PPP Loan Recipient Sued by Unrelated Third Party for False Claim – Fraud Friday

January 3, 2024

Delaney Sexton
Contributing Editor

PPP Loan Recipient Sued by Unrelated Third Party for False Claim – Fraud Friday

There has been an influx of cases involving individuals searching the SBA PPP loan database to find targets they believe were ineligible for PPP loans. These individuals file False Claims Act lawsuits in order to receive a portion of the civil damages as whistleblowers.

Now, the husband of a Real Housewives of Beverly Hills star is caught up in a lawsuit accusing him and his real estate company of illegally obtaining $3.5 million in PPP loans.

The lawsuit, filed by Relator, LLC against Mauricio Umansky and his real estate company, The Agency, demands payment of damages between $12,537 and $25,076 for each false statement allegedly made by the company to obtain the PPP loans. The lawsuit alleges multiple false statements.

Relator questions The Agency’s claim of 104 employees with an average salary of $110,552 for the first PPP loan of $2.4 million, and 73 employees with an average salary of $74,000 for the second PPP loan of $1.1 million.

The lawsuit states: “In applying for and receiving the PPP loans, defendants knowingly made false representations of fact and virtually all of the required certifications that are described above and required to be eligible. The PPP loans were not necessary to support defendants’ ongoing operations and pay their employees’ salaries, nor were they used for such purposes because defendants had ample liquidity to do so. Instead, they only bolstered defendants’ profits.”

It further alleges: “Defendants’ business revolves around luxury real estate transactions of white-collar millionaires and billionaires who are not impacted by the pandemic. The Agency does not deal in starter homes but luxury properties for the rich and famous, with the average sales price of $1.92 million. This contrasts with small businesses such as grocery stores, restaurants, and other companies that sell other products and services and depend on a voluminous flow of customers.”

Umansky’s legal team fired back in court, arguing for dismissal, stating that a whistleblower lawsuit for PPP loan fraud should not be filed based on publicly obtained information.

“Relator’s claims are jurisdictionally barred because the ‘facts’ upon which Relator relies are based entirely on publicly available information. This contravenes the essential purpose of qui tam suits under the FCA, which require Relator to present independent knowledge to substantiate its serious accusations against Defendants,” the legal team argued.

They continued, “Whistleblower protections are rendered meaningless when the accuser merely echoes publicly known information. Relator should not be permitted to misuse these protections to accuse legitimate businesses of fraudulently obtaining PPP loans.”

For now, the lawsuit still stands.

Sources:
Lawsuit
Motion to Dismiss