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Volume XI, Number 266

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First Reported FCA CARES Act Settlement Announced

The Department of Justice (DOJ) announced on January 12, 2021, the first civil settlement to resolve allegations of fraud against the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.[1] SlideBelts Inc. and its president and CEO, Brigham Taylor, have agreed to pay the United States a combined $100,000 in damages and penalties for alleged violations of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).[2]

The CARES Act was enacted in March 2020 to provide emergency financial assistance to individuals and businesses affected by the COVID-19 pandemic.[3] The CARES Act established the PPP, which provided $349 billion in forgivable loans to small businesses in order to assist in job retention and business expenses.[4] Since March 2020, Congress has authorized an additional $585 billion in PPP spending to be distributed under the Small Business Administration (SBA).

SlideBelts operates as an online retail company, and filed a petition for relief under Chapter 11 of the Bankruptcy Code in August 2019. Between April and June of 2020, while its petition was pending in the U.S. Bankruptcy Court for the Eastern District of California, SlideBelts and Taylor allegedly made false statements to federally insured financial institutions that the company was not involved in bankruptcy proceedings in order to influence the institutions to grant, and for SBA to guarantee, a PPP loan. SlideBelts received a loan for $350,000 based off of these purported false claims, which SlideBelts repaid in full to the PPP.

The government was able to recover damages and civil penalties from SlideBelts under the FCA for submitting alleged fraudulent claims for payment to the government and under the FIRREA for violations of federal criminal statutes that affect federally insured banks. This settlement is the end result of the first, but not the last, of many civil investigations and, ultimately, litigations relative to the CARES Act in the coming months and years under the FCA. In fact, during a June address to the Chamber of Commerce, Principal Deputy Attorney General Ethan Davis stated, “Going forward, the Civil Division will make it a priority to use the False Claims Act to combat fraud in the Paycheck Protection Program.”[5]

As the SBA prepares to issue a second round of PPP loans, the DOJ is likely to continue to use the FCA and the FIRREA to pursue entities receiving funds on the theory that those entities intend to exploit for their benefit these federal programs.[6]


[1] Eastern District of California Obtains Nation’s First Civil Settlement for Fraud on Cares Act Paycheck Protection Program, Press Release (January 13, 2021), https://www.justice.gov/usao-edca/pr/eastern-district-california-obtains-nation-s-first-civil-settlement-fraud-cares-act.

[2] Id.

[3] The CARES Act, Pub. L. No. 116-136 (2020).

[4] Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139 (2020).

[5] U.S. Dep’t of Justice, Principal Deputy Assistant Attorney General Ethan P. Davis delivers remarks on the False Claims Act at the U.S. Chamber of Commerce’s Institute for Legal Reform (June 26, 2020), https://www.justice.gov/civil/speech/principal-deputy-assistant-attorney-general-ethan-p-davis-delivers-remarks-false-claims.

[6] See supra, note 1.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XI, Number 19
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About this Author

George Breen, Health Care Attorney, Epstein Becker Law Firm
Member

GEORGE B. BREEN is a Member of the Firm in the Health Care and Life Sciences and Litigation practices. He is Chair of the firm's National Health Care and Life Sciences Practice Steering Committee and a member of the firm's Board of Directors.

Mr. Breen:

  • Defends clients undergoing investigation for health care fraud by the Department of Justice, the Department of Health and Human Services Office of the Inspector General, and other state and federal governmental authorities
  • ...
202-861-1823
Erica F. Sibley, Epstein Becker, Long term acute care hospitals lawyer, Healthcare Attorney
Associate

ERICA F. SIBLEY is an Associate in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green. She represents a diverse group of health care providers, including, but not limited to, long-term acute care hospitals, skilled nursing facilities, institutional pharmacies, home care agencies, adult day care facilities, physician groups, and various other health care facilities and providers.

202-861-1867
Law Clerk - Admission Pending

Lauren Petrin is a Law Clerk - Admission Pending - in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green.

202-861-1816
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