Kara DiPietro, 49, of Towson in Baltimore County, pleaded not guilty on Monday, October 26, in U.S. District Court in Baltimore to six federal counts of bank fraud, after prosecutors alleged that more than 20 applications for Paycheck Protection Program (PPP) loans in the names of businesses she controlled sought more than $7.5 million and that eight funded loans sent more than $2.5 million into bank accounts under her control.
Source: U.S. Department of Justice, District of Maryland
At the arraignment, DiPietro told the court she understood the charges and requested a jury trial. Assistant U.S. Attorney Joseph Wenner said the government would not seek her detention before trial. She agreed to surrender her passport, to refrain from opening new bank accounts and to report regularly to a court officer, and a federal public defender was appointed after the court reviewed an affidavit describing her financial hardship.
Source: Baltimore Focal News
What prosecutors allege happened
The indictment alleges that from April 2020 through May 2021, DiPietro submitted or caused to be submitted more than 20 PPP loan applications to four financial institutions in the names of several Maryland businesses and similarly named entities. Prosecutors say she served as president and chief executive officer of multiple companies, including H.M.C. Inc., Holdings Management Company Inc. and Kinetic Capital LLC. These are allegations in an indictment; DiPietro has pleaded not guilty and the charges have not been proven in court.
According to the U.S. Attorney's Office for the District of Maryland, the applications allegedly used false or fraudulent employer identification numbers that had not been assigned by the Internal Revenue Service, omitted information about earlier PPP applications connected to DiPietro and her entities, and falsely certified in some cases that the applicant business had not already received a first-draw or second-draw PPP loan.
Prosecutors further allege that some of the loan money was transferred and spent on expenses the PPP does not allow, including renovations to DiPietro's personal residence. PPP funds were required to be used on payroll costs, mortgage interest, rent and utilities.
From SBA honouree to the defendant's table
The case carries an unusual background. In 2017, the U.S. Small Business Administration named DiPietro Maryland's Small Business Person of the Year. She had bought her father's Columbia woodworking and millworking company, H.M.C. Inc., in 2015; he founded it in 1989. More recently she has worked as an operations chief in Baltimore City's Fleet Management division, and she previously appeared in the Par Funding affair as a borrower who later became a government witness. Her financial history also includes a 2023 personal bankruptcy in which she disclosed millions of dollars in liabilities.
The programme at the centre of the case
Congress created the PPP in the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, authorising up to $659 billion in forgivable loans to help small businesses keep workers employed during the pandemic; the SBA administered the programme. U.S. Attorney Kelly O. Hayes announced the indictment on October 20 with Jimmy Paul, Special Agent in Charge of the FBI's Baltimore Field Office, and William W. Kirk, Inspector General of the SBA's Office of Inspector General. The FBI and the SBA Office of Inspector General investigated the case, which prosecutors say is part of the administration's Task Force to Eliminate Fraud.
An indictment is an accusation, not a conviction. Kara DiPietro has pleaded not guilty, is presumed innocent, and will face the government's evidence at a jury trial unless the case is resolved another way.
What happens next
No trial date has been scheduled yet. If convicted, DiPietro faces a maximum sentence of 30 years in prison and a fine of up to $1 million on the bank fraud charges, according to the court reporting of her arraignment. For Maryland's large community of immigrant-owned small businesses — including Punjabi-owned trucking, retail and restaurant businesses in the Baltimore area that relied on PPP loans to survive the pandemic — the case is a reminder of how closely pandemic-era loan files are still being audited, years after the money went out.