Montclair, NJ - Spiro Harrison & Nelson, through partner Eric H. Jaso, represented a whistleblower who successfully filed three qui tam lawsuits under the federal False Claims Act uncovering the fraudulent receipt of Paycheck Protection Program (“PPP”) loans to the Department of Justice.

The whistleblower, Aidan Forsyth, a New York City-based software engineer, developed databases and used machine learning algorithms to detect suspicious patterns and anomalies showing potential fraud. The Department of Justice recently intervened in and settled these lawsuits, resulting in Mr. Forsyth, as a relator, being awarded a percentage of the government’s recovery.

“The PPP loan program was established to help small businesses make payroll during the pandemic and avoid massive layoffs and economic disaster,” said Eric H. Jaso, himself a former Justice Department prosecutor. “Unfortunately, many businesses took advantage of the emergency by obtaining taxpayer-funded forgivable loans to which they were never entitled.”

$4.4 Million New York PPP Loan Fraud Settlement

In the first case, filed in U.S. District Court in the Western District of New York Forsyth’s analytics showed that 3rd Avenue Transit, Inc. and Y&M Transit Corp., commonly owned and based at the same location in Brooklyn, NY, had obtained loans totaling $2.4 million from banks in Buffalo, NY and Queens, NY despite being ineligible. The companies’ headcount far exceeded the 300-employee maximum the Small Business Administration (“SBA”) placed on affiliated borrowers seeking to qualify as eligible small business concerns. These loans were later forgiven, costing taxpayers nearly $2.5 million. The Justice Department intervened in the case and the defendant companies settled for $4.4 million.

$1.9 Million Massachusetts PPP Loan Fraud Settlement

In the second case, filed in U.S. District Court in the District of Massachusetts Forsyth uncovered that Chroma Systems, a subsidiary of Chroma ATE, Inc., a Taiwanese company, had obtained an approximately $1.7 million PPP loan from a Los Angeles-based bank despite being ineligible due to its global headcount of over 1,800 employees far exceeding the SBA’s 300-employee maximum. This loan was later forgiven (along with fees and interest), costing the taxpayers over $1.7 million. The defendant companies settled for approximately $1.9 million.

$1.4 Million New Jersey PPP Loan Fraud Settlement

In the third case, filed in U.S. District Court in the District of New Jersey, Forsyth reported that Fred Beans Holdings, Inc., a Bucks County, Pennsylvania based auto dealership business, and four affiliated companies had obtained an approximately $975,000 in PPP loans from an Ohio-based bank despite being ineligible due to their employee headcount far exceeding the SBA’s employee maximum. These loans were later forgiven (along with fees and interest), costing the taxpayers nearly $1 million. The defendant companies settled for approximately $1.4 million.