United States Motion for Summary Judgment -- Quesenberry v. JMG Investments

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U.S. District Court for the Central District of California · No. 2:20-cv-08497-MWF-AS · Doc. 75 · 2025-11-17 · Docket on CourtListener

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BRETT A. SHUMATE 
Assistant Attorney General, Civil Division 
BILAL A. ESSAYLI 
First Assistant United States Attorney 
DAVID M. HARRIS, AUSA 
Chief, Civil Division 
HUNTER B. THOMSON 
Acting Chief, Civil Fraud Section 
PAUL B. LA SCALA (CA Bar #186939) 
Assistant United States Attorney 
Room 7516, Federal Building 
300 North Los Angeles Street 
Los Angeles, California 90012 
Tel: (213) 894-2467; Fax: (213) 894-7819 
E-mail:  Paul.LaScala@usdoj.gov  
JAMIE ANN YAVELBERG 
COLIN M. HUNTLEY 
JARED S. WIESNER 
PADEN GALLAGHER 
Attorneys, Civil Division 
United States Department of Justice 
 
P.O. Box 261, Ben Franklin Station 
 
Washington, D.C. 20044 
 
Tel: (202) 353-1274 
 
Fax: (202) 616-3085 
 
Email: Jared.S.Wiesner2@usdoj.gov 
Attorneys for the United States of America 
 
UNITED STATES DISTRICT COURT 
FOR THE CENTRAL DISTRICT OF CALIFORNIA 
 
 
UNITED STATES OF AMERICA, ex 
rel. BRYAN QUESENBERRY, 
Plaintiff, 
v. 
JMG INVESTMENTS, INC., and 
JEFFREY SCHWARTZ 
Defendants. 
 
No. 2:20−cv−08497−MWF−AS 
UNITED STATES’ NOTICE OF 
MOTION AND MOTION FOR 
SUMMARY JUDGMENT; 
MEMORANDUM OF POINTS AND 
AUTHORITIES IN SUPPORT 
THEREOF 
[Fed. R. Civ. P. 56] 
[Separate Statement of Uncontroverted 
Facts, Declarations, and [Proposed)] 
Judgment filed concurrently herewith] 
Hearing Date: 
December 15, 2025 
Hearing Time: 
10:00 a.m. 
Ctrm: 
5A 
 
 
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NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT 
PLEASE TAKE NOTICE that, on December 15, 2025 at 10:00 AM, as soon 
thereafter as it may be heard, Plaintiff United States of America (“United States”) will, 
and hereby does, move this Court for an order recommending granting summary 
judgment in its favor.  This motion will be made before the Honorable Michael W. 
Fitzgerald, United States District Judge, Courtroom 5A, 5th Floor, located at 350 W 1st 
St, Los Angeles, CA 90012.  
The United States brings this motion on the grounds that Defendants JMG 
Investments, Inc. (“JMG”) and Jeffrey Schwartz cannot raise a genuine triable issue of 
material fact or otherwise prevail on the United States’ claims against them, and the 
United States is therefore entitled to summary judgment under Fed. R. Civ. P. 56(a). 
This motion is made upon this Notice, the attached Memorandum of Points and 
Authorities, the Separate Statement of Uncontroverted Facts (“SUF”), and supporting 
declarations, filed concurrently herewith, all pleadings, records, and other documents on 
file with the Court in this action. 
Pursuant to Local Rule 7-3, on November 6, 2025, Trial Attorneys Paden 
Gallagher and Jared Wiesner met-and-conferred with Defendants’ counsel, Richard A. 
Rodgers, and discussed the substance of the United States’ contemplated Motion for 
Summary Judgment.  The parties were unable to reach a resolution which would 
eliminate the necessity for a hearing.  
 
 
Dated: November 17, 2025  
 
Respectfully submitted, 
 
BRETT A. SHUMATE 
Assistant Attorney General, Civil Division 
BILAL A. ESSAYLI 
First Assistant United States Attorney 
DAVID M. HARRIS 
Assistant United States Attorney 
Chief, Civil Division 
HUNTER B. THOMSON 
Acting Chief, Civil Fraud Section 
PAUL B. LA SCALA 
Assistant United States Attorney 
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JAMIE ANN YAVELBERG 
COLIN M. HUNTLEY 
JARED S. WIESNER 
PADEN GALLAGHER 
Attorneys, Civil Division 
 
 /s/ Paden Gallagher                                                            
PADEN GALLAGHER 
Trial Attorney 
 
Attorneys for the United States of America 
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TABLE OF CONTENTS 
I. 
INTRODUCTION ..................................................................................................... 1 
II. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND .................... 1 
A. STATUTORY AND LEGAL FRAMEWORK .................................................................... 1 
1. 
The Paycheck Protection Program ..................................................................... 1 
2. 
SBA’s Section 7(a) Loan Program ...................................................................... 2 
3. 
PPP Loan Forgiveness ....................................................................................... 3 
B. 
DEFENDANTS’ PAYCHECK PROTECTION PROGRAM LOANS ...................................... 3 
1. 
Defendants’ Loan Applications .......................................................................... 3 
2. 
Defendants’ PPP Loan Forgiveness Applications ............................................. 6 
C. 
RELEVANT PROCEDURAL BACKGROUND ................................................................. 7 
III. LEGAL STANDARD ............................................................................................... 7 
IV. ARGUMENT ............................................................................................................. 8 
A. IT IS UNDISPUTED THAT SUMMARY JUDGMENT IS WARRANTED ON THE UNITED 
STATES’ COMMON LAW CLAIMS (COUNTS IV & V). ....................................................... 8 
1. 
Summary Judgment is Warranted on the United States Payment by Mistake 
Claim (Count V). ......................................................................................................... 8 
2. 
Summary Judgment is Warranted on the United States’ Unjust Enrichment 
Claim (Count IV). ........................................................................................................ 9 
B. 
SUMMARY JUDGMENT IS WARRANTED ON THE UNITED STATES’ FCA CLAIMS 
BASED ON DEFENDANTS’ FALSE STATEMENTS AND FRAUDULENT COURSE OF CONDUCT 
IN APPLYING FOR AND RECEIVING TWO PPP LOANS (COUNTS I & II). .......................... 10 
1. 
Defendants Made False Statements in the Fountainhead Application and 
Engaged in a Fraudulent Course of Conduct to Improperly Receive Two PPP 
Loans in 2020. ........................................................................................................... 11 
2. 
Defendants’ Acted with Reckless Disregard of the Falsity of their Statements 
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at Minimum. .............................................................................................................. 13 
3. 
Defendants’ False Statements Were Material to the Decision to Issue the 
Fountainhead Loan. .................................................................................................. 15 
4. 
The Fountainhead Loan Application Constitutes a “Claim.” .......................... 16 
C. 
SUMMARY JUDGMENT IS WARRANTED ON THE UNITED STATES’ REVERSE FALSE 
CLAIM (COUNT III). ....................................................................................................... 18 
D. CALCULATION OF DAMAGES UNDER THE FALSE CLAIMS ACT ............................... 19 
V. CONCLUSION ....................................................................................................... 20 
 
