PPP and Pandemic Fraud Recoveries Significant for DOJ in FY 2023

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The Department of Justice (DOJ) recently announced that it obtained more than $2.68 billion in False Claims Act (FCA) settlements and judgments in the fiscal year ending September 23, 2023. DOJ reports that “matters that involved the health care industry” again comprised the largest portion of these FCA recoveries, but that “pandemic fraud” recoveries also comprised one of the largest categories of recoveries for DOJ this past year.

Over the last year, the DOJ says it has resolved approximately 270 FCA matters, recovering over $48.3 million in connection with improper Paycheck Protection Program (PPP) loans. The DOJ has also pursued other pandemic-related fraud, including schemes by healthcare providers to profit from the pandemic by billing for unnecessary tests and services.

Among the more notable pandemic fraud recoveries from fiscal year 2023 that DOJ reports are:

  • An automotive company agreed to pay more than $9 million to resolve allegations that it provided false information in support of a PPP loan forgiveness application. DOJ reports that, although the company’s application certified it was a small business with fewer than 500 employees, the company shared common operational control with dozens of automobile dealerships across the country, totaling more than 3,000 employees. For that reason, DOJ argued that the company was not eligible for the PPP loan it received, which was later forgiven in full.
  • A public relations company paid $2.24 million to resolve allegations that it received a PPP loan even though it was ineligible for the loan because it was a required registrant under the Foreign Agent Registration Act.
  • An individual, along with four agricultural companies he owns, agreed to pay more than $600,000 to resolve allegations that they violated the FCA by improperly including non-employee contract workers to inflate employee headcount on the companies’ PPP loan applications. The companies also agreed to repay loan funds relating to the ineligible employees, thereby relieving the SBA of liability for approximately $1.8 million in loan guarantees. 
  • In April 2023, the DOJ filed two proofs of claim in the Chapter 11 bankruptcy action commenced by an online financial technology company, alleging violations of the FCA in connection with thousands of federally guaranteed PPP loans that were approved or processed by the company. In the first proof of claim, the government alleged that the company systemically miscalculated tens of thousands of PPP loans, causing the SBA to guarantee loans in inflated amounts that exceeded what borrowers were eligible to receive under program rules. In its second proof of claim, the government alleged that the company knowingly failed to implement appropriate fraud controls to comply with applicable Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements, resulting in fraudulent claims for PPP processing fees, in addition to false claims for loan forgiveness and guarantees on fraudulent loans. The government alleged that as a result of these schemes the government suffered losses in excess of $60 million.  
  • DOJ filed claims against an individual and multiple laboratory companies owned by him for submitting claims for laboratory tests that were not ordered by healthcare providers, not medically necessary, or not performed. In its complaint, the government alleged that the individual owned and operated multiple corporate entities that allegedly sought to profit from the COVID-19 pandemic by offering COVID-19 tests to nursing homes as a way to bill Medicare for a wide array of medically unnecessary respiratory pathogen panel tests, many of which were never ordered by treating physicians.

If you have any questions about how your company can potentially prevent or resolve pandemic fraud-related matters, please do not hesitate to contact Aron Beezley or Nathaniel Greeson.