Massachusetts State Rep. Francisco Paulino was arrested Wednesday morning after a federal grand jury charged him with using pandemic relief programs as a personal funding source. Prosecutors say the Methuen Democrat fraudulently obtained more than $700,000 in COVID-era unemployment benefits and small-business loans, then moved the money into accounts tied to his businesses, real estate deals, and political campaign. Paulino, 46, represents the 16th Essex District, which covers parts of Lawrence and Methuen.
FBI agents took him into custody shortly after sunrise outside an apartment complex in Lawrence. Later that afternoon, he appeared in federal court in Boston, pleaded not guilty to all 11 counts, and was released under conditions that restrict his travel and require him to shut down part of his tax business. The indictment lists eight counts of wire fraud and three counts of money laundering. Prosecutors say the alleged scheme ran from April 2020 through at least December 2021.
That period matters because it came before Paulino won election to the Massachusetts House. He took office in January 2023. U.S. Attorney Leah Foley said Paulino treated emergency aid as a private cash machine.
“The money these two individuals allegedly scammed was meant for hard-working Americans and struggling business owners, not for two greedy individuals who lied and stole for their own personal benefit,” Foley said, referring also to a separate case against Lawrence Mayor Brian DePeña. FBI Boston Special Agent in Charge Ted Docks put it more bluntly, saying both men treated the pandemic as “their own personal cash cows.”
According to the charging documents, Paulino ran the alleged scheme largely through Madison Tax LLC, a Lawrence tax-preparation firm he owned and operated. Prosecutors say he also used Madison Mortgage Inc., another company under his control, to move money and profit from it. One of the earliest alleged acts involved a 77-year-old relative. In April 2020, prosecutors say Paulino submitted an online application for Pandemic Unemployment Assistance in the relative’s name without that person’s knowledge.
He claimed the relative had worked for Madison Tax and that the pandemic had wiped out that income. Weekly certifications followed, along with documents prosecutors call fabricated, including papers made to look like they came from the IRS. Benefits totaling more than $39,000, and in some accounts about $44,000, were deposited into a bank account held solely in Paulino’s name. The bulk of the alleged fraud involved Economic Injury Disaster Loans from the Small Business Administration.
Those loans were supposed to help businesses replace lost operating revenue at low interest. Prosecutors say Paulino used them for other purposes. Madison Tax first received a $109,200 EIDL in May 2020. In June 2021, the SBA approved an additional $292,600, bringing the total to $401,800.
Prosecutors allege Paulino then transferred large sums into Madison Mortgage and used about $220,000 of the proceeds for real estate closings and other deals that were not allowed under the loan terms. He allegedly lent money onward at interest rates of 5.5 percent and 7.94 percent and collected tens of thousands of dollars in origination fees. Those rates were far higher than the cheap federal pandemic rate attached to the original loans.
A second business, Jackson Enterprise Inc., was incorporated in late 2019 as a fast-food restaurant cafe. In August 2020 it opened Heav’nly Donuts in the same Lawrence building as the tax office. Prosecutors say the shop had no revenue before it opened. Yet on a June 2020 loan application, Paulino allegedly claimed the company had generated $426,755 in the prior year.
The SBA approved about $136,600. Prosecutors say $18,000 of that money later went toward a Lawrence real estate purchase. A third alleged episode involves a Lawrence laundry owner who spoke limited English and considered Paulino a friend. The client entrusted him with taxes, personal information, and online banking.
Prosecutors say Paulino applied for and later expanded an SBA loan in the client’s name without the client’s full knowledge. He then proposed a “business deal” and obtained $200,000 from the client. That money, according to the indictment, helped fund a mortgage through Paulino’s own mortgage company. Paulino then collected interest and fees on the new loan.
Foley said some of the money also went to loan payments and transfers into Paulino’s campaign account. House Speaker Ron Mariano called the charges “extremely concerning.” Paulino faces Democrat Celina Reyes of Lawrence in the September 1 primary. He is due back in court on October 7.
Release conditions include travel limited to Massachusetts and New Hampshire, surrender of his passport, a freeze on changing his address, temporary suspension of Madison Tax, notice to clients, and no access to client accounts or records. Each wire fraud count carries a potential sentence of up to 20 years. Each money laundering count carries up to 10 years. Paulino has not commented publicly beyond the not guilty plea.
The case remains an allegation. A jury, if the matter goes to trial, will decide whether prosecutors can prove the scheme they describe. For now, a sitting lawmaker from the Merrimack Valley is under federal indictment, and the timing, just days before a primary, has left his political future hanging over a courtroom calendar.