 
 
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TABLE OF AUTHORITIES 
Cases 
Carter v. Bridgepoint Educ., Inc.,  
No. 10-cv-1401-JLS-WVG, 2014 WL 11906590 (S.D. Cal. Jan. 8, 2014) ................  11 
Celotex Corp. v. Catrett, 
477 U.S. 317 (1986)  .....................................................................................................  8 
Cook Cnty. v. United States ex rel. Chandler, 
538 U.S. 119 (2003)  ...................................................................................................  20 
Friedman v. Live Nation Merch., Inc., 
833 F.3d 1180 (9th Cir. 2016)  ......................................................................................  8 
Hawai‘i Disability Rights Ctr. v. Kishimoto, 
122 F.4th 353 (9th Cir. 2024)  .......................................................................................  8 
In re Gateway Radiology Consultants, P.A., 
983 F.3d 1239 (11th Cir. 2020)  ....................................................................................  2 
Tolan v. Cotton, 
572 U.S. 650 (2014)  .....................................................................................................  8 
United States ex rel. Campie v. Gilead Scis., Inc., 
862 F.3d 890 (9th Cir. 2017)  .......................................................................... 11, 12, 16 
United States ex rel. Godecke v. Kinetic Concepts, Inc., 
937 F.3d 1201 (9th Cir. 2019)  ....................................................................................  15 
United States ex rel. Hendow v. Univ. of Phoenix,  
461 F.3d 1166 (9th Cir. 2006) .......................................................................... 14, 16, 17 
United States ex rel. Kane v. Healthfirst, Inc., 
120 F. Supp. 3d 370 (S.D.N.Y. 2015)  ........................................................................  18 
United States ex rel. Landis v. Tailwind Sports Corp., 
234 F. Supp. 3d 180 (D.D.C. 2017)  ...........................................................................  10 
United States ex rel. Mei Ling v. Los Angeles, 
389 F. Supp. 3d 744 (C.D. Cal. 2019)  ........................................................................  16 
United States ex rel. Phalp v. Lincare Holdings, Inc., 
857 F.3d 1148 (11th Cir. 2017)  ..................................................................................  14 
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United States ex rel. Silingo v. WellPoint, Inc., 
904 F.3d 667 (9th Cir. 2018)  ......................................................................................  18 
United States v. Honolulu Comm. Action Prog., Inc.,  
No. 16-cv-00062-JMS-KJM, 2019 WL 4739283 (D. Haw. Sept. 27, 2019)  .............  11 
United States ex rel. Duntsch v. Superior Care Pharmacy, 
No. 18-cv-1002-MMA-MSB, 2025 WL 108188 (S.D. Cal. Jan. 15, 2025)  ............  8, 9 
United States v. Bellecci, 
No. 05-cv-1538-LKK-GGH, 2008 WL 802367 (E.D. Cal. Mar. 26, 2008)  ................  9 
United States v. Bourseau, 
531 F.3d 1159 (9th Cir. 2008)  ........................................................................ 14, 15, 19 
United States v. Mackby, 
261 F.3d 821 (9th Cir. 2001)  ......................................................................................  15 
United States v. Mackby, 
339 F.3d 1013 (9th Cir. 2003)  ....................................................................................  19 
United States v. Mead,  
426 F.2d 118 (9th Cir. 1970)  ........................................................................................  9 
United States v. Systron-Donner Corp., 
486 F.2d 249 (9th Cir. 1973)  ........................................................................................  8 
United States v. Woodbury, 
359 F.2d 370 (9th Cir. 1966)  ......................................................................................  19 
Univ. Health Servs. v. United States ex rel. Escobar, 
579 U.S. 176 (2016)  ................................................................................. 11, 12, 15, 16 
Urquilla-Diaz v. Kaplan Univ., 
780 F.3d 1039 (11th Cir. 2015)  ..................................................................................  14 
Statutes 
15 U.S.C. § 634  .................................................................................................................  3 
15 U.S.C. § 636  ....................................................................................................... 1, 2, 17 
15 U.S.C. § 636m  ..............................................................................................................  3 
31 U.S.C. § 3729  ...................................................................................................... passim 
Regulations 
13 C.F.R. § 120.2  ..............................................................................................................  2 
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28 C.F.R. § 85.5  ..............................................................................................................  20 
Other 
CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020) ..............................................  1, 2 
85 Fed. Reg. 20811  .................................................................................................. passim 
85 Fed. Reg. 23450  .........................................................................................................  17 
86 Fed. Reg. 8283  .............................................................................................................  3 
Fed. R. Civ. P. 56  ................................................................................................... 1, 2, 7-8 
 
