‘Millionaire professional athlete, not a businessman’
Court documents detailed the three ways Smallwood stole taxpayer dollars from May 2020 through August 2023, when his house was raided.
The first method involved applications for Economic Injury Disaster Loans, with Smallwood seeking money for three limited liability companies he created — Smallwood Sports Management, Smallwood Enterprise Properties and Taste Buds by Smallwood’s.
The pro baller submitted applications that lied about the businesses’ gross revenues, costs of goods, number of employees and opening dates, among other “material misrepresentations,’’ court documents showed. The government approved some loans and sent him $46,400.
Smallwood didn’t stop there.
He submitted fraudulent Paycheck Protection Program applications for 13 other people who either lied about having a business before the pandemic or inflated their revenues and expenses. The 13 people he recruited got loans totaling $269,200 and each paid Smallwood kickbacks of between $4,000 and $12,000, court records said.
He also submitted bogus PPP applications for his own three entities, stealing another $220,000 in the process.
But Smallwood still wasn’t done swindling the feds.
He also recruited several others who weren’t filing tax returns and filed fake forms for them, using bogus income statements and other fraudulent information in the documents he filed with the IRS. That scheme netted $110,200.
Smallwood was arrested in October 2024 on charges that he organized and directed the three separate fraud schemes. He has been free and on pretrial supervision while awaiting sentencing. No one else was charged in connection with his crimes.
In December, Smallwood pleaded guilty in U.S. District Court in Wilmington to wire fraud, conspiracy to commit wire fraud and conspiracy to defraud the IRS.
Smallwood’s defense attorney, Mark Sheppard, had sought home confinement and probation for his client, but Assistant U.S. Attorney Jennifer Welsh had urged a 33-month prison term.
“Wendell Smallwood was a millionaire professional athlete, not a businessman,” Welsh wrote in her sentencing memo last week. “Although he had businesses registered in his name under the laws of Delaware, those businesses were either non-existent or defunct at the time of the pandemic. He was not employing people, or generating profits. Unlike so many small business owners across the country, his ‘businesses’ were not affected by COVID. “
The prosecutor’s memo said Smallwood’s crimes were “not a momentary lapse of judgment, but rather a lengthy, years-long, and evolving participation in various schemes to steal money from the government. The defendant did not create a scheme that ballooned or spiraled. Rather, every time he submitted a bogus loan application or a false tax return, he was doubling down on his decision to commit crimes.”
Sheppard had argued in his sentencing memo and before the judge that his client’s difficult childhood in a chaotic one-parent home, and his work with the Wilmington Police Athletic League and other mentoring of teens and young men, merited some leniency.
Allowing Smallwood to stay out of prison “allows this defendant to continue the good work he’s doing in the community,” Sheppard said.
Sheppard also said Smallwood went into substance abuse and mental health treatment before his 2023 arrest, and should continue with his private therapists rather than be in prison, where treatment programs aren’t as good.
Andrews said he took Smallwood’s early home life and his mentoring into consideration in his sentencing deliberations. But Andrews called the crimes “very serious” and said the record shows that Smallwood had tried to pilfer about $900,000 from the government over a period of a few years.
“The scope of your criminal activity is long, and the dollars were substantial,” Andrews told Smallwood. “It’s hard for me to think of this as a momentary lapse of judgment or something that you didn’t have tons of opportunities to stop on your own.”
Smallwood deferred comment to Sheppard after the court adjourned. The defense lawyer said he was grateful that Andrews gave Smallwood less time than the 33 to 41 months recommended in federal sentencing guidelines.
“He’s going to serve his sentence and he’s going to go back and give back to the community, which is what he’s always done,” Sheppard said. “I’m proud of him.”
Welsh said she was also satisfied with the outcome of the case.
“The court said it best, that Mr. Smallwood made some bad choices and now he’s going to face the consequences for them,” she said. “Stealing from the taxpayers has to be taken really seriously.”