Chilivis Grubman attorneys have discussed the government’s increased scrutiny of PPP loans.  As a reminder, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided over $600 billion in PPP Loans to businesses during the peak fallout of the COVID-19 pandemic.  We cautioned applicants and recipients of PPP funds to be careful while going through the process and to pay close attention to the required attestations and certifications.  We cautioned that with any submission to the federal government, particularly when the submission is to obtain government funds, businesses face potential serious criminal, civil, and administrative liability for misrepresentations or false statements.  This is particularly true considering the government’s frequent use of the False Claims Act (“FCA”).   The government’s enforcement of the CARES Act has involved individuals and businesses across the country, including NFL players and Reality TV stars.

In a recent press release, the U.S. Department of Justice noted that two Florida resorts, Kingwood Orlando Reunion Resort LLC (Orlando Reunion) and Kingwood Crystal River Resort Corp. (Crystal River), agreed to settle allegations they violated FCA and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  The two companies are related but run two separate resorts. 

The federal FCA prohibits any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government. The FCA also prohibits any person from knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim.   Under the FIRREA, the DOJ can sue for a litany of wrongful acts by or affecting federally insured financial institutions, including but not limited to false statements in loan applications, wire and mail fraud, embezzlement, and bookkeeping violations.  Like the FCA, FIRREA incentivizes whistleblowers with a potential reward of 20% to 30% of the first $1 million recovered. 

According to the settlement agreement, the government alleged that Crystal River received PPP loan funds and sought loan forgiveness, during which it certified that it planned to use the funds to provide payroll for 23 employees.  The government alleges those 23 employees were actually employed by Orlando Reunion.  Orlando Reunion and Crystal River settled the case by agreeing to pay $325,000.  

This case was brought by the former Director of Human Resources for Kingwood Resorts under the qui tam provisions of the False Claims Act, which allow parties sue on behalf of the United States and share in the government’s recovery.  The whistleblower will receive about $46,000 in connection with the settlement.  

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act litigation and government investigations.  If you need assistance with such a matter, please contact us today.