 
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I. 
INTRODUCTION 
Plaintiff, the United States of America, submits this motion for summary 
judgment as to false claims and records related to Defendants’ application for a duplicate 
Paycheck Protection Program (“PPP”) loan.  The undisputed evidence shows that 
Defendants violated the False Claims Act (“FCA”) and were unjustly enriched by 
seeking and receiving two PPP loans in 2020 despite certifying compliance with a 
prohibition on receiving more than one PPP loan that year.  Moreover, Defendants still 
have not paid back the ill-gotten loan funds despite being aware of and acknowledging 
an obligation to return the funds.  Because there is no genuine dispute of material fact on 
any of the United States’ claims, the United States seeks summary judgment as to all of 
its claims. 
II. 
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND 
A. 
Statutory and Legal Framework 
1. 
The Paycheck Protection Program 
In March 2020, Congress passed the CARES Act, Pub. L. No. 116-136, 134 Stat. 
281 (2020), to provide emergency assistance to individuals, families, businesses, and 
health-care providers coping with the COVID-19 pandemic.  See 85 Fed. Reg. 20811, 
20811-12 (April 15, 2020).  One of the Act’s measures was the PPP, tasking the Small 
Business Administration (“SBA”) with implementing a loan program to provide 
emergency financial assistance to small businesses experiencing economic hardship due 
to the pandemic.  CARES Act § 1102.  Section 1102(a)(2) temporarily expanded SBA’s 
business-loan authority by adding a new paragraph to SBA’s longstanding general 
purpose loan framework, § 7(a).  15 U.S.C. § 636(a)(36).  As § 636(a)(36)(B) states, 
“[e]xcept as otherwise provided in [Section 636(a)(36)], the [SBA] may guarantee [PPP] 
loans,” issued by private lenders, “under the same terms, conditions, and processes as 
[other] loan[s] made under” § 7(a).  The CARES Act provided for forgiveness of up to 
the full principal amount of SBA guaranteed PPP loans.  CARES Act, Pub. L. No. 116-
136, § 1106, 134 Stat. 281 (2020).   
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Congress provided that the PPP’s “maximum loan amount” was a borrower’s 
average monthly payroll expenses to employees for the 1-year period before the date of 
the loan multiplied by 2.5.  15 U.S.C. § 636(a)(36)(E).  Congress also directed that SBA 
allow additional non-§ 7(a) lenders to participate in the PPP and mandated that SBA give 
all PPP lenders “delegated authority” to make and approve PPP loans without prior SBA 
review.  15 U.S.C. § 636(a)(36)(F)(ii)(I), (iii).   
SBA launched the PPP on April 3, 2020.  (SUF ¶ 1.)  SBA also established a PPP 
loan-origination process based on borrower self-certifications of eligibility.  See 85 Fed. 
Reg. 20811, 20812, 20814–16 (April 15, 2020).  Because borrowers’ applications and 
supporting documentation were maintained by lenders and not sent to SBA, SBA did not 
make independent determinations regarding borrower eligibility or compliance with 
program rules at the loan-origination stage.  See id. at 20814.  To help ensure that as 
many eligible borrowers as possible could obtain PPP loans, an Interim Final Rule issued 
by SBA allowed borrowers to receive only one PPP loan during 2020.  See id. 20813-14.  
In accordance with this rule, all borrowers were required to certify on their loan 
applications that “[d]uring the period beginning on February 15, 2020 and ending on 
December 31, 2020, the applicant has not and will not receive another loan under this 
program.”  Id. 
2. 
SBA’s Section 7(a) Loan Program 
Section 7(a) of the Small Business Act “empower[s]” SBA to guarantee general 
purpose loans to small businesses.  15 U.S.C. § 636(a).   Typically, SBA guarantees 
loans by private lenders rather than disbursing funds directly.  In re Gateway Radiology 
Consultants, P.A., 983 F.3d 1239, 1248 (11th Cir. 2020).  Under § 7(a) loan regulations, 
SBA guaranteed loans are funded and serviced by lenders, but if a borrower defaults, 
“SBA’s guarantee requires SBA to purchase its portion of the outstanding balance.”  13 
C.F.R. § 120.2(a)(iii).  The Small Business Act also broadly authorizes SBA to “make 
such rules and regulations” as the agency “deems necessary” to implement the loan 
program, and to “take any and all actions” the agency “determines . . . are necessary or 
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desirable in making, servicing, compromising, modifying, liquidating, or otherwise 
dealing with or realizing on loans[.]”  15 U.S.C. § 634(b)(6–7). 
3. 
PPP Loan Forgiveness 
The CARES Act provided that “[a]n eligible recipient [of a PPP loan] shall be 
eligible for forgiveness . . . in an amount equal to the sum of” its covered payroll costs 
and other allowable expenses, 15 U.S.C. § 636m(b), not to exceed the principal amount 
of the loan.  15 U.S.C. § 636m(d)(1).  Typically, an eligible borrower was required to 
submit an application and supporting documentation to its lender, which would 
determine if the borrower would be entitled to forgiveness under the Act, and, if so, 
submit a request for payment to SBA.  15 U.S.C. § 636m(g); see also 86 Fed. Reg. 8283, 
8287–88 (Feb. 5, 2021).  SBA would then remit the appropriate amount to the lender, 
subject to any SBA review of the loan.  15 U.S.C. § 636m(c)(3); 86 Fed. Reg. at 8288.  
If a PPP loan is not forgiven and the loan payment becomes more than 60 days 
past due, SBA instructs lenders to “request a guaranty purchase, which is SBA’s 
purchase of the guaranteed portion of the loan.”  U.S. SMALL BUS. ADMIN., OFF. OF 
INSPECTOR GEN., SBA’S GUARANTY PURCHASES FOR PAYCHECK 
PROTECTION PROGRAM LOANS 3 (July 9, 2024) 
https://www.sba.gov/sites/default/files/2024-07/SBA%20OIG%20Report%2024-20.pdf 
(last visited Nov. 14, 2025).  SBA then “simultaneously purchases and charges off 
delinquent loans,” meaning that “SBA removes the outstanding balance of the loan from 
its accounting records.”  Id.  Charged-off loans are then referred to the Department of the 
Treasury for debt collection.  Id. at 9. 
B. 
Defendants’ Paycheck Protection Program Loans 
Defendants are JMG Investments, Inc. (“JMG”), and its sole owner, Jeffrey 
Schwartz.  Defendants received two PPP loans in 2020 in violation of the prohibition on 
receiving multiple PPP loans in 2020.  (SUF ¶ 6.)   
1. 
Defendants’ Loan Applications 
Defendants first submitted a PPP loan application to lender Bank of America on 
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April 8, 2020, for $505,987, which was assigned loan number #4670757309 (“Bank of 
America Loan”).  (SUF ¶¶ 8-9, 33.)  While that application was pending, Defendants 
prepared another loan application to lender Fountainhead SBF LLC (“Fountainhead”), 
which was submitted on May 7, 2020, for $501,588 and assigned loan number 
#3948257400 (“Fountainhead Loan”).  (SUF ¶¶ 13-14.)  Each loan application required 
Schwartz to affirm the following certification on behalf of JMG: “During the period 
beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has 
not and will not receive another loan under the Paycheck Protection Program.”  (SUF ¶¶ 
11-16.)  While the Bank of America Loan application contained an accurate Business 
Taxpayer Identification Number (“TIN”) for JMG, the Fountainhead Loan application 
contained an inaccurate TIN.  (SUF ¶¶ 19-21.) 
On May 8, 2020, just one day after submitting the Fountainhead Loan application, 
Schwartz received an email from a representative at Fountainhead’s broker which read: 
