 from the account.
Investigators also learned Davis’ businesses were not operational and did not have employees or pay any employees during the COVID-19 pandemic. Therefore, his business was not eligible to have Employee Retention Credits funds.
He was seen again accessing the same account on July 7, 2020.
Another example federal agents provided was on April 27, 2020, an unemployment claim was filed under a name the affidavit refers to as S.T., which claimed to work at I Luv Cheese Sterling Heights. Agents interviewed S.T., who also said they never worked there or heard of the company.
On Oct. 21, 2020, Davis was seen on ATM footage withdrawing $720 from the debit card to which unemployment benefits were loaded for the claim filed under S.T.‘s name.
Pritchard’s alleged involvement in scheme
Similarly, Pritchard is accused of doing the same as Davis with insurance claims. For example, a claim was submitted on March 8, 2020, using a name -- the affidavit referred to as A.D. -- using the same IP address as Davis. The claim listed Corktown Hospitality LLC as a source of income.
Another claim was filed using a name -- the affidavit referred to as D.H. -- on May 15, 2020, listing Corktown Hospitality LLC as a source of income. Law enforcement database confirmed D.H. died on July 1, 2010.
Investigators saw ATM footage of Pritchard checking card balances under the claimants' accounts in one series of transactions on July 26, 2020.
Bank records documented that card activities under multiple claimants were used on the same dates, times, and locations -- leading investigators to believe that one person had all the cards.
Investigators also found that the claimants’ bank accounts were sending money to another bank account under Pritchard’s name.
Additionally, a claim filed using the same IP address tracked to Davis and Pritchard’s home using the name D.G. paid benefits to a Goldman Sachs bank account. Investigators learned the benefits were going to Pritchard’s account, totaling over $10,000 from May through July 2020.
Agents interviewed D.G., who then said she never filed an unemployment insurance claim and did not authorize anyone to do so on her behalf. She also said she never owned a Goldman Sachs bank account.
Federal agents believe Pritchard got people’s personal information from her job as an automotive sales consultant at Rock Connections LLC, which is a sales and support contact service aiming to improve sales conversions, in 2020.
Investigators said 33 of the people tied to the unemployment insurance fraud scheme under the IP address at Davis and Pritchard’s home matched the information found through Rock Connections LLC.
Rock Connections provided training material to Pritchard during her employment of the “Platinum Rule,” which was to ensure all client information was protected.
While federal agents were investigating, they learned Michigan State Police was also looking into Davis’ alleged involvement in another fraud and identity theft scheme and got a search warrant for Davis and Pritchard’s home and electronic devices.
During an interview with Davis on Jan. 26, 2024, federal agents asked him if they could search his electronic devices -- Davis said yes.
Federal agents searched his devices and found material that could be evidence of the insurance fraud scheme Davis and Pritchard were allegedly involved in.
During an interview, Davis told federal agents he prepared and submitted tax returns with the help of a third-party preparer, Employee Retention Credits Specialists. Investigators said he knew he could receive up to $26,000 per employee through the credit.
Further investigation revealed that some of the personal information used to submit the false unemployment insurance claims was also used in fake payroll journals that Davis gave to Employee Retention Credits specialists. The false claims, as a result, made Davis allegedly receive a total of over $1 million.
