Tennessee Man Pleads Guilty to CARES Act Loan Fraud

Paul Eugene Welborn Jr., 67, of Mountain City, Tennessee, pleaded guilty to wire fraud on April 30, 2026, in U.S. District Court in Abingdon, Virginia, for misrepresentations on his application for a CARES Act loan, per the U.S. Department of Justice press release.

The fraud involved Welborn's non-profit, which had no revenue and no employees at the time of the application, yet he obtained funds from the Coronavirus Aid, Relief, and Economic Security Act program designed to support small businesses impacted by the COVID-19 pandemic.

The CARES Act, enacted in March 2020, distributed over $650 billion in loans and grants to more than 5 million small businesses nationwide through the Paycheck Protection Program and Economic Injury Disaster Loans, according to the Small Business Administration's documented program scope.

This instance diverted resources from legitimate applicants, affecting the pool of aid available to entities with actual payroll and operational needs.

Prior to the plea, Welborn faced charges for submitting false information about his non-profit's eligibility. The guilty plea shifts the case to sentencing, scheduled for a later date in the Western District of Virginia federal court, where penalties for wire fraud under 18 U.S.C. § 1343 include up to 20 years in prison and fines up to $250,000, as outlined in federal statutes.

The conviction triggers restitution requirements, compelling Welborn to repay the fraudulently obtained loan amount to the government. It also activates broader Department of Justice protocols for CARES Act fraud cases, including potential asset forfeiture proceedings.

Prosecutors must now prepare a presentence report by July 2026, per standard federal court timelines, which will inform the judge's decision and could influence similar pending cases in the district.

The Department of Justice has prosecuted over 1,500 individuals for CARES Act-related fraud since 2020, recovering more than $1.2 billion in misused funds, according to the agency's public enforcement summaries. This plea follows a pattern of actions against non-qualifying applicants, including a similar case in the Eastern District of Tennessee resolved in March 2026.