Jessica Mathews / news@whmi.com


An auto group entity has reached a settlement in a lawsuit alleging fraud regarding the federal Paycheck Protection Program following the COVID pandemic.

A release states LaFontaine Management Inc. - which is affiliated with the network of auto dealerships and other related entities in Michigan known as the LaFontaine Automotive Group - has agreed to pay $1.5 (M) million to settle allegations that it violated the False Claims Act by making false statements to the U.S. Small Business Administration (SBA) to obtain a Paycheck Protection Program (PPP) loan for which LaFontaine Management was ineligible.

Congress created the PPP in March 2020 to provide emergency financial assistance to American businesses suffering from the economic effects of the COVID-19 pandemic.

Under the PPP, eligible small businesses could receive forgivable loans guaranteed by the SBA. Regulations imposed various eligibility requirements for the PPP, including limitations on the number of employees and restrictions for certain types of businesses operating as franchises, such as auto dealerships. When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all information provided in their loan applications.

In April 2020, LaFontaine Management obtained a first draw PPP loan for $1,000,000.
The United States alleged that LaFontaine Management falsely certified it was eligible for its first draw loan and loan forgiveness, even though, together with its affiliates, it had more than 500 employees and was not operating as a franchise with a franchise identifier code from SBA, in violation of the PPP rules.

U.S. Attorney Jerome F. Gorgon, Jr. for the Eastern District of Michigan commented “Even though the PPP Program has ended, our mandate to investigate and redress the harm from fraudulent and improper PPP loans continues. We will continue to vigorously pursue allegations against companies and individuals who obtained COVID-19 relief funds that they didn’t deserve.”

SBA General Counsel Wendell Davis said “Investigations like this one reflect collaboration of the Small Business Administration, including SBA’s Office of General Counsel, and the U.S. Attorney’s Office, as well as the work of private individuals who uncover fraudulent conduct to recover funds obtained through fraud”.

The release states “This civil settlement resolved a sealed lawsuit originally filed under the qui tam or whistleblower provisions of the False Claims Act, which permit 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 has been unsealed and is captioned U.S. ex rel. Patricia Lesko and Bram Lesko v. Lafontaine Management, Inc., Case No. 2:23-cv-13130. The whistleblowers will receive a combined 15% of the settlement amount”.

The release further states “The claims resolved by the settlement are allegations only; there has been no determination of liability”.

A message seeking comment was placed with LaFontaine Automotive Group.