Executive Summary
- Southside Communities Fire Protection, Inc. agreed to pay $3,499,619 to resolve allegations of improperly obtaining a Paycheck Protection Program (PPP) loan.
- The Georgia non-profit entity was deemed ineligible for the approximately $3.1 million PPP loan due to its 501(c)(4) tax-exempt status, which was explicitly excluded from the program.
- The settlement resulted from a qui tam complaint filed by GNGH2, Inc., which will receive $318,115 as its share of the recovery.
Laws and Precedent
- The legal action against Southside Communities Fire Protection, Inc. centers on allegations of improperly obtaining a loan under the Paycheck Protection Program (PPP), established by Congress through the Coronavirus Aid, Relief and Economic Security (CARES) Act, which explicitly excluded Section 501(c)(4) tax-exempt nonprofit entities from eligibility. The case originated from a *qui tam* complaint, a provision of the False Claims Act that allows private citizens to sue on behalf of the government for false claims and share in any recovery, and was resolved through a settlement without any determination of liability.
Southside Communities Fire Protection, Inc., a Georgia non-profit entity providing emergency services, has agreed to pay $3,499,619 to resolve allegations that it improperly obtained a loan under the Paycheck Protection Program (PPP). The settlement, announced Friday by the U.S. Attorney’s Office for the Middle District of Florida, addresses claims that Southside was ineligible for the federal COVID-19 relief funds due to its tax-exempt status.
PPP Loan Allegations
The allegations stemmed from a qui tam complaint filed by GNGH2, Inc. in the Middle District of Florida. GNGH2 claimed that Southside, organized under Section 501(c)(4) of the Internal Revenue Code, was ineligible for the approximately $3.1 million PPP loan it received.
The PPP, established by Congress in March 2020 through the Coronavirus Aid, Relief and Economic Security (CARES) Act, aimed to provide emergency loans to small businesses facing economic hardship during the COVID-19 pandemic. Under the program’s rules and regulations, nonprofit entities classified as Section 501(c)(4) were explicitly excluded from eligibility.
Program Details and Enforcement
Administered by the U.S. Small Business Administration (SBA), the PPP allowed for loan forgiveness if funds were spent on eligible expenses, with borrowers required to certify the truthfulness and accuracy of all application information. The United States investigated GNGH2’s allegations with the cooperation of Southside.
U.S. Attorney Gregory W. Kehoe for the Middle District of Florida emphasized the commitment to recovering funds improperly obtained. “This settlement is the latest demonstration of our Office’s commitment to the recovery of money from individuals and entities that improperly obtained loans under the PPP program,” Kehoe stated.
Coordinated Investigation and Recovery
SBA General Counsel Wendell G. Davis highlighted the collaborative efforts, noting that the favorable settlement was “the product of enhanced efforts by federal agencies, such as the Small Business Administration, working in conjunction with the U.S. Attorney’s Office to recover the pandemic relief funds improperly procured.”
The settlement resulted from a coordinated investigation led by Assistant U.S. Attorneys Christopher J. Emden from the Middle District of Florida and Jennifer Thompson from the Southern District of Georgia, with assistance from the Small Business Administration’s Office of General Counsel. As a result of the settlement, GNGH2 will receive $318,115 as its share in the recovery. The claims resolved by the settlement are allegations only, and there has been no determination of liability.
Impact of the Settlement
This settlement underscores the ongoing federal efforts to ensure the integrity of pandemic relief programs and recover funds that were distributed outside of established eligibility criteria. It serves as a reminder of the accountability for entities that received federal aid during the COVID-19 crisis.
