Labor Organizations to Pay $5.1 Million to Settle False Claims Act Allegations Relating to Paycheck Protection Program Loans

WHEELING, WEST VIRGINIA - Four labor organizations have agreed to settle allegations that they violated the False Claims Act (FCA) by applying for and obtaining loans under the Paycheck Protection Program (PPP) for which they knew or should have known they were ineligible. The United States contended that these organization caused the Small Business Administration (SBA) to pay loan forgiveness, in addition to interest and processing fees, to financial institutions that processed the loans.

In March 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial assistance to millions of Americans suffering economic effects caused by the COVID-19 pandemic. As part of the CARES Act, Congress authorized forgivable loans to eligible small businesses for job retention and certain other expenses through the PPP. To obtain a PPP loan, a qualifying business submitted a PPP loan application, which required the business to acknowledge the program rules and make certain affirmative certifications including eligibility. These loan applications were then processed by participating lenders, and, if approved, the participating lender funded the loan. PPP loans were 100% guaranteed by the SBA.

Under the rules applicable at the time of the loans covered by today’s settlements, certain organizations were not eligible to receive a PPP loan.  Certain ineligible organizations certified they were eligible and, in fact, received loans which were ultimately forgiven. The labor organizations and the amounts they have agreed to pay are as follows:

• Local Union No. 3 of the International Brotherhood of Electrical Workers (IBEW Local 3) is a labor organization with its principal place of business in Flushing, New York. IBEW Local 3 has agreed to pay $2,697,929.88 to resolve the allegations.
• International Brotherhood of Electrical Workers Local Union 596 (IBEW Local 596) is a labor organization with its principal place of business in Clarksburg, West Virginia. IBEW Local 596 has agreed to pay $269,995.83 to resolve the allegations.
• United Association of Journeymen 598 (UA Local 598) is a labor organization with its principal place of business in Pasco, Washington. UA Local 598 has agreed to pay $835,508.00 to resolve the allegations.
• International Brotherhood of Teamsters Local 986 (Teamsters Local 986) is a labor organization with its principal place of business in Covina, California. IBEW Local 3 has agreed to pay $1,356,832.50 to resolve the allegations.

“By obtaining PPP loans for which they were ineligible, these organizations took advantage of the taxpayers and millions of American citizens who were hurting and suffering from the economic effects of the pandemic,” said Acting United States Attorney Randolph J. Bernard.  “They placed their own self-interest over compassion for others.  The United States Attorney’s Office will continue to pursue all persons and organizations who wrongfully enriched themselves at the expense of those entitled to such aid.”

This matter was litigated by Assistant United States Attorneys Maximillian F. Nogay and Jordan V. Palmer of the United States Attorneys’ Office for the Northern District of West Virginia.