North Carolina man pleads guilty to defrauding the government out of hundreds of thousands of dollars

BUFFALO, N.Y.-U.S. Attorney Michael DiGiacomo announced today that Kareem Highsmith, 51, of Charlotte, NC, pleaded guilty before U.S. Magistrate Judge Michael J. Roemer to making false, fictitious, or fraudulent claims against a government agency, which carry a maximum penalty of five years in prison and a fine of $250,000. This case is part of the Trump Administration's Task Force to Eliminate Fraud.

During the COVID epidemic, Employee Retention Credits (ERC), which was part of the CARES Act, was a refundable credit that businesses could claim in their federal tax filings based upon qualified wages paid to employees. The Paid Sick and Family Leave Credit (PSFLC) gave American businesses with fewer than 500 employees funds to provide their employees with paid leave, either for the employee's own health needs or to care for family members. Both credits could be filed on IRS Form 941.

On July 3, 2022, Highsmith electronically filed a signed Form 941 with the IRS for CMK Transportation and Delivery Service LLC (CMK), a company he owned, for the quarter ending June 30, 2020. On the form, Highsmith falsely represented that CMK employed four paid people during the relevant quarter and requested total refunds in the amount of $84,395.96. As a result, the IRS issued a tax refund check for $77,743.97 payable to CMK. In actuality, CMK did not have any business operations or employees in the second quarter of 2020 and was not entitled to any refund from the IRS for that period.

In addition to the Form 941 for the quarter ending June 30, 2020, Highsmith submitted 10 additional Form 941s for CMK, for the quarters ending September 30, 2020 through December 31, 2022, falsely claiming on each form that CMK had either three or four pain employees. The forms requested total refunds in the amount of $799,623.15, of which the defendant received approximately $324,636.81.

Highsmith also assisted others in submitting fraudulent Form 941s to the IRS, which similarly claimed ERCs and PSFLCs to which the individuals filing the returns were not entitled. These returns sought a total of approximately $2,452,360.19 in refunds, of which $603,572.21 of fraudulent claims were paid to the business owners. Highsmith received approximately $78,700 from these businesses for assisting them in filing the fraudulent Form 941s.

Between May 8, 2020 and on or about December 28, 2021, Highsmith, on behalf of companies that he owned, including CMK, submitted three Payroll Protection Program (PPP) loan applications and four Economic Injury Disaster Loan (EIDL) applications, each of which contained material misrepresentations regarding number of employees, gross revenues, and/or cost of goods sold. The total amount of loans that he sought was $443,672.57, of which he received $197,839.57.

The total loss amount of Highsmith's criminal conduct is $3,780,051.87.

On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division ("Fraud Division"). The Fraud Division is laser-focused on investigating and prosecuting those who commit fraud against the American people. The Department's work to combat fraud supports President Trump's Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.

The case is being prosecuted by Assistant U.S. Attorney Douglas A.C. Penrose. The sentencing is the result of an investigation by the Internal Revenue Service, Criminal Investigation Division, under the direction of Special Agent-in-Charge Harry Chavis.

Sentencing will be scheduled at a later date.

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