On January 9, the U.S. Department of Justice (DOJ) announced that four agricultural companies and their owner will pay $600,000 to settle allegations that they violated the False Claims Act in Paycheck Protection Loan-related (PPP) issues.
The qui tam provisions of the False Claims Act enable 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, if one occurs.
The PPP was established with the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act to aid small businesses during the COVID-19 pandemic. Participating lenders processed PPP loan applications and funded approved loans, “which was fully guaranteed by the [Small Business Administration (SBA)].”
According to the press release, Mendota Land Co., Sweetwood Farm Co. LLC, Sweetwood Farm Inc., Seaholtz Co. LLC, and their owner John Seasholtz (collectively referred to as “Seasholtz”) “are alleged to have improperly inflated the employee headcount on the companies’ PPP loan applications by impermissibly including non-employee contract workers who were, in fact, employed by other, unrelated entities.” This means that Seasholtz allegedly included individuals who were not employees on their PPP loan applications and in turn received “approximately $1.8 million in excess PPP loans.”
The DOJ states: “Seasholtz previously repaid the excess PPP loan funds to the lender, thereby relieving the U.S. Small Business Administration of liability for approximately $1.8 million in loan guarantees. As a part of the settlement announced today, Seasholtz agreed to pay approximately $400,000 in damages and penalties under the FCA and approximately $200,000 in civil penalties under [the Financial Institutions Reform, Recovery and Enforcement Act].”
A whistleblower filed a qui tam lawsuit in this case, and the press release says the suit was filed by Bell Hill LLC. “There has been no determination regarding the amount of the recovery to be paid to Bell Hill LLC,” the DOJ reports.
“PPP loans were intended to provide critical relief to small businesses,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the DOJ’s Civil Division, in the release. “The department is committed to pursuing those who knowingly obtained PPP or other COVID-19 assistance funds to which they were not entitled.”