by Tim McInnis, Esq | Dec 13, 2024 | Our Cases
NEW YORK, Dec. 11, 2024 /PRNewswire/ — NYC whistleblower attorney Timothy J. McInnis announced a
$1,470,085 settlement against Stefano Maroni, who is the owner and CEO of GMI USA Corp. and
Belovefine, Ltd., shoe designers and importers located in NYC. The settlement resolves FaIse Claims Act
allegations in a qui tam whistleblower complaint filed under seal on March 14, 2023, in the U.S. District
Court for the Southern District of New York by former Maroni employee Devyn Taylor. Taylor alleged Maroni and his companies defrauded the SBA’s Paycheck Protection Program (“PPP”) during the COVID-19 pandemic by using the same employees to get forgivable loans for each of Maroni’s two companies, when, in fact they were essentially one and the same business. The United States government, through the U.S. Attorneys’ Office for the Southern District of New York, joined Taylor’s lawsuit on December 6, 2024, and is also a party to the settlement. The case was unsealed December 9, 2024, by United States District Judge
Jennifer H. Rearden.
According to the Settlement Agreement, the PPP program was established pursuant to the Coronavirus
Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act was enacted in March 2020, and was
designed to provide emergency financial assistance to millions of Americans suffering economic effects
caused by the COVID-19 pandemic. This included authorizing forgivable loans to small businesses for
employee payroll and other expenses. To obtain a PPP loan, a qualifying business was required to submit to a participating lender, among other things, the company’s (a) average monthly payroll expenses and (b) number of employees. That information was used to determine the amount of the PPP loan.
As part of the Settlement Agreement, Maroni admitted that on paper he shifted employees from one
company to the other but applied for PPP loans in both companies’ names. He also admitted he incorrectly listed different suite numbers at the same NYC address for the two companies to falsely give the impression they were separate and distinct entities. And Maroni admitted he overstated his number of employees. As a result, Maroni obtained $1,023,322 in PPP funds.
The Settlement Agreement expressly notes it does not resolve Taylor’s allegations against Maroni, GMI and Belovefine for U.S. Customs duty fraud in a separate False Claims Act qui tam action, captioned United States ex rel. Taylor v. GMI USA Corp. et al., 16 Civ. 7216 (RWL) (S.D.N.Y.). That case, which the government did not join as to Maroni or his companies, is currently being litigated by Taylor.
McInnis noted that PPP fraud was rampant during the pandemic, and many specific instances are now
being exposed through False Claims Act qui tam lawsuits by private citizens who can receive up to 30% of any recovery. In this case, under the Settlement Agreement Taylor will receive $294,017.
On behalf of Taylor, McInnis expressed appreciation for the efforts of the U.S. Attorney’s Office for the
Southern District of New York and the SBA’s Office of Inspector General in investigating and pursuing her
allegations of PPP fraud.
The case is captioned United States ex rel. Devyn Taylor, v. Stefano Maroni., et al., 23 Civ. 2159 (JHR)
by Tim McInnis, Esq | Jul 2, 2024 | Our Cases
NYC whistleblower attorney Timothy J. McInnis announced a $354,085 settlement against The Raleigh Racquet Club, Inc. (RRC), a non-profit social and recreational club located in Raleigh, North Carolina and its former president, Kurt Harrison Ihly concerning COVID-19 pandemic relief funds. The settlement resolves FaIse Claims Act allegations in a qui tam whistleblower complaint filed under seal in April 2023 in the U.S. District Court for the Eastern District of North Carolina by former club member Lindsey Flower. On June 21, 2024, the case was unsealed by order of United States District Judge Terrence W. Boyle. Today, Flower filed a notice to dismiss the action, as required by the Settlement Agreement. The United States Attorney’s Office for the Eastern District of North Carolina, which did not formally intervened in the action, spearheaded a government investigation and oversaw the settlement negotiations, according to Attorney McInnis.
Flower’s qui tam complaint alleged that RRC unlawfully applied for and received a loan under the Payment Protection Program (“PPP”), and falsely certified in the submitted application for the PPP loan, that it was eligible to obtain a loan under the PPP. Specifically, the complaint alleged that on April 15, 2020, RRC improperly received a first-draw PPP loan in the amount of $307,900. It subsequently applied for and obtained complete forgiveness of the loan sum plus accrued interest. According to the complaint, RRC was organized as a tax-exempt private club under Section 501(c)(7) of the Internal Revenue Code, a category of non-profit organization explicitly excluded from PPP first draw eligibility. Additionally, the qui tam complaint alleged that not only was the SBA’s rule barring 501(c)(7) social clubs from participating in the PPP program “clear and unambiguous” but also “widely disseminated trade publications and websites covering the 501(c)(7) social club industry repeatedly advised such clubs that they were not eligible for such loans.” According to the Settlement Agreement, the bank that processed RRC’s PPP application, North State Bank, checked a box on the application form wrongly stating RRC was a for profit “S-Corp,” suggesting this was why the SBA approved RRC’s unlawful loan application since S-Corps were permitted to obtain PPP loans.
