Michigan Nonprofit Organizations Agree to Pay $225,887 to Settle False Claims Act Allegations Relating to Improper Receipt of Paycheck Protection Program Loans
Two Michigan nonprofit organizations, the Michigan Education Association (MEA) and the Michigan Education Special Services Association (MESSA), have agreed to settle allegations that the organizations violated the False Claims Act (FCA) by applying for and obtaining loans under the Paycheck Protection Program (PPP) for which they knew or should have known they were ineligible.
Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial support to the millions of Americans suffering economic hardship due to the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to certain small businesses and other entities struggling to pay employees and other business expenses. Under the rules applicable at the time of the loans covered by today’s settlement, certain nonprofit organizations were not eligible to receive a PPP loan.
In 2020, MEA, a 501(c)(5) nonprofit labor union organization, and MESSA, a 501(c)(9) voluntary employees’ beneficiary association, each applied for and obtained a PPP loan. The United States contended that these organizations knew or should have known they were ineligible to receive their PPP loans, and that they caused the Small Business Administration (SBA) to pay lender fees to the bank that processed the loans. In connection with the settlements announced today, MEA will pay $115,265 and MESSA will pay $110,622 to the United States resolve these allegations. MEA and MESSA repaid their loan proceeds in full in December 2020.
“The PPP was intended to provide critical economic relief to eligible small businesses and other entities,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “This settlement reflects the department’s commitment to ensuring the integrity of the PPP loan process.”
“Those who violate the False Claims Act by fraudulently receiving SBA pandemic program funds meant for eligible small businesses will be held accountable,” said Special Agent in Charge Sharon Johnson of SBA OIG’s Central Region. “Today’s settlements send a strong message that those responsible will be held accountable. I want to thank the Department of Justice and our law enforcement partners for their dedication and pursuit of justice.”
The settlement resolved a lawsuit filed under the qui tam or whistleblower provision of the FCA, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The qui tam lawsuit was filed by the Mackinac Center for Public Policy and is captioned U.S. ex rel. Mackinac Center for Public Policy v. Michigan Education Association, et al., Dkt. No. 1:22-cv-00028-HYJ-PJG (W.D. Mich.). Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery. The Mackinac Center for Public Policy’s share of the settlement has not been determined.
The resolution obtained in this matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Western District of Michigan, with assistance from the SBA’s Office of General Counsel and the SBA Office of the Inspector General.
This matter was handled by Trial Attorney Evan J. Ballan of the Civil Division and Assistant U.S. Attorney Andrew J. Hull of the Western District of Michigan.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The task force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit https://www.justice.gov/coronavirus.
Tips and complaints from all sources about potential fraud affecting COVID-19 government relief programs can be reported by visiting the webpage of the Civil Division’s Fraud Section, which can be found here. Anyone with information about allegations of attempted fraud involving COVID-19 can also report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The claims resolved by the settlements are allegations only, and there has been no determination of liability.
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