LaFontaine Management, Inc., a company associated with 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 obtain a Paycheck Protection Program (PPP) loan from the U.S. Small Business Administration (SBA). The announcement was made by United States Attorney Jerome F. Gorgon, Jr.
The PPP was established in March 2020 to help American businesses affected by the COVID-19 pandemic. It allowed eligible small businesses to receive forgivable loans guaranteed by the SBA, but imposed restrictions such as employee limits and specific requirements for franchises like auto dealerships. Applicants were required to certify that all information provided was accurate.
According to federal authorities, LaFontaine Management received a $1 million PPP loan in April 2020 after certifying its eligibility. The government alleged that LaFontaine Management falsely claimed eligibility for both the loan and subsequent forgiveness, despite having more than 500 employees across its affiliates and not operating as a franchise with an SBA-issued identifier code—both violations of PPP 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.”
Wendell Davis, General Counsel for the SBA, added: “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.”
The settlement resolves a lawsuit originally filed under whistleblower provisions of the False Claims Act by Patricia Lesko and Bram Lesko on behalf of the United States. The whistleblowers will receive 15% of the settlement amount.
Assistant U.S. Attorney Anthony Gentner managed this case with support from SBA’s Office of General Counsel.
Authorities encourage anyone with information about COVID-19-related fraud to report it through the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via their online complaint form at https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The settlement does not constitute an admission of liability; all claims resolved are considered allegations only.