“You have a loan number with us and Fountainhead- congrats! You will receive a 
request for follow up documents within a few days, but you have reserved your ‘slice of 
the pie.’”  (SUF ¶ 24.)  Schwartz believed that this email meant that “[his] loan had gone 
through” with Fountainhead.  (SUF ¶ 25.)  A few days later, on May 12, 2020, Schwartz 
received a second email from a Fountainhead representative which read: 
“Congratulations! Your PPP loan has been approved with the SBA.”  (SUF ¶ 27.)  The 
email further requested information to “prepare everything for closing” on the loan, 
which Schwartz submitted on May 14, 2020.  (SUF ¶¶ 27-29.)  Despite receiving these 
notifications and providing the closing information to Fountainhead, Defendants never 
withdrew their application for the Bank of America Loan.  (SUF ¶¶ 28-31.) 
Instead, on May 15, 2020, one day after providing the requested information to 
Fountainhead, Schwartz signed a promissory note with Bank of America to receive the 
Bank of America Loan, and Defendants received the $505,987 loan proceeds that same 
day.  (SUF ¶¶ 32-33.)  Schwartz then moved the Bank of America funds between his 
bank accounts on May 19, 2020, and used funds from the loan on May 21, 2020, to pay 
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JMG’s payroll.  (SUF ¶¶ 36-37.)  Defendants never withdrew their application from 
Fountainhead or informed SBA or Fountainhead that they had already received one PPP 
loan and, therefore, were ineligible to receive a PPP loan from Fountainhead.  (SUF ¶¶ 
35, 38.) 
On May 22, 2020, one day after spending funds from the Bank of America 
Loan, Schwartz signed and submitted several documents to Fountainhead to secure the 
Fountainhead Loan.  (SUF ¶ 39.)  Among those documents was a promissory note, a 
“Borrower Certification and Agreement,” which was meant “to induce Fountainhead to 
provide [Schwartz] with a PPP loan,” and a “U.S. Small Business Settlement Sheet,” 
which required Schwartz to certify the following:  “There has been no unremedied 
adverse change in the Borrower’s or Operating Company’s financial condition, 
organization, management, operations or assets since the date of the application that 
would warrant withholding or not making this disbursement or any further 
disbursement.”  (SUF ¶¶ 40-45.)  Schwartz understood from signing these documents 
“that if Fountainhead charged off that loan, [he] would then have an obligation to repay 
those loan funds to the government.”  (SUF ¶ 70.)  Defendants received the $501,588 
from that loan later that day, and SBA paid Fountainhead a processing fee of 3% of the 
loan, or $15,047.  (SUF ¶¶ 46-47.) 
Just over two weeks after receiving the Fountainhead Loan, Schwartz emailed 
Lori Grieder, the person who connected him with Fountainhead, about the loan.  Even 
though he had signed several closing documents with Fountainhead after receiving the 
Bank of America Loan, Schwartz claimed in that email that he was “extremely surprised 
when the money [from the Fountainhead Loan] was deposited into [his] Chase account” 
and requested “an email or letter from [Ms. Grieder] stating that if, in fact, [he] [is] 
forced to pay that loan back to the SBA (Chase), [Ms. Grieder] w[ould] reimburse [him] 
for the $10,032 that [he was] paying [her]” for connecting him to Fountainhead.  (SUF 
¶¶ 50-51.)  When asked under oath what he meant by the email, Schwartz admitted: 
“Well I knew – I knew that I was – I was only supposed to get one PPP loan, and then all 
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of a sudden the loan from Fountainhead came through.  I wasn't expecting it because I 
had already received the loan from Bank of America.”  (SUF ¶ 52.)  Ms. Grieder 
testified that during a phone conversation following that email, Schwartz informed Ms. 
Grieder that he was “going to put the money aside” from the Fountainhead Loan in case 
“[he] happen[s] to have to pay” it back.  (SUF ¶ 53.)   
2. 
Defendants’ PPP Loan Forgiveness Applications 
Defendants applied for forgiveness on both PPP loans despite only being eligible 
to receive one PPP loan in 2020.  Defendants applied for forgiveness on the Bank of 
America Loan on November 30, 2020, and were granted forgiveness on the loan in 
February 2021.  (SUF ¶¶ 56-58.)  Schwartz was aware that the loan had been forgiven.  
(SUF ¶ 59.) 
Despite Schwartz’s earlier statement that he would “put the money aside” from the 
Fountainhead loan in anticipation of having to repay it, Defendants nonetheless applied 
for forgiveness on the Fountainhead Loan at some point before July 2021.  (SUF ¶ 61.)  
After that application was denied, Defendants applied for forgiveness a second time on 
July 19, 2021.  (SUF ¶ 60.)  Fountainhead also denied this application, and, in April 
2022, Fountainhead informed Schwartz “that they can only accept one PPP per year 
from any account so they are rejecting the forgiveness on that loan but will give [him] 5 
years to pay it back.”  (SUF ¶ 62.)  Despite this, Defendants did not pay back the loan to 
Fountainhead, and Schwartz, instead, contemplated “try[ing] to get them to forgive it this 
year 2022” since Defendants did “not have one th[at] year.”  (SUF ¶¶ 63-64.)   
Schwartz again applied for forgiveness with Fountainhead.  (See SUF ¶ 65 (noting 
that JMG’s loan forgiveness application was once again “pending” in July 2022).)  On 
July 5, 2022, a representative of Fountainhead emailed Ms. Grieder, who forwarded the 
message on to Schwartz, that JMG’s account “shows 2-1st draw and 1-2nd draw” loans 
with “a 1st draw and a 2nd draw that both show “Paid in Full,” but that SBA only “allows 
for 1-1st draw and 1-2nd draw.”  (SUF ¶ 65.)  That application was similarly denied, and 
SBA purchased the Fountainhead Loan from Fountainhead for $501,588 in July 2022 
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pursuant to SBA’s guaranty.  (SUF ¶¶ 66-67.)1  Despite admitting that they “do not 
assert any right to retain the proceeds of the [Fountainhead Loan],” Defendants never 
repaid any of the funds from the loan.  (SUF ¶¶ 71-72.)  
C. 
Relevant Procedural Background  
Relator filed this qui tam action on September 10, 2020, against Schwartz, JMG, 
and several other now-dismissed Defendants who allegedly received improper PPP 
loans.  (See Dkt. 1.)  On May 30, 2024, the United States filed a notice of its election to 
intervene as to the claims against JMG and Schwartz.  (See Dkt. 38.)  The United States 
filed its Complaint in Intervention on August 28, 2024.  (See Dkt. 41.) 
The United States asserts five counts in its Complaint.  The first three counts arise 
under the False Claims Act:  first, the presentation of a false claim for payment under 31 
U.S.C. § 3729(a)(1)(A) (Count I); second, the submission of false records material to a 
false or fraudulent claim under 31 U.S.C. § 3729(a)(1)(B) (Count II); and third, a reverse 
false claim under 31 U.S.C. § 3729(a)(1)(G) (Count III).  (See Dkt. 41 ¶¶ 42-56).  The 
final two counts for unjust enrichment (Count IV) and payment by mistake (Count V) 
arise under federal common law.  (See Dkt. 41 ¶¶ 57-67.) 
III. 
LEGAL STANDARD 
Summary judgment is proper when the pleadings, the discovery and disclosure 
materials, and any affidavits or declarations show that there is no genuine dispute of any 
material fact and that the moving party is entitled to judgment as a matter of law.  Fed. 
R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323–25 (1986).  “There is a 
genuine issue of material fact when a reasonable jury reviewing the evidence submitted 
 
