On October 11, the Department of Justice announced that Victory Automotive Group Inc. has agreed to pay $9 million to settle allegations of violating the False Claims Act, for which they “knowingly provided false information in support of a Paycheck Protection Program (PPP) loan forgiveness application it submitted.”
The Paycheck Protection Program (PPP) was established by Congress in March 2020, as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The program aimed to provide emergency loans to small businesses that were struggling due to the COVID-19 pandemic. Only small businesses were eligible for PPP loans, which depended on several factors such as the number of employees, amount of revenues, and net worth of the applicant, along with any other corporate affiliates that share common operational control.
According to the Department of Justice (DOJ) press release, Victory Automotive Group Inc.’s, “…application for a PPP loan certified it was a small business with fewer than 500 employees. However, VAG shared common operational control with dozens of automobile dealerships across the country, and VAG and its affiliates had more than 3,000 employees in total. For that reason, VAG was not eligible for the $6,282,362 PPP loan it received, which was later forgiven in full.”
The settlement stems from a qui tam whistleblower lawsuit that was filed against Victory Automotive Group. The False Claims Act’s qui tam provisions 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. In this settlement, the whistleblower will receive a total of approximately $1.62 million.
“PPP loans were intended to help small businesses during the pandemic,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to holding accountable those who undermined the purpose of the PPP program and knowingly obtained PPP funds for which they were not eligible.”
“The settlement in this matter demonstrates the excellent results achieved through the combined efforts of SBA and the Department of Justice to uncover and forcefully respond to PPP misconduct,” said SBA General Counsel Therese Meers. “The federal government is strongly committed to identifying and aggressively pursuing any instances of fraud or misconduct within the Paycheck Protection Program.”
The first settlement of a qui tam False Claims Act case related to a PPP loan occurred in September 2022. President Biden has expressed continued interest in pursuing COVID-19-related fraud, saying in his 2023 State of the Union address: “…as we emerge from this crisis stronger, I’m also doubling down on prosecuting criminals who stole relief money meant to keep workers and small businesses afloat during the pandemic.”
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.”