Georgia Qui Tam Attorneys Handling CARES Act Claims
Assistance for whistleblowers documenting fraud regarding PPP and SBA loans
The federal government’s $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act included programs designed to help individuals and small businesses: direct payments for taxpayers, additional money for unemployment insurance, money for hospitals and local governments, and billions for loans and grants. One such program is the billion Paycheck Protection Program (PPP), designed to help businesses keep employees on their payrolls for the duration of the economic shutdown.
While we believe most Americans will do the right thing, history proves that there are those who will take advantage of these loans and grants. Defrauding the government is illegal, and whistleblowers who expose such fraud may be entitled to compensation through the False Claims Act. The Georgia qui tam attorneys of Harris Lowry Manton LLP represent whistleblowers who have procured evidence of individuals, organizations, and business which are defrauding the government. Contact us in Atlanta or Savannah to discuss your qui tam case with an attorney.
How does a qui tam claim work?
When companies engage in acts of fraud or deception, the person who exposes that fraud is a whistleblower. The federal government has provisions in place to protect whistleblowers, as do most states. When those companies defraud the government or government-subsidized programs and agencies, the whistleblower can file a qui tam action. In short, all qui tam actions are acts of whistleblowing, but not all whistleblowers will file qui tam actions.
Often, qui tam actions are filed to disclose fraud involving agencies and issues such as:
- Medicare or Medicaid
- Department of Defense contracting
- Energy sector
- Pharmaceuticals and off-brand marketing
- Price manipulation
- Trade
- Financial fraud
- Disaster relief
Recent qui tam actions include exposure of 3M’s coverup involving defective earplugs being sold to the government for our soldiers, and Insys Therapeutics’ kickback scheme involving the sale of its signature opioid drug, Subsys.
What is the CARES Act?
The CARES Act is a stimulus program designed to both protect the American workforce, and to help reduce the economic damage the COVID-19 pandemic has and will continue to cause. The Act contains multiple provisions and programs designed to address immediate needs, such as:
- $1200 stimulus checks for eligible American workers
- Expanded deductions for charitable organizations
- Deferments for tax filings and tax payments
- Extensions for mortgage payments for federally backed mortgages
- Deferments for student loans
The act also includes a new program, the Federal Pandemic Unemployment Compensation (FPUC) program, which increases the amount of money a person can seek through each state’s unemployment insurance, and which allows workers who are not normally eligible for unemployment to apply.
What the CARES Act is doing for businesses
The CARES Act also includes the Paycheck Protection Program, a Small Business Administration (SBA) “loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.” Per the SBA’s website, the following companies and individuals may be eligible for PPP loans if their businesses have been affected by coronavirus:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
The SBA has already started accepting applications for the loan, and has waived the usual requirement that businesses attempt to secure a loan through other sources (called the “Credit Elsewhere” requirement) before applying. You can find more information here.
The program is capped at $350 billion to cover all businesses throughout the country, and businesses are capped at $10 million in loans.
What makes the PPP different from other small business loans is that borrowers can have their loans forgiven completely “if the funds are used for payroll costs, interest on mortgages, rent, and utilities,” provided that at least 75% of the entirety of the loan went towards payroll. The loan is essentially converted into a grant, provided borrowers follow the rules. “Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”
Why fraud is likely when it comes to PPP loans
PPP loans are based on how much a company made and spent the previous year. However, there are ways for dishonest companies to “stretch” the amount of money they need now. Such acts of fraud could include:
- Falsely claiming fewer than 500 employees in order to qualify
- Falsely claiming more employees than a company currently has on payroll, in order to secure a larger loan
- Failing to disclose if employees leave
- Submitting fraudulent expenditures
- Falsely claiming to be negatively affected by COVID-19
Defrauding the government is a felony offense, and making false statements or overvaluing the company’s worth and/or expenditures could lead to $5000 in fines, and/or up to 2 years in federal prison. Embezzling funds can lead to $10,000 in fines and/or up to 5 years in prison. The borrowers will also have to pay restitution.
