Casey Crowther, accused of committing an unusually bold fraud in obtaining a federal pandemic rescue loan, says what he did was perfectly legal.

On Sept. 2, officers from the Lee County, Fla., sheriff’s department arrested Crowther, the owner of Target Roofing & Sheet Metal, a $32-million-a-year contractor based in Fort Myers, Fla. The central charge against him is that he bought a $689,000 pleasure boat with funds from the federal Paycheck Protection Program (PPP), created by Congress so virus-impacted small businesses could keep employees on the payroll.

Crowther is the largest-revenue construction business owner charged with fraud and faces years in prison. He pleaded not guilty in U.S. district court in Fort Myers, Fla., to the charge of making a false statement to a bank. His attorney says Crowther actually spent $3.5 million to rehire furloughed employees, more than the amount he borrowed, and used the funds “in payroll and hired over 50 team members to its staff.”

Crowther’s defense, detailed in a motion to dismiss the charges filed Oct. 7, presents an entirely different picture than that put forward by prosecutors who depicted him as a greedy business owner taking advantage of a national emergency.

Instead, Crowther contends that his business was in peril, with projects canceled and 80% of Target Roofing’s revenue dependent on a single project as county construction sites were closing. The company laid off 19 workers.

In his motion, Crowther didn’t explicitly deny that he used the accounts into which the federal loan money was deposited to purchase a boat—as federal prosecutors and a grand jury charge in allegations that confirmed many people’s fears about the program’s vulnerability to abuse.

But Crowther portrays the purchase of the boat as an attempt while “panicked” to shore up his company’s finances, claiming he intended to resell the boat by August at a profit. The loan program rules don’t say that every dollar had to be spent on payroll or rent, he argues.

“This is exactly what the PPP program was intended for,” said a statement from Target Roofing.

News of Crowther's arrest, including a TV station’s reposting of a video on social media showing him on the 40-ft-long boat, caught the attention of management consultants and accountants who believe simple methods could have prevented what occurred.

Inherent Danger

“Somebody should have said no,” when Crowther wired the funds out of its original account, says Michael McLin, managing director of Maxim Consulting Group.

But Jack Callahan, a partner in accountant CohnReznick’s construction practice, says any large government program put together so rapidly with little guidance was bound to be “fraught with corruption.”

Crowther, 35, has roots in southwest Florida’s roofing industry. His father, David Crowther, has operated CFS Roofing Services since 2010. His grandfather Lee J. Crowther owns Crowther Roofing & Sheet Metal.

The firms owned by Casey Crowther and David Crowther both received PPP loans through the same small Florida lender, Sanibel Captiva Community Bank. Crowther Roofing & Sheet Metal is not a loan recipient. David Crowther has not been charged with any crimes related to either PPP loan.

After the pandemic struck, the rescue program was set up to disburse funds through the U.S. Small Business Administration. On April 7, SBA approved a loan through Sanibel Captiva bank to Target Roofing & Sheet Metal. The SBA data listed Target’s staff at 135. The amount borrowed was $2.01 million.

As a PPP borrower, Crowther was obliged to spend most of the money on salaries, rent, utilities or other expenses related to keeping employees on the job. Loans would be forgiven if 60% was used on payroll over 24 weeks.

He signed certifications that “current economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant” and that no other source of liquidity existed and funds would be used for specified purposes.

Straying from the guidelines, the application warned, could bring a criminal investigation. SBA’s website also described a type of PPP certification safe harbor stating that companies borrowing less than $2 million would automatically “be deemed to have made the required certification” on the necessity of the loan in good faith.

According to the charges, within days of receiving the funds, Crowther wired $3,300 into an account that he and his wife used for personal expenses. He sent another $100,000 to an account to be used as a loan to a former partner or employee.

Crowther wired the largest part of the money, $689,000, to a dealer for the new boat. He later posted a social media video of himself and children on the boat, motoring across the waters near his home.

In common business practice, such financial transactions above a certain threshold often require a second person’s approval—even if the first person is the 100% owner.

“In a business of that size, the checks ought to be signed by two parties in the organization,” says McLin, with the second person being an accountant, controller, treasurer or chief financial officer. A simple stamp is all that may be necessary.

But no built-in brake appears to have been in place at Target Roofing, of which Casey Crowther was sole owner.

Todd Haugh, associate professor of business law and ethics at Indiana University, says that in 100%-owned businesses, the owner sometimes believes that since all business proceeds come to the owner, all the money is to use as the owner wishes.

The “idea of funds being verified or certified is in some way lost on people,” Haugh says. “It doesn’t excuse the wrongdoing but does sometimes explain it.”

The $510-billion PPP loan program, which was limited to companies with 500 employees or fewer, relied on local banks as fast-acting funnels for the SBA funds. Specifically, federal prosecutors charged Crowther with making a misleading statement to a lender.

Loans From the Community Bank

Federal law and U.S. Treasury Dept. rules require banks to both know their customers and to make a formal notice of any suspicious activity to banking and law enforcement agencies. Contacted by phone, Sanibel Captiva bank Chief Financial Officer David Hall cited the bank’s obligation to protect its customers’ confidentiality and declined to comment on Crowther’s alleged fraud.

Accountants who have worked with construction companies say that banks processed so many PPP loans so quickly in the early months  of the pandemic shutdown that some corruption was inevitable.

CohnReznick’s Callahan acknowledges the limited governmental oversight as it expedited PPP funding in the spring. “You tell them how much money you want, supported with tax returns that no one could verify the accuracy of, and we will write you a check,” is the way he describes the government approach.

Joseph Natarelli, national leader of construction services at accountant Marcum, says he could see a contractor getting confused, commingling PPP money with other funds to buy a piece of equipment or other business expense.

But “the program was very clear what those funds could be used for—payroll and rent,” he says.

Crowther was apparently at odds with Sanibel Captiva bank in the days leading to his boat purchase, and his motion emphasizes the bank’s role in getting Target’s PPP loan.

A month before the PPP boat purchase, Crowther states, the bank rejected a $400,000 cash deposit into Target Roofing’s operating account that he attempted to make with proceeds from the sale of a different boat. Not long after, according to his motion, a “third party source” informed authorities that Crowther intended to sell the newly acquired boat “at a significant profit.”

The funds used to purchase the boat were recorded by Target as a loan to Crowther—another sign of the aboveboard and legitimate nature of his actions,  according to the motion. “In fact, when he was arrested Crowther already had repaid the vast majority of the loan to Target,” the motion claims, adding that the government had no legal basis for seizing the boat or arresting him—an act carried out on his 35th birthday. 

A Nov. 2 trial date has been set.