U.S. Attorney Michael DiGiacomo announced Monday that 3rd Avenue Transit, Inc. and Y&M Transit Corporation have agreed to pay $4.4 million to resolve False Claims Act allegations that they improperly obtained Paycheck Protection Program loans from the U.S. Small Business Administration (SBA) for which they were not eligible.
The PPP was an emergency loan program established by the Coronavirus Aid, Relief and Economic Security (CARES) Act in March of 2020 and expanded by the American Rescue Plan Act (ARPA) in 2021.
Under the PPP, eligible businesses could obtain loans to cover payroll costs or other specified business expenses. PPP loans were guaranteed by the Small Business Administration (SBA) and subject to forgiveness if spent on eligible expenses.
However, PPP loans were available only to businesses that met the eligibility criteria. As a condition of second-draw loan eligibility, the applicant company and its affiliates must have had no more than 300 employees in total.
When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all information provided in their loan applications, including regarding their size, number of employees, and affiliate entities.
3rd Avenue and Y&M applied for and received a total of $2,402,800 in second-draw PPP loans, certifying that they were a small business with fewer than 300 employees.
The government contends that 3rd Avenue and Y&M, along with a third company, were affiliates under the PPP rules.
As a result, 3rd Avenue and Y&M were ineligible for the second-draw loans because they employed more than 300 employees.
“Paycheck Protection Program loans were intended to help small businesses during the COVID-19 pandemic,” stated U.S. Attorney DiGiacomo. “Our office continues to invest time and resources to hold accountable those who obtained PPP funds for which they were not eligible.”
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act.
Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the settlement or judgment.
