Massachusetts State Representative Francisco Paulino Arrested in $700,000 COVID Fraud and Money-Laundering Caseption Case

Massachusetts State Representative Francisco Paulino has been arrested and charged with allegedly fraudulently obtaining more than $700,000 in COVID-19 unemployment benefits and federally backed small-business loans, then using the proceeds for real estate transactions and mortgage lending, according to an indictment unsealed by federal prosecutors.

Paulino, 46, of Methuen, Massachusetts, represents the state’s 16th Essex District, which includes Lawrence and Methuen. Prosecutors allege that the conduct occurred primarily during the COVID-19 pandemic, before Paulino was elected to public office.

A federal grand jury in Boston returned an 11-count indictment against Paulino, charging him with eight counts of wire fraud and three counts of money laundering. He was scheduled to make his initial appearance in federal court in Boston following his arrest.

The case involves allegations that Paulino exploited several pandemic-era government assistance programs, including Pandemic Unemployment Assistance (PUA) and Economic Injury Disaster Loans (EIDLs), by submitting false information and fabricated documentation to obtain funds for businesses and individuals who were allegedly not eligible for the amounts claimed.

Alleged use of a relative’s identity to obtain unemployment benefits

One of the allegations centres on PUA benefits obtained in the name of a 77-year-old relative who prosecutors say was unaware of the application.

The PUA program was established during the pandemic to provide unemployment assistance to people who did not qualify for traditional unemployment benefits, including certain independent contractors and self-employed workers.

According to the indictment, Paulino submitted an online PUA application to the Massachusetts Department of Unemployment Assistance in April 2020. The application allegedly falsely stated that his relative had worked for Paulino’s business, Madison Tax LLC, during 2019.

Prosecutors allege that Paulino submitted fabricated records to support the application and subsequently filed false weekly certifications on the relative’s behalf.

The indictment further alleges that Paulino directed the Massachusetts unemployment agency to deposit the benefits into a bank account held solely in his own name.

Between April 2020 and September 2021, the state allegedly paid more than $44,000 in PUA benefits as a result of the application.

Federal prosecutors allege that Paulino subsequently used the money for a variety of purposes, including real estate expenses, loan payments and transfers into his political campaign account.

Alleged manipulation of COVID small-business loans

The case also focuses heavily on the federal government’s Economic Injury Disaster Loan program, which was administered by the U.S. Small Business Administration during the pandemic.

EIDLs were designed to provide financial assistance to businesses experiencing substantial economic disruption because of COVID-19. The loans came with restrictions governing how the proceeds could be used, including requirements that funds be directed toward legitimate working-capital needs associated with economic injury caused by the pandemic.

Prosecutors allege that Paulino obtained multiple EIDLs by providing inaccurate financial information and subsequently diverted portions of the money toward activities that were not permitted under the program.

Alleged false revenue claims for restaurant business

One of the businesses at the centre of the case was Jackson Enterprise Inc., which Paulino incorporated in November 2019 as a fast-food restaurant cafe.

According to prosecutors, the company had generated no revenue before August 2020.

The indictment alleges that tax filings submitted to the IRS reported Jackson Enterprise’s revenue as zero for 2019 and $116,925 for 2020. Yet, when Paulino allegedly applied for an EIDL from the SBA in June 2020, he reported that the business had generated $426,755 in revenue during the preceding 12 months.

The SBA subsequently approved the application and deposited $136,600 into Jackson Enterprise’s bank account in July 2020.

Prosecutors allege that Paulino then used approximately $18,000 of the loan proceeds toward the purchase of real estate in Lawrence.

$401,800 loan to Madison Tax

Paulino allegedly obtained another EIDL for Madison Tax.

The business initially received a $109,200 loan in May 2020, according to the indictment. Paulino later allegedly requested an increase from the SBA.

In June 2021, the SBA approved an additional $292,600, bringing the total EIDL amount for Madison Tax to $401,800.

After the additional funds were deposited in October 2021, prosecutors allege that Paulino transferred $100,000 into the account of another company he controlled, Madison Mortgage Inc.

The money was allegedly then used to help finance a $600,000 mortgage provided to two individuals purchasing a home in Methuen.

Two months later, Paulino allegedly transferred another $120,000 from Madison Tax to Madison Mortgage. Prosecutors say those funds were used to help finance a $460,000 mortgage to an LLC purchasing property in Lawrence.

According to the indictment, the transactions represented an improper use of $220,000 in EIDL proceeds.

