Individuals and businesses doing business with or submitting claims to the U.S. Government may face False Claims Act (“FCA”) culpability for several reasons – including keeping overpayments, or as in a recent case, retaining PPP loan funds. 31 U.S.C. 3729(a)(1)(G).
On February 1, 2023, the U.S. Department of Justice announced settlements by three companies to resolve FCA allegations related to the receipt and retention of PPP loans. The government alleges that the three companies may have violated the FCA by keeping known overpayments, colloquially called a “reverse false claim.” Chilivis Grubman attorneys have discussed reverse false claims in detail, which arise when an individual “knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. 3729(a)(1)(G). All that is required is for the offending party to “know” that they have received or have kept money to which they are not entitled. While the reverse false claim theory may receive less publicity, the government equally enforces reverse false claims and often with other FCA theories.
The DOJ’s announcement involves La Baguette, LLC (which runs a bakery in Palo Alto, CA), Dynamic Integrated Solutions, Inc. (an industrial equipment supplier in Santa Clara, CA), and Priority Acquisitions, Inc. (a licensed general contractor in Castro Valley, CA). All three companies were accused of taking improper action related to the receipt of duplicate PPP loans. Specifically, La Baguette allegedly retained a duplicate PPP loan and then sought forgiveness for the duplicate loan. For its actions, La Baguette agreed to pay a $430,000 settlement. Priority Acquisitions and Dynamic Integrated Solution both received and retained duplicate PPP loans. For their respective actions (or inaction), the companies agreed to repay their respective PPP loans and to each pay $50,000 in civil damages.
These settlements clarify that the government is not only investigating individuals and businesses that fraudulently apply for PPP loans, but it is also investigating individuals and businesses who received duplicate PPP loans or some other overpayment and did not return the funds. According to Special Agent in Charge Weston King of SBA OIG’s Western Region, “those who violate the False Claims Act by fraudulently receiving and retaining SBA pandemic program funds will be held accountable.” All individuals and businesses doing business with the government or otherwise receiving funds from the government should understand that, where an individual or entity knows of an overpayment, the FCA requires affirmative action.
All three settlements were brought by a whistleblower under the qui tam provisions of the False Claim Act. The qui tam case is captioned U.S. ex rel. Quesenberry v. Bay Wire, Inc., et al., No. 2:20-cv-712 (N.D. Cal.).
The attorneys at Chilivis Grubman represent clients of all types and sizes in connection to financial fraud and White-Collar Criminal matters. If you need assistance with such a matter, please contact us today.