A sitting Democratic state representative in Massachusetts was arrested Wednesday morning after a federal grand jury hit him with 11 felony counts tied to pandemic relief money.

And the allegations are ugly.

Francisco Paulino, who represents Lawrence and Methuen in the Massachusetts House, is accused of using a 77-year-old relative’s identity, a trusted client’s bank access and his own tax business to move taxpayer-backed COVID funds into accounts he controlled.

The case arrives less than two weeks after federal agents arrested the Democratic mayor of Lawrence in a separate pandemic-loan fraud investigation.

News of Paulino’s arrest spread quickly Wednesday:

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The 24-page federal indictment charges Paulino with eight counts of wire fraud and aiding and abetting, followed by three counts of unlawful monetary transactions involving allegedly criminal proceeds. The case was filed Tuesday in the U.S. District Court for the District of Massachusetts.

Prosecutors say the scheme ran from approximately April 2020 through December 2021 and involved two emergency programs: Pandemic Unemployment Assistance for workers and Economic Injury Disaster Loans for small businesses. The government alleges Paulino used other people’s personal information, Madison Tax and intermediaries to funnel funds into accounts he controlled.

The eight wire-fraud counts identify specific applications, certifications and government transfers. The final three counts target alleged transactions of $100,000, $120,000 and $200,000 through Citizens Bank.

The indictment is an accusation, not a conviction. Paulino is presumed innocent unless prosecutors prove the charges beyond a reasonable doubt.

Prosecutors allege Paulino filed for unemployment benefits in the name of a relative who was about 77 years old at the time and did so without that person’s knowledge. That claim alone allegedly produced $44,160 in benefits.

The application allegedly claimed the relative had been self-employed and earned income before COVID, while directing the benefit payments into a bank account held solely in Paulino’s name.

When the state later requested proof, the indictment says Paulino submitted fabricated tax documents showing income that the relative never earned.

Massachusetts ultimately paid $44,160 on the claim, according to prosecutors. Roughly $39,330 was allegedly deposited directly into Paulino’s account and used for real estate expenses, loan payments and transfers to his campaign account.

The FBI publicly confirmed that Paulino and Lawrence Mayor Brian DePena had both been indicted:

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The allegations go well beyond one unemployment claim.

Paulino owned Madison Tax, a Lawrence tax-preparation and business-planning company, and Madison Mortgage, a mortgage brokerage. Prosecutors say he used those businesses to obtain and redirect low-interest disaster loans that were supposed to keep struggling companies alive.

One alleged scheme involved Jackson Enterprise, the company behind a Lawrence Heav’nly Donuts shop that did not open until August 2020.

The indictment says Paulino sought an EIDL for the company in June 2020 by claiming $426,755 in revenue for the 12 months ending January 31, 2020. His own tax filings allegedly showed the company had no revenue in 2019.

The SBA approved a $136,700 loan.

Prosecutors say approximately $18,000 from that loan was later moved through Madison Tax and applied toward the purchase of real estate in Lawrence.

Madison Tax received its own EIDL as well.

The indictment says the loan eventually grew to $401,800 after a 2021 modification. Paulino allegedly certified that the money would be used as working capital to address pandemic-related harm, while portions were later routed through Madison Mortgage to fund private real estate loans.

One $100,000 transfer allegedly helped finance a $600,000 mortgage on a Methuen property. Another $120,000 transfer allegedly went toward a $460,000 mortgage tied to a Lawrence property.

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Paulino’s businesses then collected interest and loan-origination fees from the borrowers, according to prosecutors.

The most disturbing allegations involve a longtime Madison Tax client who owned a coin-operated laundry in Lawrence.

The indictment describes that client as a Dominican Republic native with a sixth-grade education who spoke little English and trusted Paulino with personal information and online banking credentials.

Prosecutors say Paulino obtained a $243,200 increase on the client’s disaster loan without the client’s knowledge.

After the money landed in the client’s account, Paulino allegedly transferred $7,798.47 to Madison Tax without permission and then pressed the client to lend him $200,000.

The indictment says the $200,000 was moved into Madison Tax and used to help fund another mortgage on Lawrence real estate. Madison Mortgage allegedly charged a $17,000 origination fee on that transaction.

This was money Congress approved as an emergency lifeline for workers and businesses being crushed by government-mandated shutdowns.

According to the charges, it became cheap capital for private real estate deals.

The Massachusetts Legislature’s official biography identifies Paulino as a Democrat representing the 16th Essex District and lists his profession as tax lawyer and business consultant. His district includes parts of Lawrence and Methuen, the two communities repeatedly named in the federal filing.

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The biography identifies him as founder and president of Madison Mortgage and founder of Madison Tax, the same companies at the center of the indictment. It also says he worked as a senior mortgage consultant and earned both a law degree and a Master of Laws in taxation from Suffolk University Law School.

Paulino has served in the Massachusetts House since 2023 after previously sitting on the Lawrence School Committee. He won his legislative election in November 2021, during the same period in which prosecutors say some of the alleged transfers occurred.

Those credentials matter because the government is not describing a businessman who stumbled into unfamiliar paperwork. Prosecutors allege a tax and mortgage professional used the very systems he was trained to understand.

The U.S. Attorney’s Office announced the arrest and the separate DePena indictment Wednesday morning:

The Justice Department’s case against DePena alleges that the Lawrence mayor obtained more than $1.5 million in EIDL money for a tire business and used portions to fund his campaign, pay personal taxes and wipe out more than $880,000 in high-interest mortgages.

Federal officials say DePena moved $120,000 into a personal account before writing $90,000 in checks to his mayoral campaign. They also allege he transferred more than $1.15 million from the business account to a personal account on the day the SBA released a major loan increase.

DePena was initially arrested on August 14. The indictment unsealed Wednesday expands his case to four wire-fraud counts and seven unlawful-monetary-transaction counts, according to court reporting.

His case is separate from Paulino’s, and both men are entitled to the presumption of innocence. Prosecutors have not alleged that the two men ran one combined scheme.

The political connection is hard to miss, however. Both men are Democratic elected officials from Lawrence, and DePena endorsed Paulino during his 2022 primary campaign.

President Trump’s Justice Department has made pandemic and benefit fraud a national enforcement priority, backed by a new National Fraud Enforcement Division and a Massachusetts Benefit & Voter Fraud Team.

For years, Americans were told that the rush, the spending and the lack of controls were the price of saving the economy.

Now investigators are following the money.

In Lawrence, that trail has reached City Hall and the State House at almost the same time.

This is a Guest Post from our friends over at WLTReport. View the original article here.

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