Florida Resorts Settle DOJ Charges for FCA Violations and PPP Fraud
Commentary by Jason S. Kanterman
Two Florida resorts agreed to settle with the DOJ for conspiring to fraudulently obtain loan funds provided under the Paycheck Protection Program ("PPP").
According to the DOJ, the Settlement Agreement follows a qui tam action that was filed by a whistleblower with the U.S. District Court for the Middle District of Florida under the False Claims Act ("FCA"). Among other things, the whistleblower alleged that the resort-defendants wrongfully obtained and ultimately pocketed funds that they received from certain PPP loans that were supposed to be used for SBA-approved payroll and business expenses, but never were. As further described in the Settlement Agreement, one resort-defendant allegedly inflated the number of purported employees that it had on payroll by identifying in its loan application materials various employees that were not employed by it, but rather by other resorts. In doing so, the DOJ found that the resort-defendants improperly inflated the sums they were to receive under the loan program. As a result, the DOJ stated that the resort-defendants violated the FCA and Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") after knowingly providing false information in their PPP loan applications.
To settle the charges, the resort-defendants agreed to (i) pay $325,000, in addition to interest, $98,688 of which will be paid in restitution and (ii) execute a Consent Judgement as stipulated in the Settlement Agreement. Per case documents, the DOJ intends to pay the relator $46,192 in a relator’s share.
Commentary
Once again, the DOJ demonstrates a willingness to invoke the False Claims Act in prosecuting pandemic-era fraud.
Fraudulent activity in the PPP loan process has been described by the U.S. Small Business Association as "unprecedented." It should, therefore, come as little surprise that the Government is interested in pursuing those who took advantage of the system during a global crisis; the False Claims Act — with its treble damage provisions, attorney fee provisions and powerful penalty components — gives the Government a strong enforcement mechanism through which to do so. With a statute of limitations period measuring six years from the date the fraud is committed, expect to see a steady stream of False Claims Act cases involving pandemic-era fraud for the foreseeable future.