Champaign business owner charged with failing to pay taxes, fraudulent use of COVID relief funds
URBANA — A Champaign business owner has been charged with fraud related to his use of COVID-19 relief funds.
Hans Lee Grotelueschen, 56, is facing charges for allegedly failing to pay employment taxes to the Internal Revenue Service, as well as fraud related to Economic Injury Disaster Loans and the Paycheck Protection Program.
Grotelueschen, a local developer behind the Hyatt Place Champaign/Urbana and the property hosting Carmon’s Event Center, also is involved in dealings in court regarding those two properties.
The U.S. Attorney’s Office for the Central District of Illinois filed 19 separate counts of collecting employment taxes from the employees of YG Financial Group PC, including taxes for Social Security and Medicare payments, without turning over those taxes or paying the employer’s portion to the IRS.
The alleged total share of employment taxes he failed to pay was $859,552.68 from 2018 through 2024.
One count of wire fraud accuses Grotelueschen of fraudulently obtaining and improperly using loans provided during the early years of the COVID-19 pandemic.
EDILs and PPP loans were administered by the Small Business Administration to fund small businesses directly impacted by the pandemic. The funds were intended for certain expenses, such as payroll, rent, utilities and mortgage interest.
The charges allege that through YG Financial Group PC and YG Hotel Investors LLC, Grotelueschen fraudulently obtained both types of loans and then used them for purposes not permitted by the SBA.
He also allegedly obtained forgiveness from the SBA for some of the loans by falsely certifying he had used them for payroll costs.
The charges allege that the loans obtained between April 2020 and February 2022 totaled $1,727,245.78.
Grotelueschen appeared in federal court in Urbana and was released on bond by U.S. Magistrate Judge Eric I. Long.
A jury trial is scheduled for Oct. 27.
If he is convicted, Grotelueschen faces up to 30 years in prison for wire fraud, and up to five years in prison for each count of failing to pay employment taxes.
Earlier this year, a major investor in Hyatt Place Champaign/Urbana filed suit against Grotelueschen, accusing him of diverting more than $1 million from the hotel to Carmon’s.
Carlos Nieto filed suit in January on behalf of the members of YG Hotel Investors, seeking financial relief for himself and other shareholders.
The suit states that Nieto himself contributed $3.63 million to the hotel project by providing loans, and then later forgave the debt in exchange for an equity stake.
Jason Bartell of Bartell Powell LLP, Nieto’s attorney, wrote that Grotelueschen told Nieto in late 2020 that the hotel project was “running out of money” as he sought a short-term loan.
However, Bartell wrote, the “financial distress was largely self-inflicted” because funds were being secretly diverted from YG Hotel Investors LLC to Carmon’s Event Center.
The alleged transactions were apparently recorded later than they occurred and listed as “essentially a vague ‘IOU’ from Carmon’s or related entities to YG Investors,” according to Bartell.
Around a year before Nieto filed this suit, First Mid Bank & Trust filed a complaint against Downtown Champaign Holdings LLC, which Grotelueschen ran, claiming the limited liability company owed the bank more than $4.2 million, plus interest and late charges.
This nearly led to foreclosure of multiple downtown Champaign properties, including the property that houses Carmon’s.
The business was ultimately able to stay open.
As for the suit related to the Hyatt, Nieto filed a motion in March stating that Grotelueschen had filed a bankruptcy petition, which resulted in an automatic stay of proceedings against him.
The motion requested the judge make a default judgment providing relief to the plaintiff, including $3.88 million in compensatory damages to Nieto personally and $1.25 million in compensatory damages in favor of YG Hotel Investors LLC.
The request also includes judicial dissolution of YG Hotel Investors LLC and appointment of a receiver to wind up the LLC’s affairs.
The judge is yet to respond to Nieto’s motion.