By SDCN Editor
Four California agricultural companies and their owner have agreed Monday to settle allegations that they violated the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) by knowingly submitting false information in support of Paycheck Protection Program (PPP) loan applications, according to federal prosecutors.
Mendota Land Co., Sweetwood Farm Co. LLC, Sweetwood Farm Inc., Seasholtz Co. LLC, and their owner John Seasholtz are alleged to have improperly inflated the employee headcount on the companies’ PPP loan applications by impermissibly including non-employee contract workers who were, in fact, employed by other, unrelated entities. The settlement resolves allegations that the inclusion of non-employees caused Seasholtz to receive approximately $1.8 million in excess PPP funds. Seasholtz previously repaid the excess PPP loan funds to the lender, thereby relieving the U.S. Small Business Administration of liability for approximately $1.8 million in loan guarantees. As a part of the settlement, Seasholtz agreed to pay approximately $400,000 in damages and penalties under the FCA and approximately $200,000 in civil penalties under FIRREA.
“PPP loans were intended to provide critical relief to small businesses,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division. “The department is committed to pursuing those who knowingly obtained PPP or other COVID-19 assistance funds to which they were not entitled.”
“Paycheck Protection Program funds have helped qualified businesses throughout the Central Valley that were negatively impacted by the pandemic,” said Phillip Talbert for the Eastern District of California. “The U.S. Attorney’s Office invested significant time and resources in this investigation and will continue to do so to ensure that PPP funds only go to those who are eligible.”
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 small businesses struggling to pay employees and other business expenses. When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all information provided in their loan applications, including their number of employees and average monthly payroll.
The settlement resolved a lawsuit filed under the qui tam or whistleblower provision of the False Claims Act, 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 Bell Hill LLC and is captioned United States ex rel. Bell Hill, LLC v. John Seasholtz, et al., No. 1:20-cv-942 (E.D. Cal.). There has been no determination regarding the amount of the recovery to be paid to Bell Hill LLC.