The United States Attorneys Office for The Eastern District of California released a statement that they have secured the nation’s first False Claims Act (FCA) settlement to resolve claims of fraud against the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The CARES Act was the March 2020 program that provides emergency assistance for the coronavirus COVID-19 pandemic. The CARES Act includes $350 billion in loans to small businesses to cover expenses and maintain employment, known as the Paycheck Protection Program (PPP). Additional funding provided an additional $585 billion later in 2020.

The Eastern District of California secured a settlement against SlideBelts, a company incorporated in Delaware with its principal office in El Dorado Hills, California. SlideBelts is a manufacturer and seller of various fashion accessories.

At the time of the PPP program, the company had filed for bankruptcy. The rules of the PPP program are that companies in a bankruptcy proceeding are not eligible to receive a PPP loan. The government’s stated reasoning is “debtors in bankruptcy would present an unacceptably high risk of an unauthorized use of funds or non-repayment of unforgiven loans” and “the Bankruptcy Code does not require any person to make a loan or a financial accommodation to a debtor in bankruptcy”.

The government maintains the company and owners made untrue statements to federal insured financial institutions that it was not involved in a bankruptcy proceeding in order to receive a loan guaranteed by the Small Business Administration (SBA) under the PPP program of the CARES Act. The company received $350,000 through the program by listing itself as not part of a bankruptcy.

The SBA demanded the loan be returned, and now the company has entered into a settlement for $100,000, in addition to repaying the loan in full. The settlement resolves claims of misconduct of the False Claims Act and Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). U.S. Attorney McGregor W Scott stated “The Department of Justice and our partners at the SBA will use all tools at our disposal, including civil fraud statutes, to aggressively pursue those who exploit federal programs intended to help those in need during this national emergency.”

The False Claims Act

The federal False Claims Act was the nation’s first whistleblower law intended to combat fraud against the government. After multiple reports of government contractor fraud in the 1980s, the False Claims Act was updated to add additional penalties and protections. Recently, the Act was amended to provide additional protections for whistleblowers.

False Claims Act Whistleblower

To encourage reporting, the law offer whistleblower rewards.  Rewards of up to 30% of the eventual fine or fee paid by bad actors could be awarded to the whistleblower who reported the fraud.

To learn more about the False Claims Act and what types of fraud or misconduct can be reported, read our page on becoming a False Claims Act qui tam whistleblower.

COVID-19 Whistleblower

The Occupational Safety and Health Administration (OSHA) maintains a whistleblower program for workplace safety violations and retaliation against employees. This is in addition to the False Claims Act whistleblower program, as well as the IRS whistleblower program.

Over 4,000 COVID-19 complaints have been filed as of December 15, 2020. More than 1,000 of these complaints are docketed for investigation by OSHA.

Whistleblower Attorney

Schneider Wallace represents whistleblowers, whether the violation or fraud is on the federal government, state government, a local government or a government contractor. We can assist in claims of OSHA violations for failing to protect workers, and cases of fraud against the government for misuse of pandemic assistance funds.

Schedule a free and private consultation with our whistleblower attorneys. Contact us at 1-800-689-0024 or info@schneiderwallace.com.