LaFontaine Management, Inc., a company connected to the LaFontaine Automotive Group in Michigan, has agreed to pay $1.5 million to settle allegations that it violated the False Claims Act by making false statements to the U.S. Small Business Administration (SBA) when applying for a Paycheck Protection Program (PPP) loan.
The PPP was established in March 2020 to provide financial relief to businesses affected by the COVID-19 pandemic. The program set eligibility requirements, including limits on employee numbers and specific rules for franchise businesses. Applicants were required to certify that all information provided was accurate.
In April 2020, LaFontaine Management received a $1 million PPP loan. Authorities allege that the company falsely certified its eligibility for both the loan and forgiveness, despite having more than 500 employees across its affiliates and not operating as an SBA-recognized franchise, which would have made it ineligible under program rules.
“Even though the PPP Program has ended, our mandate to investigate and redress the harm from fraudulent and improper PPP loans continues,” said U.S. Attorney Jerome F. Gorgon, Jr. for the Eastern District of Michigan. “We will continue to vigorously pursue allegations against companies and individuals who obtained COVID-19 relief funds that they didn’t deserve.”
“Investigations like this one reflect collaboration of the Small Business Administration, including SBA’s Office of General Counsel, and the U.S. Attorney’s Office, as well as the work of private individuals who uncover fraudulent conduct to recover funds obtained through fraud,” said SBA General Counsel Wendell Davis.
The settlement resolves a lawsuit originally filed under whistleblower provisions of the False Claims Act by Patricia Lesko and Bram Lesko. The whistleblowers will receive 15% of the settlement amount.
Assistant U.S. Attorney Anthony Gentner handled this matter with help from SBA’s Office of General Counsel.
Individuals with information about COVID-19-related fraud are encouraged to report it via phone or through an online complaint form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The government noted that these claims are only allegations; there has been no determination of liability.
