clock menu more-arrow no yes

Filed under:

Convicted fraudster ordered into prison after feds allege new COVID-19 scheme

Prosecutors say Crystal Lundberg spent money from a COVID-19 loan — meant for small businesses struggling through the pandemic — on travel and legal bills, electronics, clothing and other items.

Crystal Lundberg is seen in a Facebook photo included in a federal court filing.
Crystal Lundberg is seen in a Facebook photo included in a federal court filing.
U.S. District Court records

Insisting that “enough is enough,” an agitated federal judge ordered a convicted fraudster into prison Friday after the feds say she squandered thousands from a $150,000 COVID-19 loan.

Prosecutors said Crystal Lundberg used the money — meant for small businesses struggling through the pandemic — on travel and legal bills, electronics, clothing and other items. She would have done it all while putting off her surrender date with the Federal Bureau of Prisons originally set for Jan. 20, 2020.

U.S. District Judge Elaine Bucklo sentenced Lundberg last December to more than four years in prison for wire fraud. Since the feds leveled their new allegations earlier this week, she has been held in custody at the downtown Metropolitan Correctional Center, records show.

Lundberg’s attorney, Andrea Gambino, told Bucklo during a hearing Friday she would not “take any position” regarding the latest claims against her client, insisting she didn’t want to commit Lundberg to answers “before she’s been charged with anything.” Still, she acknowledged Lundberg’s answers about her criminal history on an application seeking the loan were “incomplete.”

Bucklo said there was probable cause to believe Lundberg had committed a crime while awaiting her prison date, and she ordered Lundberg’s bond revoked.

Lundberg, 34, has been in hot water with the feds since 2017, when she was first charged along with financial executive Scott Kennedy in a $5.79 million fraud scheme. The two met when Kennedy hired her as an escort. He later gave her access to his company’s credit card, and she helped him rack up exorbitant charges on luxury goods and services.

Kennedy pleaded guilty, testified at Lundberg’s trial about how he had fallen in love with her, and was sentenced in July to more than two years in prison. Records show he is in custody at a low-security facility in Texas.

However, Lundberg was sentenced first, following her conviction at trial. Bucklo handed her a 53-month sentence in December 2019. Since then, Lundberg has repeatedly sought to delay her surrender to the federal prison system.

Meanwhile, the feds say Lundberg applied twice this summer for a COVID-19 Economic Injury Disaster Loan for a beauty salon business. Such a loan must be repaid by the borrower, and a felony conviction within the past five years automatically disqualifies an applicant from the program, according to an affidavit from an FBI special agent.

In her first application in June, Lundberg answered “no” to questions asking whether she faced criminal charges or had been convicted of a felony in the last five years. That application was denied because her application did not indicate an economic injury, according to the affidavit.

In her second application in August, she answered “yes” to the questions about her criminal history. When the Small Business Administration followed up to ask her about it, she apparently made reference only to a separate criminal case she faced in state court in Winnebago County, which was ultimately dismissed, and didn’t mention her federal conviction.

“Eating [sic] in abetting a fugitive and obstruction of justice my daughter had her boyfriends friend in my house and I didn’t know about it so when the cops came to my door asked me about it I said no but I allowed them to check my house and they found a boy there so the arrested me but I got the charges dismissed,” Lundberg allegedly wrote.

An SBA loan officer wrote “Offense: Charges dropped,” in Lundberg’s file on Aug. 31, the affidavit said. The next day, the SBA approved her $150,000 loan. Between Sept. 5 and Sept. 30, the feds say there were $75,031 in withdrawals from the account in which the money was deposited.

They also said expenditures from the account that month included $1,446 on SnapTravel, $1,088 at Towne Place Suites and $649 at Home2 Suites. They also said $13,250 went to law firms in Palatine, Rockford and Schaumburg, including to a firm representing Lundberg’s daughter in a battery case in Winnebago County. They also said purchases were made “at or near the Mall of America” after Lundberg asked a judge for permission to take a relative to the Mayo Clinic.