Last week, DOJ announced the first civil settlement to resolve allegations of fraud against the Paycheck Protection Program (PPP). The settling defendants are SlideBelts Inc. (a California-based online retailer) and its president/CEO, Brigham Taylor. The defendants have agreed to pay $100,000 in damages and penalties. In addition, SlideBelts has repaid the $350,000 in PPP funds that it fraudulently received.
The Paycheck Protection Program
The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES). Congress passed the CARES Act last March to provide emergency assistance to persons and businesses suffering financial hardship due to the COVID-19 pandemic. The PPP authorized hundreds of billions of dollars in forgivable loans to small businesses. The Small Business Administration (SBA) administers the PPP.
We previously have written about criminal prosecutions for defrauding the Paycheck Protection Program. For example, DOJ’s first such case charged two men who lied about employing dozens of persons at various businesses. In fact, they had no employees. DOJ also indicted a Florida man who spent his PPP loan on a Lamborghini and other luxury items instead of using the funds to retain employees of his moving company.
Last week, DOJ settled the first civil case alleging that defendants committed fraud when they applied for PPP loans.
The Fraud Scheme and Settlement
At the time it sought a Paycheck Protection Program loan, SlideBelts was in bankruptcy. The PPP, however, excludes debtors in bankruptcy from receiving loans. The Government alleged that SlideBelts and its CEO lied to federally-insured banks about the bankruptcy to get the loans approved. As a result of the false statements, SlideBelts received a $350,000 loan guaranteed by the SBA.
As part of the settlement, the defendants admitted that they made false statements that SlideBelts was not in bankruptcy. DOJ asserted that this conduct violated both the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The defendants violated the False Claims Act by causing false claims for payment to the SBA and by making false statements material to those claims. They violated FIRREA by lying to federally-insured banks about the bankruptcy. The settlement requires the defendants to pay $100,000. Prior to the settlement, SlideBelts repaid the $350,000 loan in full.
The First, But Not the Last
While this case is the first civil PPP fraud settlement, there no doubt will be many more. We have noted before that unscrupulous people inevitably will try to take advantage of the COVID-19 crisis and the vast amounts of money that federal, state, and local governments are spending to fight it. This case is but one example of a particular type of COVID-19 fraud. As we note here, there are many other areas where we expect to see COVID-19 fraud.
Fortunately, whistleblowers can help the Government fight COVID-19 fraud and protect taxpayer dollars. If you know of COVID-19 fraud, please contact us. Whistleblowers can be eligible for rewards under the False Claims Act or other whistleblower programs.