According to the Settlement Agreement, the PPP program was established pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act was enacted in March 2020, and was designed to provide emergency financial assistance to millions of Americans suffering economic effects caused by the COVID-19 pandemic. This included authorizing forgivable loans to small businesses for employee payroll and certain other expenses through the PPP. To obtain a PPP loan, a qualifying organization was required to submit a PPP loan application signed by an authorized representative. The loan application required the authorized representative to acknowledge the PPP rules and make certain affirmative certifications regarding the organization’s eligibility to obtain a PPP loan. PPP loan applications were processed by participating lenders, which received processing fees from the SBA. Following the approvals of loan applications, the participating lenders funded the loans, which were 100% guaranteed by the SBA. Non-profit corporations organized under Section 501(c)(7) of the Internal Revenue Code were not eligible to receive first-draw PPP loans pursuant to SBA, Interim Final Rule, Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20811, 20812 (Apr. 15, 2020).
Attorney McInnis noted that PPP fraud was rampant because so much PPP money was given out to so many people during the height of the pandemic without normal lending controls and oversight. A Government Accounting Office report has acknowledged that the government sacrificed safeguards for speed in disbursing funds. PPP loans were granted on a first-come, first served basis and the initial PPP appropriation was depleted after just 13 days. In this haste, many small businesses hardest hit by the pandemic were shut out of the program.
One way PPP fraud is now being addressed, according to McInnis, is through False Claims Act qui tam lawsuits by private citizens who can not only redress PPP fraud but also receive a reward for prompting a government investigation. In this case, under the Settlement Agreement Flower received $46,185.
On behalf of Flower and her attorneys, McInnis expressed appreciation for the efforts of the U.S. Attorney’s Office for the Eastern District of North Carolina and the SBA’s Office of Inspector General in recouping the PPP loan proceeds from RRC.
by Tim McInnis, Esq | May 18, 2023 | Our Cases
Whistleblower attorney Timothy J. McInnis announced his client, Clemire Young, will receive $60,000 (20%) from the proceeds of a $300,000 Government healthcare fraud settlement with The Brookdale Hospital Medical Center (“Brookdale Hospital”), a 530-bed, nonprofit teaching hospital located at One Brookdale Plaza, Brooklyn, NY.
The settlement, which was approved by US District Judge I. Leo Glasser on 5/17/2023,
resolves allegations brought by Ms. Young , a former employee of Brookdale Hospital, under the qui tam whistleblower provisions of the Federal and NY False Claims Acts. Her complaint, which had been under seal since April 2019, alleged Brookdale Hospital violated these acts by causing ineligible participants to receive WIC benefits and misappropriating WIC grant funds by, among other things, paying employees for no show jobs and buying things for personal use, such as furniture.
WIC is the Special Supplemental Nutrition Program for Women, Infants, and Children. It is a federal funded/state administered program serving low-income pregnant, postpartum, and breastfeeding women, infants, and children up to age 5 who are at nutritional risk by providing nutritious foods to supplement diets, information on healthy eating, including breastfeeding promotion and support, and referrals to health care.
Ms Young, through attorney McInnis, expressed appreciation for the investigative and
settlement efforts of the U.S. Attorney’s Office for the Eastern District of New York and the Office of Inspector General for the US Department of Agriculture. “This case is an example where a concerned employee saw the tip of the iceberg and reported it to authorities who then were able to expose the whole iceberg,” said McInnis.
by Tim McInnis, Esq | Mar 12, 2023 | Our Cases
Whistleblower to Receive $210,000 from
$1M Government Customs Fraud
Settlement with Samsung C&T America
NYC whistleblower attorney Timothy J. McInnis announced that his client, Devyn Taylor, will receive $210,000 from the proceeds of a $1 million Government Customs fraud settlement with Samsung C&T America, Inc. (“SCTA”), a global trading and investment company. The settlement, which was approved by U.S. District Judge Paul G. Gardephe on February 6, 2023, resolves allegations brought by the United States against SCTA under False Claims Act. Taylor had previously filed under seal a qui tam whistleblower case pursuant to the False Claims Act against another party and that filing help lead to the Government’s settlement with SCTA, according to McInnis. The award to Ms. Taylor was also approved by J. Gardephe and publicly reported by the court on February 16, 2023.
