Defendant Geoffrey Palermo bilked owners of a Hilton Hotel out of more than $1.5 million as part of kickback scheme, fraudulently obtained SBA and PPP loans for his car repair shop business, and failed to pay over taxes withheld from employee paychecks Date: July 12, 2024 Contact: newsroom@ci.irs.gov Geoffrey Palermo, a former hospitality executive who went on to operate numerous auto repair shops in the Bay Area, was sentenced to 65 months in prison, following his conviction on wire fraud, failing to pay over taxes, and other charges, announced First Assistant United States Attorney Patrick Robbins, IRS Criminal Investigation Acting Special Agent in Charge Michael Mosley of the Oakland Field Office, and Federal Bureau of Investigation Special Agent in Charge Robert K. Tripp. The sentence was handed down by the Honorable James Donato, U.S. District Judge. Palermo, of Novato, Calif., pleaded guilty on March 11, 2024, to one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; two counts of honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346; one count of wire fraud, in violation of 18 U.S.C. § 1343; one count of making a false statement to a bank, in violation of 18 U.S.C. § 1014; and one count of willful failure to collect or pay over tax, in violation of 26 U.S.C. § 7202. He had been charged in a Second Superseding Indictment in October 2021 with these charges. During the relevant time, 2008 through 2016, Palermo was working as the manager of the Hilton hotel located in downtown San Francisco. During this timeframe, Palermo had authority to enter into contracts, choose contractors, and otherwise manage construction and capital improvement projects at the hotel. According to his plea agreement, Palermo admitted he devised a kickback scheme involving contractors to deprive the Hilton hotel’s owners of more than $1.8 million in kickbacks that went to Palermo. As part of the scheme, Palermo agreed with one contractor, Adan Roldan, 56, of Roseville, Calif., that Roldan would submit falsely inflated invoices for construction and renovation work at the hotel, that Palermo would approve the false invoices, and that Roldan and the second contractor would pay a kickback to Palermo associated with the falsely inflated invoices. From 2013 through 2016, as a result of this scheme, Palermo approved—and the hotel’s owners paid—over $6.4 million to A. Roldan Construction based on invoices submitted by Roldan’s construction company. In exchange, Roldan paid more than $1.6 million in kickbacks to Palermo. Additionally, in 2014 and 2015, Palermo approved—and the hotel’s owners paid—over $2 million to a second contractor based on falsely inflated invoices submitted by that contractor, and the contractor paid Palermo over $300,000 in kickbacks. In exchange for kickbacks, Palermo continued to hire Roldan and the second contractor to do work at the Hilton. According to Palermo’s plea agreement, after leaving his job as a manager at the Hilton San Francisco in 2016, Palermo managed GMP Cars, LLC, a collision and auto repair business he owned and controlled. Beginning in approximately August 2019 and continuing through December 2019, Palermo devised and participated in a scheme to obtain approximately $5 million in Small Business Administration (SBA) loans for GMP Cars from a commercial lender by making false statements and omissions in loan applications. Specifically, when applying for SBA loans, GMP Cars failed to disclose that its business banking account was overdrawn by more than $700,000, presented false bank statements showing inflated cash balances, submitted an incomplete debt schedule, submitted false financial statements showing inflated revenue, and presented falsified documents relating to an acquisition. Furthermore, according to the plea agreement, on April 3, 2020, Palermo caused GMP Cars to make false statements in its application for a Paycheck Protection Program (“PPP”) loan. Specifically, Palermo caused GMP Cars to falsely certify on its loan application that it had employees for whom it paid salaries and payroll taxes, and Palermo caused GMP Cars to submit a purported payroll summary showing that payroll taxes were being accrued and paid when in fact Palermo had caused GMP Cars to not pay payroll taxes. Also as part of his plea agreement, Palermo admitted that as the owner and manager of GMP Cars he had a duty to collect, account for, and pay over employee federal income tax, Social Security tax, and Medicare tax. Palermo admitted that in 2018 he caused GMP Cars to withhold federal income tax, Social Security tax, and Medicare tax totaling more than $1 million. Palermo willfully caused GMP Cars to fail to pay over to the IRS more than $1 million in federal taxes withheld from employee paychecks owed to the IRS for 2018. A federal grand jury issued a second superseding indictment against Palermo and Roldan on October 5, 2021. Palermo and Roldan were charged with one count of wire fraud conspiracy, in violation of 18 U.S.C. § 1349. Palermo was charged with two counts of wire fraud and honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346; one count of wire fraud, in violation of 18 U.S.C. § 1343; one count of making a false statement to a bank, in violation of 18 U.S.C § 1014; and four counts of failure to collect or pay over taxes due and owed, in violation of 26 U.S.C § 7202. At Palermo’s sentencing, the three outstanding tax counts were dismissed pursuant to the plea agreement between Palermo and the United States, and the related case, United States v. Palermo, Case No. 21-cr-187 JD, was also dismissed. Palermo has been detained since June 27, 2023. In addition to the 65-month sentence, Judge Donato ordered Palermo to serve three years of supervised release, which will begin after he leaves prison. Judge Donato scheduled a hearing for August 19, 2024, to determine issues regarding restitution and forfeiture. On March 11, 2024, Roland pleaded guilty to one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. His sentencing hearing is scheduled for August 12, 2024. Assistant U.S. Attorneys Christiaan Highsmith and Noah Stern are prosecuting the case with the assistance of Aarian Beti. The prosecution is the result of an investigation by IRS-CI and the FBI.
