SAN DIEGO – Multiple nonprofit organizations—including two private country clubs and two homeowners associations—have paid $5,809,021.60 to settle allegations that they violated the False Claims Act by knowingly submitting false claims and obtaining Paycheck Protection Program loans for which they were not eligible.
Congress created the Paycheck Protection Program loans, known as 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 the economic effects caused by the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other permitted business expenses. Under the CARES Act, certain entities organized under section 501(c) of the Internal Revenue Code were not eligible for PPP loans.
Rancho Santa Fe Association is a homeowners association and 501(c)(4) nonprofit organization. Rancho Santa Fe Association serves members in the community of Rancho Santa Fe in San Diego County, which includes over 4,000 residents, the Rancho Santa Fe Golf Club, the Rancho Santa Fe Tennis Club, private sports fields, The Inn at Rancho Santa Fe, nearly 60 miles of private equestrian and pedestrian trails, shops, restaurants, and full-time security patrol. In April 2020, Rancho Santa Fe Association applied for a PPP loan and later received disbursement of a $1,542,100 loan. The United States contended that Rancho Santa Fe Association knew or should have known it was not eligible to receive its PPP loan as a 501(c)(4) nonprofit organization, and it caused the Small Business Administration (SBA) to forgive the loan and to pay lender fees and interest to the bank that processed the loan. Rancho Santa Fe Association paid $2,037,451.44 to settle allegations that it knowingly violated the False Claims Act.
Pine Mountain Lake Association, a homeowner’s association and 501(c)(4) nonprofit organization, is in Groveland, California near Yosemite National Park. Pine Mountain Lake Association is a gated community with amenities that include a private lake with six miles of shoreline, 18-hole championship golf course, swimming pool, tennis and pickleball courts, hiking trails, archery range, equestrian center, restaurant and lounge, and lake lodge. In April 2020, Pine Mountain Lake Association applied for a PPP loan and later received disbursement of a $687,500 loan. In January 2021, Pine Mountain Lake Association applied for a second PPP loan and later received disbursement of a $950,000 loan. The United States contended that Pine Mountain Lake Association knew or should have known it was not eligible to receive its PPP loans as a 501(c)(4) nonprofit organization, and it caused the SBA to forgive the loan and to pay lender fees and interest to the bank that processed the loans. Pine Mountain Lake Association paid $2,372,440.98 to settle allegations that it knowingly violated the False Claims Act
Glendora Country Club, a private country club and 501(c)(7) nonprofit organization, is in San Gabriel Valley and offers its members an 18-hole golf course, a 25-yard swimming pool, and dining and entertainment options. In April 2020, Glendora Country Club applied for a PPP loan and later received disbursement of a $471,685 loan. The United States contended that Glendora Country Club knew or should have known it was not eligible to receive its PPP loan as a 501(c)(7) nonprofit organization, and it caused the SBA to forgive the loan and to pay lender fees and interest to the bank that processed the loan. Glendora Country Club paid $708,843.42 to settle allegations that it knowingly violated the False Claims Act.
The Palms Golf Club, a private, single membership golf club and a 501(c)(7) nonprofit organization, is in La Quinta, California. The Palms Golf Club claims to offer a world-class golfing environment with a golf course designed by Fred Couples, state-of-the-art practice facility, locker rooms and fitness facilities, and multiple dining options. In May 2020, The Palms Golf Club applied for a PPP loan and later received disbursement of a $327,035 loan. The United States contended that The Palms Golf Club knew or should have known it was not eligible to receive its PPP loan as a 501(c)(7) nonprofit organization, and it caused the SBA to forgive the loan and to pay lender fees and interest to the bank that processed the loan. The Palms Golf Club paid $690,285.76 on an ability-to-pay basis to settle allegations that it knowingly violated the False Claims Act.
“The PPP program was born from the urgent need to support small businesses weathering the storm of a generational pandemic,” said U.S. Attorney Tara McGrath. “These agreements hold accountable those who deceitfully diverted public funds from the deserving hands of struggling small businesses trying to support their employees and serve their customers.”
“Providing false information to obtain PPP loans and forgiveness is wrong,” said SBA OIG’s Western Region Special Agent in Charge Weston King. “Today’s settlement sends a strong message that attempts to wrongfully obtain loan fund and forgiveness will not go unnoticed, and violators will be identified. I want to thank the Department of Justice and our law enforcement partners for their support and dedication to pursuing justice in this case.”
The settlements resolve claims brought by Wade Riner under the qui tam or whistleblower provisions of the False Claims Act. Under these provisions, a private party can file an action on behalf of the United States and receive a portion of the recovery. The case is captioned United States ex rel. Riner v. Rancho Santa Fe Ass’n, et al., 22-CV-1285-GPC-KSC. Mr. Riner will receive a total share of nearly $700,000.
The resolution obtained in this matter was the result of a coordinated effort between the U.S. Attorney’s Office for the Southern District of California and the SBA’s Office of General Counsel and Office of the Inspector General. In total, the United States recovered over $6.1 million against the named defendant in the qui tam action.
This matter was handled by Assistant U.S. Attorney Dylan M. Aste.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
2 comments
The unanswered question is, if 501(c)4 and 501(c)7 organizations were ineligible for such loans, WHY did the federal government approve them in the first place?
THIS is why you don’t donate. Ever. Would my donation go towards this, or the executive salaries? It DEFINITELY wouldn’t go to what I wanted it to go to. I’d be better off giving 5 bucks to the homeless guy on A and 18th, at least he’d get some funding.