The DOJ recently entered into a settlement with a New York not-for-profit regarding allegations that it obtained an inflated Paycheck Protection Program (PPP) loan. The settlement resolves a qui tam False Claims Act (FCA) action filed in the Northern District of New York in which DOJ intervened on October 18, 2022.
The DOJ alleged in the settlement agreement that the not-for-profit’s former chief financial officer provided another former not-for-profit executive with data and calculations showing that the not-for-profit’s “average monthly payroll,” when multiplied in accordance with the PPP loan eligibility formula, totaled less than $500,000. Yet, in early April 2020, that individual applied to the Small Business Association (SBA) for a $500,000 loan on the not-for-profit’s behalf, violating the PPP loan guidelines.
Later that year, as part of consulting firm’s annual audit of the not-for-profit’s financial statements, the consulting firm notified the not-for-profit that it had applied for and received a larger loan than it was entitled to under SBA guidelines, advising the former not-for-profit executive to return the excess funds. Instead of following the consulting firm’s recommendation, another not-for-profit executive applied to the SBA for forgiveness of the $500,000 loan. The SBA eventually determined that the not-for-profit overstated its average monthly payroll and declined to forgive the not-for-profit’s loan, which formed the basis of the now settled FCA suit. Per the settlement agreement, the not-for-profit must pay $86,676 in a total settlement amount, which encompasses $15,000 in restitution.