On March 15, 2022, the U.S. Attorney’s Office for the Eastern District of Washington, in conjunction with the Department of Energy and the Small Business Administration, entered into a Deferred Criminal Prosecution Agreement and Civil Settlement Agreement with a vendor of Washington-based Occupational Health Services, as well as two of its individual owners and officers, under a Paycheck Protection Program (PPP) loan that the provider obtained, but does not not used for salary costs and other eligible expenses, as required by the PPP program. The government alleged that the defendants knowingly submitted false statements and certifications to the SBA when applying for forgiveness of the PPP loan, in violation of the False Claims Act and the federal criminal prohibition against making false, fictitious or fraudulent.
In April 2020, the health service provider requested and obtained a PPP loan of $1,344,700, which the provider then transferred to its corporate money market account, where it remained unused. A year later, in April 2021, the provider, through one of its individual owners, requested full forgiveness of the PPP loan and certified, among other things, that “the dollar amount for which the forgiveness is requested…was used to pay business costs eligible for the discount (payroll costs to retain employees; business mortgage interest payments; business rent or lease payments; business utility payments; covered operating expenses; covered property damage; covered supplier costs; or covered worker protection expenses). In reality, the PPP funds had not been used for these reasons, but had instead been transferred out of the money market account and used to make personal donations to charity on behalf of individual owners. The government therefore argued that the certifications made in the supplier’s PPP loan forgiveness application were materially misrepresentations, and that these misrepresentations caused the SBA to forfeit the PPP loan entirely.
As part of the civil settlement, the health service provider and the individual owners agreed to pay $2,939,400 in restitution and penalties, which includes a $250,000 penalty to be paid by the individual owners with their own funds. The case was investigated as part of the U.S. Attorney’s Office COVID-19 Fraud Strike Force, which included the U.S. Attorney’s Office for the Eastern District of Washington, the Department’s Inspector General’s Office of Richland Energy, the Washington field office and the SBA office inspector. General’s field office in Seattle, Washington.