1 In November 2022, Fountainhead submitted Defendants’ July 19, 2021 forgiveness 
application to SBA despite SBA having purchased the guaranty.  (SUF ¶ 67.).  Because 
SBA utilizes a “two-step process involving automated screening of all loans at the 
outset, followed by manual forgiveness review of select loans afterward” to determine if 
a loan is eligible for forgiveness, and because the Fountainhead Loan “underwent the 
automated review stage and was not chosen for manual forgiveness review,” SBA 
ultimately reclassified the Fountainhead Loan from guaranteed purchased to forgiven.  
(SUF ¶ 68.)  However, “[i]f SBA had known that JMG had already received the Bank of 
America Loan, it would not have forgiven the Fountainhead Loan.”  (SUF ¶ 69.)   
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on summary judgment could return a verdict for the nonmoving party.”  Hawai‘i 
Disability Rights Ctr. v. Kishimoto, 122 F.4th 353, 363 (9th Cir. 2024).  The moving 
party has “the ultimate burden of persuasion on a motion for summary judgment.”  
Friedman v. Live Nation Merch., Inc., 833 F.3d 1180, 1188 (9th Cir. 2016) (quoting 
Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000)).  In 
considering a motion for summary judgment, a court must view the evidence “in the 
light most favorable to the opposing party.”  Tolan v. Cotton, 572 U.S. 650, 657 (2014) 
(quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). 
IV. 
ARGUMENT 
A. 
It is Undisputed that Summary Judgment is Warranted on the United 
States’ Common Law Claims (Counts IV & V).  
The United States’ common law claims of unjust enrichment and payment by 
mistake are “alternative theories of relief, which the government may bring alongside its 
FCA claims,” and exist “independent of statute.”  United States ex rel. Duntsch v. 
Superior Care Pharmacy, No. 18-cv-1002-MMA-MSB, 2025 WL 108188, at *3 (S.D. 
Cal. Jan. 15, 2025); see also United States v. Systron-Donner Corp., 486 F.2d 249, 251 
(9th Cir. 1973) (“[T]he common-law remedy of payment by mistake is available to the 
United States independent of its statutory remedies.”).  Because there is no genuine 
dispute as to any fact material to these claims, and because Defendants have already 
admitted that they should not have received the Fountainhead Loan by making clear that 
they “do not assert any right to retain the proceeds of the [Fountainhead Loan],” 
summary judgment is warranted.  (SUF ¶ 72; Dkt. 57 at 6.) 
1. 
Summary Judgment is Warranted on the United States Payment by 
Mistake Claim (Count V). 
The theory of payment by mistake is “both a theory of recovery and remedy 
uniquely ‘available to the United States and [] independent of statute,’” meant to allow 
the United States to “recover payments made under an erroneous belief that was material 
to the decision to pay, even if the payments were innocently received.”  United States v. 
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Bellecci, No. 05-cv-1538-LKK-GGH, 2008 WL 802367, at *4 (E.D. Cal. Mar. 26, 
2008), rep. and rec. adopted, No. 05-cv-1538-LKK-GGH, 2008 WL 2420752 (E.D. Cal. 
June 13, 2008) (quoting United States v. Mead, 426 F.2d 118, 124 (9th Cir. 1970)).  To 
prove it is “entitled to recover” mistakenly paid funds under this theory, the United 
States must show that it “made the[] payments under an erroneous belief which was 
material to the decision to pay” the funds.  Duntsch, 2025 WL 108188, at *3 (quoting 
Mead, 426 F.2d at 124).  A defendant’s “[k]nowledge of falsity is not a requisite for 
recovery under the mistake doctrine.”  Mead, 426 F.2d at 125 n.6. 
There is no dispute that the United States guaranteed, and Fountainhead disbursed, 
the Fountainhead Loan under the mistaken belief that JMG would only receive one PPP 
loan in 2020 and, thus, was eligible to receive the Fountainhead Loan.  Borrowers were 
required to certify that they would only receive one PPP loan in 2020 to receive a PPP 
loan.  See 85 Fed. Reg. 20811, 20813-14 (April 15, 2020).  Defendants did so in their 
application, and Fountainhead relied on that certification in disbursing the fully 
guaranteed Fountainhead Loan.  (SUF ¶¶ 4-5, 16.)  Indeed, “[i]f SBA had known that 
JMG had already received the Bank of America Loan, it would not have forgiven the 
Fountainhead Loan.”  (SUF ¶ 69.)  Thus, the loan was made under the mistaken belief 
that Defendants would only receive one PPP loan in 2020, and there is no genuine 
dispute that JMG was paid by mistake. 
2. 
Summary Judgment is Warranted on the United States’ Unjust 
Enrichment Claim (Count IV). 
The common law remedy of unjust enrichment is similarly available to the United 
States outside of its statutory remedies.  See Duntsch, 2025 WL 108188, at *3; see also 
Bellecci, 2008 WL 802367, at *6 (noting that “federal common law supports 
reimbursement of federal monies improperly paid pursuant to federal programs” under a 
theory of unjust enrichment).  To prove unjust enrichment, a plaintiff must show: “(1) 
the plaintiff conferred a benefit on the defendant; (2) the defendant retains the benefit; 
and (3) under the circumstances, the defendant’s retention of the benefit is unjust.”  
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United States ex rel. Landis v. Tailwind Sports Corp., 234 F. Supp. 3d 180, 205 & n.15 
(D.D.C. 2017) (quoting In re APA Assessment Fee Litig. v. APA, 766 F.3d 39, 45–46 
(D.C. Cir. 2014)).  
As to the first two elements, there is no dispute that the United States conferred a 
benefit on Defendants of $501,588 through the fully guaranteed Fountainhead Loan and 
that Defendants retained the benefit of that loan since they utilized the loan funds and 
have not paid them back.  (See SUF ¶¶ 46, 71.)  Nor can there be any genuine dispute 
that Defendants’ retention of that benefit would be unjust.  Businesses were only 
permitted to receive one PPP loan in 2020 to ensure that enough funds were available to 
assist as many borrowers as possible.  See 85 Fed. Reg. 20811, 20813 (April 15, 2020).  
This meant that borrowers that were struggling but still followed the rules governing the 
PPP were restricted to a single PPP loan, while Defendants were given nearly twice the 
money that they were entitled to receive by not following the same rules.  Allowing 
Defendants to retain the benefit of their second PPP loan when no other borrower was 
entitled to receive more than one PPP loan in 2020 would be plainly unjust, especially 
when Defendants agree that they do not have “any right to retain the proceeds of” the 
loan in the first place.  (SUF ¶ 72.)  
B. 
Summary Judgment is Warranted on the United States’ FCA Claims 
Based on Defendants’ False Statements and Fraudulent Course of 
Conduct in Applying for and Receiving Two PPP Loans (Counts I & 
II). 
The FCA imposes liability on any person who “knowingly presents, or causes to 
be presented, a false or fraudulent claim for payment or approval” and who “knowingly 
makes, uses, or causes to be made or used, a false record or statement material to a false 
or fraudulent claim.”  31 U.S.C. § 3729(a)(1)(A), (B).  While section 3729(a)(1)(A) 
creates liability for one who presents or causes another to present a false claim to the 
government for payment or approval, section 3729(a)(1)(B) prevents “those who make 
false records or statements . . . from escaping liability solely on the ground that they did 
