DETROIT – Two people face federal charges for their alleged involvement in pandemic unemployment insurance fraud and tax refund fraud.

Michael Davis and Rachelle Pritchard face several federal charges, including wire fraud and identity theft.

An affidavit was submitted on November 20, 2024. The investigation began in March 2023 when the U.S. Department of Labor, Office of Inspector General (DOL-OIG) received a report that Davis and Pritchard allegedly conspired together to filing fraudulent unemployment insurance claims in more than 100 different names, resulting in approximately $1.9 million in unemployment insurance benefits.

The investigation also found that Davis obtained approximately $1 million in employee retention credits, a credit available to eligible businesses and tax-exempt organizations impacted during the COVID-19 pandemic. Davis allegedly gave false tax logs and records to a tax preparer to submit false tax returns to the IRS.

Background

Due to the COVID-19 pandemic, the U.S. government provided federal funds to states, including Michigan, to help fund unemployment benefits through several benefit programs from March 2020 to September 2021.

The IRS offered the Employee Retention Credit and the Family and Medical Leave Act Credit to qualified employers and businesses for the 2020 and 2021 tax periods.

Details

Between March 2020 and June 2020, approximately 122 unemployment insurance claims were filed under the same IP address. According to the investigating federal agent, this large volume of claims from a single AP address is a strong indicator that these claims are false.

Most of the submitted claims reported the same sources of income, which investigators say is another indicator of fraud. Some of the sources of income mentioned were businesses owned by Davis.

Davis and Pritchard were seen on ATM footage withdrawing money and checking account balances on debit cards in other people’s names that had unemployment benefits loaded on them.

Federal agents interviewed most of the people whose names appeared on the unemployment insurance claims, and each of them confirmed that they had not filed for unemployment benefits and had not given permission to do so on their behalf.

For example, investigators found an unemployment insurance claim on May 6, 2020, using one name — the affidavit called ML — citing Corktown Hospitality LLC as the source of income.

Federal agents interviewed ML and learned that he had not filed for unemployment insurance and had never worked or heard of Corktown Hospitality LLC.

Investigators saw ATM footage of transactions made with the Bank of American debit card that unemployment benefits were loaded onto for the claim filed on ML’s behalf. Davis was seen in ATM footage on July 6, 2020, just before midnight, withdrawing $1,000 from the account.

Investigators also learned that Davis’ businesses were not operational and did not have employees or pay any employees during the COVID-19 pandemic. Therefore, his company was not eligible for employee retention credit funds.

He was seen again accessing the same account on July 7, 2020.

Another example provided by federal agents is that on April 27, 2020, an unemployment claim was filed under a name the affidavit refers to as ST, who claimed to work at I Luv Cheese Sterling Heights. Officers interviewed ST, who also said he had never worked there or heard of the company.

On October 21, 2020, Davis was seen in ATM footage withdrawing $720 from the debit card that unemployment benefits were loaded onto for the claim filed on behalf of ST.

Pritchard’s alleged involvement in a scheme

Likewise, Pritchard is accused of doing the same thing as Davis with insurance claims. For example, a claim was submitted on March 8, 2020, using a name – the affidavit called AD – using the same IP address as Davis. The claim cited Corktown Hospitality LLC as a source of income.

Another claim was filed under one name – the affidavit called DH – on May 15, 2020, citing Corktown Hospitality LLC as the source of income. The law enforcement database confirmed that DH died on July 1, 2010.

Investigators saw footage of a Pritchard ATM checking card balances under the plaintiffs’ accounts during a series of transactions on July 26, 2020.

Bank records showed that multiple applicants’ card activities were used on the same dates, times and locations, leading investigators to believe that one person held all of the cards.

Investigators also discovered that the plaintiffs’ bank accounts were sending money to another bank account in Pritchard’s name.

Additionally, a claim filed using the same IP address traced to Davis’ home and Pritchard under the name DG paid benefits into a Goldman Sachs bank account. Investigators learned the profits went into Pritchard’s account, totaling more than $10,000 from May to July 2020.

Officers interviewed DG, who then said she had never filed for unemployment insurance and had not authorized anyone to do so on her behalf. She also said she never owned a bank account with Goldman Sachs.

Federal agents believe Pritchard obtained personal information about individuals through her work as an automotive sales consultant at Rock Connections LLC, a sales contact and support service aimed at improving sales conversions, in 2020.

Investigators said 33 of the people linked to the unemployment insurance fraud scheme under the IP address of Davis and Pritchard’s home matched information found through Rock Connections LLC.

Rock Connections provided training materials to Pritchard during his employment of the “Platinum Rule,” which was intended to ensure that all customer information was protected.

While federal agents were investigating, they learned that Michigan State Police were also investigating Davis’ alleged involvement in another fraud and identity theft scheme and obtained a search warrant for the Davis and Pritchard’s home and electronics.

During an interview with Davis on January 26, 2024, federal agents asked if they could search his electronic devices – Davis said yes.

Federal agents searched his devices and found items that could be evidence of the insurance fraud scheme in which Davis and Pritchard were allegedly involved.

During an interview, Davis told federal agents that he prepared and submitted tax returns with the help of a third-party preparer, Employee Retention Credits Specialists. Investigators said he knew he could receive up to $26,000 per employee from the credit.

Further investigation revealed that some of the personal information used to submit the false unemployment insurance claims was also used in fake payroll logs that Davis turned over to Employee Retention Credit Specialists. As a result, the false statements allegedly resulted in Davis receiving a total of more than $1 million.