California Law Firm Settles False Claims Act Allegations Over Misuse of PPP Loan Funds

On August 15, 2024, a California-based law firm, along with senior managers, agreed to a settlement totaling $274,000 to resolve allegations of False Claims Act violations related to the misuse of Paycheck Protection Program (PPP) loan funds.

Background on the Case

The PPP, established under the CARES Act in March 2020, was designed to provide emergency financial relief to businesses affected by the COVID-19 pandemic. The program offered forgivable loans to help businesses maintain their workforce and cover other essential expenses. However, businesses were required to certify that the loan funds were used for eligible expenses, primarily payroll, in their application for PPP loan forgiveness.

The allegations against the law firm and its senior management stem from claims that they falsified information in their PPP loan forgiveness application. According to the United States Department of Justice, Bloom and Pollock directed the firm to falsely certify that the PPP funds were used for eligible payroll expenses. The DOJ contends that the firm used a portion of the loan for employees who were either ineligible or did not work during the covered period.

Settlement Details

As part of the settlement, the law firm will pay $204,200.34, while the senior managers involved will each pay $35,384.49. This resolution follows a qui tam lawsuit filed by Liberty Law Office Inc. under the False Claims Act, which allows private individuals to file lawsuits on behalf of the government and share in the recovery. Liberty Law Office Inc. will receive approximately $44,000 from the settlement.

Principal Deputy Assistant Attorney General Brian M. Boynton emphasized the DOJ's commitment to tackling misuse of taxpayer-funded programs, stating, “PPP loans were intended to provide critical relief to small businesses.” U.S. Attorney Martin Estrada echoed this sentiment, reinforcing the expectation that attorneys must adhere to legal standards, especially in the context of pandemic relief programs.

Coordinated Efforts and Ongoing Oversight

The settlement resulted from a collaborative effort between the DOJ’s Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Central District of California, with additional support from the Small Business Administration’s Office of General Counsel and the SBA Office of the Inspector General.

This case underscores the ongoing vigilance of the COVID-19 Fraud Enforcement Task Force, established by the Attorney General on May 17, 2021. The Task Force aims to combat and prevent pandemic-related fraud through enhanced coordination and resource allocation.

Need Help?

For more information or legal assistance regarding compliance and fraud prevention, Anderson P.C. is here to help. Contact us today to learn how we can assist you in safeguarding your business and addressing any legal concerns.

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