not themselves present a claim for payment or approval.”  United States v. Honolulu 
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Comm. Action Prog., Inc., No. 16-cv-00062-JMS-KJM, 2019 WL 4739283, at *7 (D. 
Haw. Sept. 27, 2019) (quoting United States ex rel. Totten v. Bombardier Corp., 380 
F.3d 488, 501 (D.C. Cir. 2004) (Roberts, J.)) (emphasis in original).  Thus, section 
3729(a)(1)(B) is “complementary” to section 3729(a)(1)(A), and the elements for each 
count “are practically identical.”  Id. at *7 (quoting Pencheng Si v. Laogai Rsrch. 
Found., 71 F. Supp. 3d 73, 87 (D.D.C. 2014) (Jackson, J.)).  To prove a violation under 
these theories, the United States must show “(1) a false statement or fraudulent course of 
conduct, (2) made with the scienter, (3) that was material, causing (4) the government to 
pay out money or forfeit moneys due.”  United States ex rel. Campie v. Gilead Scis., 
Inc., 862 F.3d 890, 899 (9th Cir. 2017) (citation omitted).   
Because there is no genuine dispute of material fact as to any of those elements, 
the United States is entitled to summary judgment on its 31 U.S.C. § 3729(a)(1)(A) and 
3729(a)(1)(B) claims. 
1. 
Defendants Made False Statements in the Fountainhead Application 
and Engaged in a Fraudulent Course of Conduct to Improperly 
Receive Two PPP Loans in 2020.  
Because “Congress did not define what makes a claim ‘false’ or ‘fraudulent’” in 
the FCA, courts apply the “well-settled meaning of the common-law terms,” which 
includes “claims containing express falsehoods.”  Univ. Health Servs. v. United States ex 
rel. Escobar, 579 U.S. 176, 187 (2016) (citation omitted).  But “‘[t]he False Claims Act . 
. . is not limited to . . . facially false or fraudulent claims for payment’” and is, instead, 
“‘intended to reach all types of fraud, without qualification, that might result in financial 
loss to the Government.’”  Carter v. Bridgepoint Educ., Inc., No. 10-cv-1401-JLS-
WVG, 2014 WL 11906590, at *3 (S.D. Cal. Jan. 8, 2014) (quoting United States ex rel. 
Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1170 (9th Cir. 2006) (alteration in original).  
Here, not only did Defendants submit false statements in the Fountainhead Loan 
application, they perpetuated that falsity by continuing to seek the Bank of America 
Loan after the Fountainhead Loan was approved and by signing closing documents to 
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receive the Fountainhead Loan after already receiving and spending funds from the Bank 
of America Loan.  
Defendants applied for their first PPP loan with Bank of America on April 8, 
2020.  (SUF ¶ 8.)  Then, on May 7, 2020, while that loan application was still pending 
and without withdrawing it, Defendants submitted an application for a second PPP loan 
with Fountainhead, expressly certifying that “[d]uring the period beginning on February 
15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive 
another loan under the Paycheck Protection Program.”  (SUF ¶¶ 13-16.)  As a result, 
Defendants received PPP loans from both Bank of America and Fountainhead, and their 
certification that they would only receive a single PPP loan in 2020 was an “express 
falsehood.”  Escobar, 579 U.S. at 187. 
But even beyond the applications themselves, Defendants engaged in a 
“fraudulent course of conduct” throughout the loan application process designed to 
secure them two PPP loans despite certifying they would only receive one.  Campie, 862 
F.3d at 899.  Indeed, on May 8, 2020, just one day after submitting the Fountainhead 
Loan application, Schwartz received an email from Fountainhead’s broker informing 
him that he had received a “loan number” and that his “slice of the pie” had been 
“reserved,” which Schwartz understood to mean that “[his] loan had gone through.”  
(SUF ¶¶ 24-25.)  This was followed by another email on May 12, 2020, explicitly 
confirming that the Fountainhead Loan “ha[d] been approved with the SBA.”  (SUF ¶ 
27.)  Despite those notifications confirming that JMG would be receiving a PPP loan 
from Fountainhead and Schwartz understanding that the Fountainhead Loan “had gone 
through,” Defendants kept their application with Bank of America pending and even 
signed a promissory note with Bank of America to secure that PPP loan on May 15, 
2020—a step without which Schwartz admitted he did not believe Bank of America 
would have “given [him] a PPP loan.”  (SUF ¶ 32.)  
Defendants then doubled down by taking steps to ensure that they received a 
second PPP loan from Fountainhead just one week after receiving the Bank of America 
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Loan.  As Schwartz admitted, Defendants received the funds from the Bank of America 
Loan on May 15, 2020, and then worked with an agent of Bank of America to transfer 
the funds a few days later before spending some of the PPP funds on May 21, 2020.  
(SUF ¶¶ 33, 36-37.)  But on May 22, 2020, the very next day, Defendants signed and 
submitted several closing documents, including a promissory note, to Fountainhead to 
secure a second PPP loan despite previously certifying in their application that they 
would not receive more than one PPP loan in 2020.  (SUF ¶¶ 39-45; see also SUF ¶ 40 
(noting that Schwartz signed the “Borrower Certification and Agreement” on May 22,  
2020 to “induce Fountainhead to provide [him] with a PPP loan”).  And included in 
those documents was a “U.S. Small Business Settlement Sheet,” which must be 
submitted to SBA “upon request, or, in the event of a loan default, with the Lender’s 
request for guaranty purchase,” that included a re-certification of the information upon 
which Defendants’ original loan application was based.  (See SUF ¶¶ 44-45; see also 
Declaration of Paden Gallagher (“Gallagher Decl.”), Ex. I at 23 (“At the time of 
completion of this form, the Lender and the Borrower certify that . . . [t]here has been no 
unremedied adverse change in the Borrower’s or Operating Company’s financial 
condition, organization, management, operations or assets since the date of the 
application that would warrant withholding or not making this disbursement or any 
further disbursement.”).)  Put simply, even after Defendants certified they would only 
receive one PPP loan in 2020 and had received one PPP loan, they then took affirmative 
action to secure a second PPP loan for which they were not eligible. 
Accordingly, there is no genuine dispute that Defendants submitted false 
statements in their Fountainhead Loan application and furthered that falsity through their 
course of conduct, and summary judgment is warranted on that element. 
2. 
Defendants’ Acted with Reckless Disregard of the Falsity of their 
Statements at Minimum. 
The FCA imposes liability on any person who submits a false claim to the 
government with “actual knowledge,” “deliberate ignorance,” or “reckless disregard of 
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the truth.”  31 U.S.C. § 3729(a)(1)(A)-(B), (b)(1)(A)(i)-(iii).  “[N]o proof of specific 
intent to defraud” is “require[d].”  31 U.S.C. § 3729(b)(1)(B).  In defining “knowingly” 
to include deliberate ignorance and reckless disregard, “Congress attempted ‘to reach 
what has become known as the “ostrich” type situation where an individual has “buried 
