On November 1, the U.S. Attorney’s Office for the Northern District of New York announced that Feast American Diners LLC and Dawood Beshay, the corporate owner and managing member of multiple Denny’s restaurants throughout Arizona and New York. agreed to pay $2 million to settle allegations of violations of the False Claims Act (FCA).
The settlement is the first FCA settlement relating to Restaurant Revitalization Fund (RRF) grants issued during the COVID-19 pandemic. The U.S. charged Beshay with falsely certifying on behalf of Feast American Diners that the company was eligible for a RRF grant when it owned and operated too many restaurants to qualify.
“The Restaurant Revitalization Fund was meant to provide a financial lifeline to restaurants and other eligible entities that were struggling to stay afloat during the COVID-19 pandemic,” said U.S. Attorney Carla B. Freedman. “Feast American Diners and Dawood Beshay are paying a steep price for falsely certifying their eligibility for these funds.”
The RRF was established in March 2021 with the passage of the American Rescue Plan Act as part of the U.S. government’s continued efforts to provide support and relief to small businesses adversely affected by the COVID-19 pandemic. To qualify for an RRF grant, an applicant had to certify that they did not own and operate more than 20 locations.
According to the U.S., Feast American Diners and Beshay admit that in the application for a RRF grant, “Beshay affixed his initials next to the following statement: ‘The Applicant, together with its affiliates, does not own or operate more than 20 locations.’ In fact, Feast American Diners owned 21 Denny’s locations as of March 13, 2020 and each of those locations made sales that day, facts that Beshay acknowledges that he should have known.”
“Those who provide false information for the purpose of receiving and retaining SBA program funds meant for eligible small businesses will be held accountable,” said SBA Office of Inspector General (OIG) Eastern Region Special Agent in Charge Amaleka McCall-Brathwaite. “Today’s settlement sends a strong message that those responsible will be brought to justice. I want to thank the U.S. Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”
The settlement stems from a qui tam whistleblower suit filed in December 2022. The False Claims Act’s qui tam provisions allow private citizens to file lawsuits on behalf of the government if they know of an individual or company defrauding the government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery. In this settlement, the whistleblower is set to receive $200,000.
On July 25, a bipartisan group of senators introduced the False Claims Amendments Act of 2023, which address a few technical loopholes undermining the success of the FCA. The bill is widely supported by whistleblower advocates.
“The False Claims Act is America’s number one fraud-fighting law,” said whistleblower attorney Stephen M. Kohn. “These amendments are urgently needed to ensure that whistleblowers can continue to play their key role in protecting taxpayers from corporate criminals.”
Further Reading:
Bipartisan Legislation Unveiled to Strengthen False Claims Act