The government further alleges that Paulino personally profited from the transactions by charging interest on the mortgages and collecting loan-origination fees.

The alleged interest rates were 5.5% and 7.94%, while the borrowers were also allegedly charged a combined $25,000 in loan-origination fees.

Client’s government loan allegedly redirected into another mortgage

The indictment describes another alleged scheme involving a client of Paulino’s tax and mortgage businesses.

In June 2020, Paulino allegedly advised the client to apply for an EIDL and told the individual that he would handle the paperwork.

The client subsequently received a $104,300 EIDL, according to prosecutors.

The indictment alleges that Paulino later sought an increase to the loan without the client’s knowledge. In September 2021, the SBA allegedly approved an additional $243,200.

Prosecutors say Paulino told the client that he had secured additional government financing and instructed the client to leave the money in the business account while he developed a proposed business arrangement.

The indictment alleges that Paulino later asked the client to lend him $200,000. The money was allegedly transferred from the client’s account into Paulino’s Madison Tax account.

Paulino then allegedly used the $200,000 to help finance a $680,000 mortgage for another Madison Mortgage client purchasing property in Lawrence.

According to prosecutors, Paulino charged the mortgage borrower an interest rate of 6.25% and a $17,000 loan-origination fee.

Allegations combine government-benefit fraud and money laundering

The case is notable because prosecutors have brought both wire-fraud and money-laundering charges, alleging not only that government funds were obtained through fraudulent representations but also that proceeds were subsequently moved through business accounts and used in financial transactions.

The alleged movement of pandemic-relief funds between Paulino’s businesses and their subsequent use in real-estate financing form a central element of the government’s case.

The allegations illustrate how pandemic-relief fraud can extend beyond the initial submission of false information to government agencies. Once funds were allegedly obtained, prosecutors say they were transferred between related entities, deployed in real-estate transactions and used in mortgage lending activities.

Investigation involves multiple federal and state agencies

The case was announced by a group of federal and state law-enforcement officials, reflecting the multi-agency effort to investigate pandemic-related financial fraud.

The investigation involves the U.S. Attorney’s Office for the District of Massachusetts, the Internal Revenue Service’s Criminal Investigation division, the Federal Bureau of Investigation, the U.S. Department of Labor’s Office of Inspector General and the Massachusetts Office of the Inspector General.

Assistant U.S. Attorneys Kistina E. Barclay and Christine Wichers of the Public Corruption Unit are prosecuting the case.

The prosecution also comes as federal authorities in Massachusetts have increased their focus on fraud involving government benefits.

Massachusetts launches dedicated fraud initiative

In March 2026, U.S. Attorney Leah B. Foley announced the creation of the Benefit & Voter Fraud Team, a district-wide initiative established in response to fraud uncovered across Massachusetts.

The initiative encourages members of the public to report suspected benefit fraud to authorities.

The federal government has also established a broader national enforcement structure. In April 2026, the Department of Justice announced the creation of the National Fraud Enforcement Division, tasked with investigating and prosecuting fraud against the American public.

The federal effort forms part of the Trump administration’s broader initiative to address alleged fraud, waste and abuse involving federal benefit programs.

Potential penalties

The charges against Paulino carry significant potential penalties if he is ultimately convicted.

Each wire-fraud count carries a maximum sentence of 20 years in prison, up to three years of supervised release and a fine of up to $250,000.

Each money-laundering count carries a maximum sentence of 10 years in prison, up to three years of supervised release and a fine of up to $250,000.

Any sentence would ultimately be determined by a federal district court judge under the applicable federal sentencing statutes and U.S. Sentencing Guidelines.

Presumption of innocence

Despite the extensive allegations outlined in the indictment, Paulino has not been convicted of the offences.

The charges contained in the federal indictment are allegations, and the defendant is presumed innocent unless and until prosecutors prove his guilt beyond a reasonable doubt in court.

The case nevertheless represents a significant development given Paulino’s position as a sitting state legislator and the alleged conduct involving federal pandemic-relief programs.

The prosecution places renewed attention on the vulnerabilities exposed by the rapid distribution of government assistance during the COVID-19 crisis, particularly the challenges authorities faced in verifying applicants, validating financial information and monitoring how public funds were subsequently used.

As the federal case proceeds, scrutiny is likely to focus on the financial records underlying the alleged transactions, the movement of government funds between Paulino’s businesses and the extent to which the proceeds were ultimately used for real-estate and mortgage activities.