Defrauding the Federal Pandemic Unemployment Compensation program
The U.S. Department of Labor has issued guidance about attempts to defraud the government through the U.S. Department of Labor, stating “An individual who has committed fraud and was subsequently disqualified for a week that included a payment of FPUC is therefore ineligible for additional FPUC in accordance with the provisions of the applicable state UC law relating to fraud in connection with a claim for UC and is subject to prosecution under 18 U.S.C. §1001.”
However, because unemployment insurance is issued through each state’s specific program, the penalties will be handled by the state. Per the Georgia Department of Labor:
[I]ndividuals who knowingly make false statements, misrepresent or omit material facts, or knowingly accept benefits to which they are not entitled lose the right to future unemployment benefits for up to 15 months and are subject to criminal and civil legal actions and fines.
Individuals who commit fraud are liable for the total amount of improperly paid benefits plus penalties and interest. A penalty of 15 percent will be added to, and become part of, the overpayment amount. Interest of one percent per month (or any fraction of a month) shall accrue until the overpayment (including the penalty) is repaid. Penalty amounts will not be waived.
State officials who use money meant for unemployment insurance in other ways, such as to address their own budget shortfalls, or who are caught abusing the system in any way, could be subject to additional fines and penalties, including incarceration.
Other government programs which could be defrauded
- The Internal Revenue Service (IRS)
- The Securities and Exchange Commission (SEC)
- The Commodities and Futures Trading Commission (CFTC)
- The Small Business Administration’s Economic Injury disaster Advance Loan
- Federal Emergency Management Agency (FEMA)
Bringing a qui tam action for fraud
Any businesses which submit false information in order to secure a forgivable PPP loan through the SBA could be liable for civil penalties and, potentially, treble damages.
Bringing a qui tam action against a company or business can be a challenge, especially because they so often rely on confidentiality. Furthermore, you cannot bring a qui tam action if another party has filed a lawsuit under the False Claims Act with the same evidence. You have six years from the date of the violation to bring a claim, or three years from the date that the government knew or reasonably should have known that a violation occurred. If the fraud was against a state agency, you have to file in state court, but claims involving federal agencies are heard in federal court, so you need a qui tam lawyer who can practice in either, depending on the nature of the action.
Qui tam actions are often more effective when the whistleblower (or “relator”) still works for the employer who is defrauding the government, because that relator may be more able to access important evidence. However, it is not required that you are or remain employed by the fraudulent company.
How does the qui tam process work?
First, a relator meets with an attorney, who then files the lawsuit under the False Claims Act. Then, the lawsuit is filed in federal district court under seal, to ensure it is kept confidential. The Department of Justice (DOJ) investigates the claim and determines whether it will pursue a case. If it does, the suit is unsealed, and it becomes public knowledge. If the DOJ passes on the lawsuit, then the relator needs to decide whether he/she will pursue a claim on his/her own.
How much compensation is awarded in successful qui tam claims?
Relators are generally awarded between 15% and 25% of the monies collected by the government, if the government pursues the case. If the relator continues with the suit on his or her own, the award is generally between 25% and 30%.
For a claim that proves your employer has defrauded the government out of $10 million (the maximum amount of the PPP loan):
- If the DOJ takes up your case, you could receive between $1.5 million and $2.5 million.
- If you pursue the case on your own, you could be awarded between $2.5 million and $3 million.
How are relators protected under the law?
The False Claims Act prohibits companies and entities from retaliating against relators, under 31 U.S. Code § 3730:
1. In general. - Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.
2. Relief. - Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. An action under this subsection may be brought in the appropriate district court of the United States for the relief provided in this subsection.
Georgia has its own set of whistleblower protection laws, but they are more limited in scope. If you were wrongfully terminated, suspended, disciplined, demoted, or otherwise harmed, speak with a Georgia qui tam attorney right away to learn about your options.
Suspect fraud? Contact our Georgia qui tam attorneys today
Harris Lowry Manton LLPs has dedicated itself to protecting the rights of clients throughout the state. If you believe that your employer is defrauding the federal Paycheck Protection Program, the Small Business Administration, the Federal Pandemic Unemployment Compensation program, or any federal or state program designed to help people during the coronavirus outbreak, we want to help.
To reserve a consultation with a qui tam attorney, please call us in Atlanta at 404-961-7650, in Savannah at 912-651-9967, or fill out our contact form. Your first consultation is free.