North Central Connecticut Woman Ordered To Pay Back $1.1 Million In Federal Covid Funds Fraud Case

EAST GRANBY, CT — An East Granby woman has been sentenced in connection with a federal $1.1 million pandemic relief program fraud scheme.

David X. Sullivan, United States Attorney for the District of Connecticut, announced that Karen Gaston, 45, of East Granby, was sentenced Thursday by U.S. District Judge Sarah F. Russell in New Haven to three years of probation for defrauding COVID-19 pandemic relief programs of more than $1.1 million.

During her probation, Gaston must serve four weekends of incarceration, 10 months in home detention, and 500 hours of community service.

According to case records the case involves the Coronavirus Aid, Relief, and Economic Security, or CARES Act, which, in March 2020 was set up to provide emergency financial assistance to Americans suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of forgivable loans to small businesses for job retention and certain other expenses through the Paycheck Protection Program. The PPP was overseen by the U.S. Small Business Administration, and individual PPP loans were issued by private lenders, which received and processed PPP applications and supporting documentation, and then made loans using the lenders’ own funds, which were guaranteed by the SBA. The CARES Act also authorized SBA to distribute Economic Injury Disaster Loans, which provided working capital to eligible small businesses, including sole proprietors, to meet operating expenses.

According to case records, in 2020, Gaston controlled certain business entities including LNK, Elegant Clinical, Ruby Red LLC, and Diamond Shine LLC. LNK and Diamond Shine LLC were operational, but shared resources and employees; Ruby Red LLC had only one client and Gaston was its sole employee; and Elegant Clinical was no longer operational, according to case records.

Beginning in approximately April 2020, Gaston submitted loan applications to the PPP and EIDL programs that falsely represented the status of the operations, resources, and employees of the entities and also filed loan applications at separate financial institutions in order to "disguise the true nature of her criminal activity," Sullivan said.

Sullivan continued, "Specifically, Gaston’s loan applications falsely represented that her businesses were all active and operating concerns; falsely represented the number of employees and the amount of wages purportedly paid by the businesses; included copies of fraudulent tax returns and tax related documents; and falsely represented that a family member, used as an applicant on an application, was a part owner of one of her entities."

As least one loan application was submitted after Gaston was arrested for state offenses related to a Medicaid fraud scheme, according to case records.

Gaston received $1,163,910 in PPP and EIDL loan funds through the scheme, according to case record.

Instead of using the funds for payroll or other operating expenses, she spent the money on personal expenditures, including, cars, travel, food, luxury home goods, expensive jewelry, and paying off her home mortgage, according to case records.

Judge Russell ordered Gaston to pay full restitution. She also forfeited a ring she purchased in July 2020 from the jeweler Harry Winston for $39,521.63, Sullivan said.

On June 12, 2025, Gaston pleaded guilty to wire fraud and making illegal monetary transactions.

The investigation was conducted by the Internal Revenue Service, Criminal Investigation Division.