As the U.S. Attorney for the Southern District of New York reported in a press release issued February 7, 2023, its settlement with SCTA resolved claims “that between May 2016 and December 2018, SCTA violated the False Claims Act by misclassifying imported footwear under the Harmonized Tariff Schedule (“HTS”) and by not paying the full amount of customs duties owed.”
Ms Taylor, through her attorney, McInnis, expressed appreciation for the investigative and settlement efforts of the U.S. Attorney’s Office for the Southern District of New York, the U.S. Customs and Border Protection (CBP) and Homeland Security Investigations (HIS). The Government’s case is captioned, United States of America, Plaintiff-Intervenor, v. Samsung C&T America, Inc., Defendant, 16 Civ. 7216 (PGG), in the United States District Court for the Southern District of New York. Further details of the Government’s allegations are set out in its Complaint in Intervention, which can be found on the court’s electronic docket. For additional information about this case or other False Claims Act matters, please contact:
Timothy J. McInnis, Esq.
McInnis Law
521 Fifth Avenue, 17 Fl., New York, NY 10175
(212) 292-4573
tmcinnis@mcinnis-law.com
by Tim McInnis, Esq | Oct 30, 2022 | Our Cases
NEW YORK, Oct. 25, 2022 NYC whistleblower attorney Timothy J. McInnis announced a $86,676 settlement against The Rensselaerville Institute (TRI), a non-profit organization providing educational services for young people located in Delmar, NY. The settlement resolves False Claims Act allegations in a qui tam whistleblower complaint filed by former CFO Alexandra Poole under seal in August 2021 in the U.S. District Court for the Northern District of New York. The case was unsealed October 25, 2022, by order of United States Magistrate Judge Andrew T. Baxter. The United States Attorney’s Office for the Northern District of New York intervened in the action on October 18, 2022 and spearheaded the settlement, according to Attorney McInnis.
Poole’s complaint alleged that TRI defrauded the Small Business Administration (SBA) Payroll Protection Program (PPP) by knowingly overstating its average monthly payroll. TRI did this to unlawfully increase the amount of an SBA-guaranteed loan it could receive. The SBA subsequently determined TRI had, in fact, overstated its average monthly payroll on its PPP loan application and received excess funding of $86,676. Under the terms of the Settlement Agreement, TRI acknowledged and accepted responsibility for this conduct.
As stated in the Settlement Agreement, the PPP was established pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, in March 2020. It was designed to provide emergency financial assistance to small businesses suffering economically from the COVID-19 pandemic through forgivable loans for payroll and other specified expenses. Poole’s complaint further alleges the SBA made approximately 5.2 million PPP loans, totaling nearly $700 billion, many with little or no lending controls or oversight.
While ensuing PPP fraud was rampant, there have been very few recoveries under the civil qui tam provisions of the False Claims Act, observed Attorney McInnis. These provisions allow private citizens to sue on behalf of the Government in order to help stop fraud against the United States and recover ill-gotten gains, McInnis explained. Even more rare, is a successful qui tam suit against a non-profit organization, McInnis said, noting he believes this is the first of its kind.
Under the terms of the Settlement Agreement, Poole, who is known as a qui tam relator, will receive $17,000 (19.6%) as a reward for initiating the lawsuit and prompting the Government’s investigation. Poole also alleged whistleblower retaliation/wrongful termination by TRI and that claim, as well as the amount of attorneys’ fees to be awarded to McInnis Law and co-counsel Tabner, Ryan and Keniry, LLP remain unresolved by the Settlement Agreement.
On behalf of Ms. Poole and her attorneys, Attorney McInnis expressed appreciation for the investigative and settlement efforts of the U.S. Attorney’s Office for the Northern District of New York and the SBA. The case is captioned, United States ex rel. Alexandra Poole v. The Rensselaerville Institute, Inc., et al., 1:21-cv-943, United States District Court for the Northern District of New York.
For additional information, please contact Attorney Timothy J. McInnis, of McInnis Law, 521 Fifth Avenue, 17th Fl., New York, NY 10175, at (212) 292-4573 or tmcinnis@mcinnis-law.com.
Complaint
ECF Settlement Agreement
