1st Paycheck Protection plan fraud settlement is reached

McGregor W. Scott, the U.S. attorney in Sacramento, announced what he said is the first civil settlement in the nation for fraud related to the federal Paycheck Protection Program.

SlideBelts Inc., an internet retailer, and its CEO agreed to pay $100,000 in combined damages and penalties to resolve claims they lied to banks working with the federal government Coronavirus Aid, Relief, and Economic Security Act.

CEO Brigham Taylor and other company officials falsely told banks the company was not in bankruptcy proceedings between April and June while seeking access to funds. This allowed the company to receive $350,000 in loans. The company has already repaid these funds, according to Scott's announcement on Tuesday evening.

SlideBelts is located in El Dorado Hills, in eastern California, but is incorporated in Delaware.

"The defendants made false statements to multiple banks in order to obtain a Paycheck Protection Program loan that should have been disbursed to an honest small business suffering financially from the economic effects of the COVID-19 pandemic," Scott, the U.S. attorney for the Eastern District of California, said in a news release. "The Department of Justice and our partners at the [Small Business Administration] will use all tools at our disposal, including civil fraud statutes, to aggressively pursue those who exploit federal programs intended to help those in need during this national emergency."

The loans came from $585 billion the federal government distributed to help businesses meet their payrolls and avoid laying off workers. Congress excluded companies in bankruptcy because of the "unacceptably high risk" they would not repay the loans.

As part of the settlement, Taylor and the company admitted to violating two federal laws, the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act. The Office of the Inspector General for the U.S. Small Business Administration investigated the violations. The company has filed two bankruptcy petitions, the first one in 2019.

On Tuesday, U.S. Eastern District Bankruptcy Judge Fredrick E. Clement rejected the company's proposed bankruptcy plan in its current case, In re: SlideBelts, Inc., 20-24098-A-11 (Bankr. E.D. Cal. Aug. 25, 2020).