his head in the sand” and failed to make simple inquiries which would alert him that 
false claims are being submitted.’”  United States v. Bourseau, 531 F.3d 1159, 1168 (9th 
Cir. 2008) (quoting S. Rep. No. 99–345, at 21 (1986)); see also United States ex rel. 
Phalp v. Lincare Holdings, Inc., 857 F.3d 1148, 1155 (11th Cir. 2017) (discussing the 
same as to reckless disregard).  Congress further “adopted ‘the concept that individuals 
and contractors receiving public funds have some duty to make a limited inquiry so as to 
be reasonably certain they are entitled to the money they seek.’”  Bourseau, 531 F.3d at 
1168 (quoting S. Rep. No. 99-345, at 20 (1986)).  Indeed, circuit courts have “uniformly 
described reckless disregard for purposes of the False Claims Act as akin to ‘an 
extension of gross negligence’ or an ‘extreme version of ordinary negligence.’”  
Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1058 (11th Cir. 2015) (quoting United 
States v. Krizek, 111 F.3d 934, 942 (D.C. Cir. 1997); see also Krizek, 111 F. 3d at 943 
(“reckless disregard” is “a linear extension of gross negligence, or ‘gross negligence-
plus’”). 
There can be no genuine dispute that Defendants acted at least with reckless 
disregard when certifying that they would not receive two PPP loans in 2020.  When 
Defendants submitted the Fountainhead Loan application on May 7, 2025, they were 
aware that they had an application pending with Bank of America and did not withdraw 
that application.  (SUF ¶¶ 8, 13, 26.)  Nor did they do so after Fountainhead’s broker 
informed them that they had a “loan number” on May 8, 2020, or when Fountainhead 
explicitly confirmed that the Fountainhead Loan “ha[d] been approved with the SBA” on 
May 12, 2020.  (SUF ¶¶ 24-28.)  Instead, after receiving that confirmation, Defendants 
signed a promissory note with Bank of America to secure their first PPP loan on May 15, 
2020, which Defendants then followed up with further actions to secure a second PPP 
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loan from Fountainhead just one week later.  (SUF ¶¶ 32, 39-46.)   
And as to Defendants’ knowledge of the prohibition on multiple PPP loans in 
2020, Schwartz has already admitted that he was aware of the prohibition when he was 
applying for the PPP loans.  When questioned as to what he meant in an email he sent to 
Lori Grieder on June 8, 2022, about receiving a second PPP loan from Fountainhead, 
Schwartz admitted that he “knew that . . . [he] was only supposed to get one PPP loan,” 
and Ms. Grieder confirmed that Schwartz informed Ms. Grieder that he was “going to 
put the money aside” from the Fountainhead Loan in case “[he] happen[ed] to have to 
pay” back the loan.  (SUF ¶¶ 51-53 (emphasis added).)  Furthermore, there is no doubt 
that Schwartz, at minimum, “buried his head in the sand” regarding the prohibition on 
multiple PPP loans, Bourseau, 531 F.3d at 1168, since he admitted that he prepared at 
least three PPP loan applications containing the certification regarding the prohibition, 
read each certification before doing so, and affirmatively made the certification in each 
application (see SUF ¶¶ 10-18, 22).  See also United States v. Mackby, 261 F.3d 821, 
828 (9th Cir. 2001) (“Protection of the public fisc requires that those who seek public 
funds act with scrupulous regard for the requirements of law.”) (quoting Heckler v. 
Cmty. Health Servs. of Crawford County, Inc., 467 U.S. 51, 63 (1984)). 
There is no genuine dispute that Defendants acted, at minimum, with reckless 
disregard of the falsity of their statements, and summary judgment is warranted on 
scienter as well.  
3. 
Defendants’ False Statements Were Material to the Decision to Issue 
the Fountainhead Loan. 
A statement is “material” under the FCA if it has “a natural tendency to influence, 
or be capable of influencing, the payment or receipt of money or property.”  31 U.S.C. § 
3729(b)(4).  The materiality standard is “demanding,” but there is no “bright-line test for 
determining whether the FCA’s materiality requirement has been met.”  United States ex 
rel. Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1213 (9th Cir. 2019) (citing 
Escobar, 579 U.S. at 194).  Materiality “looks to the effect on the likely or actual 
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behavior of the recipient of the alleged misrepresentation.”  Escobar, 579 U.S. at 193 
(citation omitted).  The Supreme Court identified at least four factors relevant to 
materiality in Escobar:  (1) whether the violated requirement is a condition of payment; 
(2) whether the violations go to the “essence of the bargain”; (3) whether the violations 
are significant or trivial; and (4) what actions the government has taken when it has 
actual knowledge of the same or similar violations.  Id. at 193–95 & n.5; United States 
ex rel. Mei Ling v. Los Angeles, 389 F. Supp. 3d 744, 753 (C.D. Cal. 2019). 
Defendants’ certifications that JMG would not receive two PPP loans in 2020 had 
the “natural tendency to influence” or was “capable of influencing” the SBA’s decision 
to guarantee the Fountainhead Loan.  31 U.S.C. § 3729(b)(4).  Under the rules governing 
the PPP, SBA and its lenders were not permitted to provide any borrower with two PPP 
loans in 2020.  See 85 Fed. Reg. 20811, 20813-14 (April 15, 2020).  And as indicated on 
the Fountainhead Loan application itself, to submit an application for a PPP loan in 
2020, the applicant “must certify in good faith” that “[d]uring the period beginning on 
February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not 
receive another loan under the Paycheck Protection Program.”  (Gallagher Decl., Ex. A 
at 2.)  Without initialing next to that certification, Defendants’ application would have 
been denied, and JMG would never have received the Fountainhead Loan.  (SUF ¶¶ 4-5.)   
Thus, Defendants’ certification was clearly material, and summary judgment is 
warranted on that element.   
4. 
The Fountainhead Loan Application Constitutes a “Claim.” 
The fourth element under the FCA is the existence of a “claim.”  See Campie, 862 
F.3d at 907 (referring to the fourth element as the “claim”).  A “claim” under the FCA is 
“any request or demand, whether under a contract or otherwise, for money or property” 
that “is presented to an officer, employee, or agent of the United States” or “is made to a 
contractor, grantee, or other recipient, if the money is to be spent or used on the 
Government’s behalf or to advance a Government program or interest” and the United 
States has or will provide or reimburse any portion of the money or property.  31 U.S.C. 
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§ 3729(b)(2).  Presentment of a claim against the government fisc can take multiple 
forms, including direct requests for payment to a federal agency or “submitting requests 
to private lenders for government-insured loans.”  Hendow, 461 F.3d at 1177.  It is 
“irrelevant how the federal bureaucracy has apportioned the [false] statements among 
layers of paperwork”; “[a]ll that matters is whether the false statement or course of 
conduct causes the government to ‘pay out money or to forfeit moneys due.’”  Id. 
(citations omitted).   
An application for a PPP loan satisfies this definition because it is a request for 
money from a lender, and the CARES Act “temporarily permit[ted] SBA to guarantee 
