In the latest example of the government’s ongoing crackdown on Covid-19 fraud, a Michigan-based hotel, social club, and restaurant, The Detroit Club, along with its owners and operators, will pay $357,669 to settle allegations that they defrauded COVID-19 pandemic relief programs in violation of the False Claims Act. The settling parties/defendants include Detroit Management Corporation, Lynn Kassotis, Citi Investment Group Corporation, and Emre Uralli.

In March 2020, Congress announced the Paycheck Protection Program (PPP), part of the Coronavirus Aid, Relief, and Economic Security Act for emergency financial assistance to help struggling American businesses during the pandemic. The PPP, administered by the United States Small Business Administration (SBA), offered loans by private lenders, guaranteed by the SBA.

Under the PPP, businesses that met certain eligibility requirements could receive forgivable loans for expenses such as payroll and other operational costs up to 24 weeks after the loan was issued. To apply, businesses submitted PPP applications, certified their loan eligibility, and affirmed they would only use the loan’s funds for eligible purposes.

The defendants applied for two PPP loans during the pandemic on behalf of The Detroit Club—receiving $348,400 through the first draw loan in 2020 and $410,546 through the second draw loan in 2021, for a total of $758,946 in PPP funds. They certified that the loans would go toward appropriate expenses, eligible for forgiveness. They also obtained forgiveness of $167,040 for building lease expenses, even though those expenses were ineligible under the program.

Acting U.S. Attorney Julie A. Beck for the Eastern District of Michigan stated: “The False Claims Act is an important tool to deter and hold accountable those who defraud the government. Entities who took advantage of the COVID-19 pandemic to commit fraud against the government will be vigorously investigated by our office.”

This settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act, where a private party or “relator” can file an action on behalf of the United States and receive a portion of the government’s recovery. In this case, captioned United States ex rel. Decker v. Detroit Club Management Corporation, et al., case no. 23-cv-10209 (E.D. Mich.), the whistleblower will receive $71,533.96.

Whistleblower partner Marlene Koury explained: “During COVID-19, the misuse of emergency relief funds by individuals and companies undermines the very purpose of these resources – supporting those in need. Government enforcement serves as a reminder that any future emergency funding must cover its intended uses.”

The Role of Whistleblowers and COVID-19 Related Fraud

Whistleblowers are vital to speaking out against misconduct and sharing information about matters such as defrauding the government. This fraud can include COVID-19 era information related to falsely certifying requirements when applying for COVID-19 loans, unauthorized use of funds, payment of kickbacks to obtain government contracts related to COVID-19, and more.

Our Firm Helps COVID-19 Fraud Whistleblowers

Constantine Cannon handles cases related to COVID-19 fraud. We take pride in representing whistleblowers who come forward with critical information. If you have details or questions regarding a possible case, please contact us to see how we can help.

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United States Attorney’s Office, Eastern District of Michigan Press Release

Read A COVID-19 Club Con: The Detroit Club Owners and Operators Settle False Claims Act Allegations at constantinecannon.com