Chilivis Grubman attorneys often remind readers that the False Claims Act (FCA) is not limited to any single industry.  Any company or individual submitting claims for payment to the federal government faces the threat of FCA liability if those claims turn out to be false or fraudulent.  The government has shown its willingness to use the FCA as an enforcement tool in various industries, like finance, education, and military contracting.  Individuals and businesses doing business with the government or seeking funding from the government should be careful and to pay close attention to the required attestations and certifications.  With any submission to the federal government, particularly when the submission is to obtain government funds, individuals and businesses face serious potential criminal, civil, and administrative liability for misrepresentations or false statements.  A recent U.S. Department of Justice (DOJ) announcement highlights an FCA enforcement action based on false certifications and the government’s willingness to use the FCA as an enforcement tool in the restaurant industry, an industry rarely associated with FCA enforcement actions.   

In the press release, the DOJ announced the first FCA settlement associated with the Restaurant Revitalization Fund (RRF).  The RRF iss a COVID-19 pandemic program designed to provide restaurants, bars, and other eligible businesses that serve food or drink with funding equal to their pandemic-related revenue loss of up to $10 million per business and no more than $5 million per physical location.  Like other COVID-19 programs, recipients of RRF funds that satisfy the program’s requirements may not have to repay funds.  Applicants for RRF funding must make certifications to the federal government.  For example, RRF applicants must certify that they did not own or operate more than 20 locations as of March 13, 2020. 

According to the DOJ, Feast American Diners LLC and Dawood Beshay (collectively “Feast”), the corporate owner and managing member of several Denny’s branded restaurants in Arizona and New York, agreed to pay $2 million to resolve allegations they made false certifications on their application for a grant from the RRF.  Feast applied for an RRF grant for $928,554 and in its application, Feast certified that it did not own or operate more than 20 locations as of March 13, 2020.  However, Feast actually owned 21 Denny’s locations as of March 13, 2020.  As noted by United States Attorney Carla B. Freedman, “Feast American Diners and Dawood Beshay are paying a steep price for falsely certifying their eligibility for these funds.  Based on the settlement agreement documents, it appears the false certifications occurred in two relatively inconspicuous locations excerpted below.  

This case shows why individuals and businesses should be careful and pay close attention to the required attestations, certifications, and overall application for government funding or claims submitted for payment.  It appears that a mere “x” and an applicant’s initials resulted in false certification(s) and was enough for an FCA investigation that resulted in a $2 million settlement.

The lawsuit in this case was filed in 2022 in the US District Court for the Northern District of New York under the qui tam provisions of the FCA.  The qui tam provisions provide financial incentives and a procedural structure to whistleblowers – or relators – so individuals can bring false claims act cases on behalf of the government.  The financial incentive can be significant, as whistleblowers are entitled to 15% to 30% of the money the government recovers, based on several factors.  According to the settlement agreement, the relator will receive at least $200,000.

United States ex rel. GNGH2 Inc. v. Feast American Diners LLC, No. 5:22-cv-1331 (N.D.N.Y.).

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.