On March 12, the Department of Justice (DOJ) announced that Florida resident Patrick Walsh and his companies agreed to pay roughly $20 million to settle charges they violated the False Claims Act by defrauding the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. This is just the latest DOJ action to go after COVID relief fraud, which remains a top enforcement priority for the government, and which continues to be facilitated by whistleblowers with inside information into the fraud.

The government created the PPP and EIDL loan programs as part of the CARES Act to support struggling businesses during the COVID-19 pandemic.  The Small Business Administration (SBA) administers both programs with the SBA guaranteeing PPP loans and directly providing EIDL loans.  Qualifying under the loan programs required meeting certain eligibility requirements and using the loan proceeds for eligible business expenses.

With this settlement, Walsh admitted he and his companies had done neither.  They secured roughly $7.8 million in loans by misrepresenting employee rosters and payrolls, even for companies that were entirely dormant or inactive.  And Walsh used the loans for personal purposes, including buying a private island, investing in Texas oil interests, and paying off personal debts.

Walsh unsurprisingly defaulted on the PPP loans causing the SBA to cover the losses under its loan guarantee obligations.  The SBA also had to cover the interest and processing fee expenses incurred by the lenders related to the defaulted loans.

Notably, Walsh is already serving time for these offenses.  In January 2023, he pleaded guilty to wire fraud and money laundering in connection with the fraudulent loans and was sentenced to 66 months in prison and ordered to pay $7.8 million in restitution.

DOJ’s efforts to go after Walsh both criminally and civilly, and for such large penalties, is a testament to the government’s continued efforts to combat COVID-19 fraud.  Indeed, in its 2024 False Claims Act Roundup, DOJ identified Pandemic Fraud as one of its high priority enforcement areas.  DOJ noted in the last year alone, it secured more than 250 False Claims Act settlements and judgments in this area, mostly related to improper PPP payments and Medicare fraud connected to COVID-19 testing and treatment.

In announcing the Walsh settlement, Acting DOJ Civil Chief highlighted how “PPP and EIDL loans were intended to help small businesses during the pandemic,” and that DOJ “is committed to holding accountable those who undermined the purpose of these programs by knowingly obtaining and retaining loan proceeds for which they were not eligible.”

Acting US Attorney Michelle Spaven added that Walsh’s criminal and civil resolution “should serve as a significant deterrent to others . . .  who would attempt to steal millions of dollars from the American people and exploit Federal relief programs.”

Constantine Cannon whistleblower partner Gordon Schnell remarked that “while we are certainly seeing changes in enforcement priorities under the Trump administration, we should expect to see no drop off in the government’s commitment to go after COVID relief fraud, and PPP fraud in particular.”  Schnell added that “the hefty prison sentence and financial penalty the government secured against Walsh is a testament to that commitment.”

Like most False Claims Act settlements, this one originated with a lawsuit filed by a whistleblower under the qui tam provisions of the statute which allow private parties to bring lawsuits on behalf of the government against those that defraud the government.  The whistleblower in this case was Andrew Hersh, who performed information technology services for Walsh.  He will receive a yet-to-be-determined whistleblower award from the proceeds of the government’s recovery.

If you have information about possible COVID-19 fraud or would like to learn more about what it means to be a whistleblower under the False Claims Act, please do not hesitate to contact us.  We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consultation.

Read Another Whistleblower Helps DOJ Go After COVID-19 Fraud at constantinecannon.com