State representative charged for alleged pandemic benefit fraud

BOSTON — A Massachusetts state representative has been arrested and charged with allegedly fraudulently obtaining more than $700,000 in COVID-19 unemployment benefits and small-business loans and using the money for real estate purchases, mortgage loans and other expenses.

According to the United States District Attorney, Francisco Paulino, 46, of Methuen, who represents the 16th Essex District, was arrested Wednesday and charged in an 11-count indictment returned by a federal grand jury in Boston.

He faces eight counts of wire fraud and three counts of money laundering.

The U.S. Attorney’s Office said the alleged conduct occurred before Paulino was elected to public office.

He was elected to the Massachusetts House in 2022 and represents parts of Lawrence and Methuen.

“Paulino fraudulently obtained” Pandemic Unemployment Assistance benefits in the name of an unknowing 77-year-old relative between 2020 and 2021, prosecutors allege.

According to the indictment, Paulino submitted an online application to the Massachusetts Department of Unemployment Assistance in April 2020 claiming the relative had worked for his business, Madison Tax, LLC, in 2019.

Prosecutors allege Paulino submitted fake documents supporting the application and false weekly certifications. He also allegedly directed the state to deposit the benefits into a bank account held solely in his name.

The Massachusetts Department of Unemployment Assistance ultimately paid more than $44,000 in PUA benefits between April 2020 and September 2021, according to the indictment.

Prosecutors allege Paulino used the money for real estate expenses, loan payments and transfers into his political campaign account.

The indictment also accuses Paulino of fraud involving three Economic Injury Disaster Loans, or EIDLs, administered by the U.S. Small Business Administration during the pandemic.

One alleged scheme involved Jackson Enterprise Inc., a business Paulino incorporated in November 2019 as a “fast food restaurant cafe.”

Prosecutors say Jackson Enterprise had no revenue before August 2020. Madison Tax’s tax returns reported Jackson Enterprise revenue of $0 in 2019 and $116,925 in 2020, according to the charging documents.

Paulino also allegedly obtained a $109,200 EIDL for Madison Tax in May 2020. In June 2021, the SBA approved an additional $292,600, bringing the Madison Tax loan to $401,800.

According to the indictment, Paulino transferred $100,000 of the additional EIDL money into the account of another business, Madison Mortgage Inc., in October 2021. Prosecutors allege he then used the money to help fund a $600,000 mortgage to two people purchasing a home in Methuen.

Two months later, Paulino allegedly transferred another $120,000 from the Madison Tax account to Madison Mortgage. Prosecutors say that money was used to help fund a $460,000 mortgage to an LLC for the purchase of a home in Lawrence.

The indictment alleges that Paulino used a total of $220,000 of Madison Tax’s EIDL proceeds for impermissible purposes. Prosecutors also allege that he profited from the transactions by charging interest rates of 5.5% and 7.94% and collecting $25,000 in loan-origination fees from the home purchasers.

Paulino faces eight counts of wire fraud and three counts of money laundering.

Each wire-fraud count carries a potential sentence of up to 20 years in prison, up to three years of supervised release and a fine of up to $250,000.

Each money-laundering count carries a potential sentence of up to 10 years in prison, three years of supervised release and a fine of up to $250,000.

Paulino appeared in court with handcuffs on Wednesday and plead not guilty to all 11 charges.

In a separate case, federal prosecutors unsealed an indictment charging Lawrence Mayor Brian DePena with allegedly fraudulently obtaining COVID relief funds.

DePena is accused of participating in a separate scheme involving more than $1.5 million in COVID-era small-business loans. Prosecutors previously charged him with wire fraud and money laundering.

The cases involving Paulino and DePena are separate.

Paulino is expected in court for a discovery hearing on September 23.

This is a developing story. Check back for updates as more information becomes available.

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