100 percent of 7(a) loans” from those lenders.  85 Fed. Reg. at 20811.  Further, Congress 
directed that SBA allow additional non-§ 7(a) lenders to participate in the PPP and 
mandated that SBA give all PPP lenders “delegated authority” to make and approve PPP 
loans without prior SBA review.  15 U.S.C. § 636(a)(36)(F)(ii)(I), (iii).  This allowed 
lenders to issue PPP loans at no risk because the United States would be required to 
either forgive or purchase any outstanding amounts of the loan.  In short, an application 
submitted to a lender acting with delegated authority from SBA to issue PPP loans is a 
request for a “government-insured loan,” and it constitutes a “claim” under the FCA.  
See Hendow, 461 F.3d at 1177. 
Here, SBA delegated authority to Fountainhead “to make and approve covered 
loans” under the PPP.  15 U.S.C. § 636(a)(36)(F)(ii)(I).  SBA only required 
Fountainhead to submit an “executed SBA Form 2484,” an official request for a loan 
guaranty, “to issue PPP loans and receive a loan number for each originated PPP loan” 
through SBA’s E-Tran system without waiting for a “separate SBA Authorization.”  85 
Fed. Reg. 23450, 23451 & n.1 (Apr. 28, 2020).  Thus, Defendants’ application to 
Fountainhead constitutes a “claim” for a fully guaranteed PPP loan, which the United 
States was forced to purchase for $501,588 when Defendants did not repay the loan. 
The Fountainhead Loan application constitutes a “claim” and because the 
application included materially false statements made with, at minimum, reckless 
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disregard of their falsity, the United States is entitled to summary judgment as to its FCA 
claims brought under 31 U.S.C. § 3729(a)(1)(A) and (B). 
C. 
Summary Judgment is Warranted on the United States’ Reverse False 
Claim (Count III). 
The “reverse false claim” provision of the FCA imposes liability on a defendant 
who “knowingly conceals or knowingly and improperly avoids or decreases an 
obligation to pay or transmit money or property to the Government.”  31 U.S.C. § 
3729(a)(1)(G).  This provision “is designed to cover Government money or property that 
is knowingly retained by a person even though they have no right to it.”  United States ex 
rel. Silingo v. WellPoint, Inc., 904 F.3d 667, 676 (9th Cir. 2018) (quoting S. Rep. No. 
111-10 at 13–14 (2009)).  An “obligation” under the FCA is defined as an “an 
established duty, whether or not fixed, arising from an express or implied contractual, 
grantor-grantee, or licensor-licensee relationship, from a fee-based or similar 
relationship, from statute or regulation, or from the retention of any overpayment.”  31 
U.S.C. § 3729(b)(3).  “Avoidance” of that obligation “includes behavior where an 
individual is put on notice of a potential issue, is legally obligated to address it, and does 
nothing.”  United States ex rel. Kane v. Healthfirst, Inc., 120 F. Supp. 3d 370, 394 
(S.D.N.Y. 2015).   
That Defendants owed an “obligation” which they “avoided” cannot be in dispute.  
The Fountainhead Loan constitutes an “overpayment” because Defendants were not 
eligible to receive the loan and, in fact, “do not assert any right to retain” it.  (SUF ¶ 72.)  
Schwartz even acknowledged this when JMG received the duplicate PPP loan, stating to 
Lori Grieder that he was “going to put the money aside” from the Fountainhead Loan in 
case “[he] happen[ed] to have to pay” it back.  (SUF ¶ 53.)  Despite this, Defendants 
have made no payments on the loan.  (SUF ¶ 54.)  But beyond not repaying the loan, 
Defendants applied for forgiveness at least three times despite knowing that the 
Fountainhead Loan was not eligible for forgiveness.  (SUF ¶¶ 59-65.)  Fountainhead told 
Schwartz that the reason they were “rejecting the forgiveness” on the Fountainhead Loan 
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was because “they can only accept one PPP per year from any account” and that JMG 
would have “5 years to pay it back.”  (SUF ¶ 62.)  Rather than agree to repay the loan, 
Schwartz contemplated applying for forgiveness again, resulting in Fountainhead 
explaining—again—why forgiveness was impossible.  (SUF ¶¶ 64-65; see also 
Gallagher Decl., Ex. N (Fountainhead explaining that “SBA allows for 1-1st draw and 1-
2nd draw,” while JMG had received “2-1st draw and 1-2nd draw”).)  Defendants still made 
no payments on the loan, culminating in SBA purchasing the loan pursuant to the 
guarantee, which Schwartz knew would result in JMG incurring an obligation to repay 
the loan to the government.  (SUF ¶¶ 66, 70; Gallagher Decl., Ex. B 77:21-24 (Schwartz 
testifying that he “knew that if Fountainhead charged off th[e] loan, [he] would then 
have an obligation to repay the funds to the government”).) 
Because Defendants retained an overpayment in the form of the Fountainhead 
Loan and have not paid any of that overpayment back, the United States is entitled to 
summary judgment on its reverse false claim. 
D. 
Calculation of Damages Under the False Claims Act 
“Ordinarily the measure of the government’s damages [under the FCA] would be 
the amount that it paid out by reason of the false statements over and above what it 
would have paid if the claims had been truthful.”  United States v. Mackby, 339 F.3d 
1013, 1018 (9th Cir. 2003) (quoting United States v. Woodbury, 359 F.2d 370, 379 (9th 
Cir. 1966)) (alteration in original).  Similarly, damages for a reverse false claim “consist 
of the difference between what the defendant should have paid the government and what 
the defendant actually paid the government.”  Bourseau, 531 F.3d at 1172.   
The Government’s damages start with the reimbursement for the fraudulently 
obtained loan.  See Mackby, 339 F.3d at 1018 (damages are the total amount the 
Government paid because of the falsity).  The burden then shifts to Defendants to prove 
any offsets, but there is no offset to a loan that would have never been made or forgiven.  
Defendants obtained $501,588 for the Fountainhead Loan and caused SBA to pay 
$15,407.46 in processing fees to Fountainhead, for total single damages of $516,995.46.  
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(SUF ¶¶ 46-47.)  Further, each false claim, record, and statement is subject to a 
mandatory civil penalty. 31 U.S.C. § 3729(a)(1).  FCA penalties “are adjusted upward 
for inflation under the Federal Civil Penalties Inflation Adjustment Act of 1990.”  Cook 
Cnty. v. United States ex rel. Chandler, 538 U.S. 119, 123 n.1 (2003).  For penalties 
assessed after July 3, 2025, for violations that occur after November 2015, the statutory 
penalty is $14,308 to $28,619 per violation.  28 C.F.R. § 85.5.  In this case, there are 
multiple violations: the materially false loan application and the materially false 
forgiveness applications.   
Accordingly, the United States is entitled to summary judgment for three times the 
amount of the Fountainhead Loan plus the processing fee associated with that loan, 
which amounts to $1,550,986.38.  In addition, the United States requests the Court to 
enter two civil penalties – one for the loan application and one representing the 
forgiveness applications – in an amount that it deems appropriate within the current 
statutory range. 
V. 
CONCLUSION 
The United States respectfully requests that the Court grant summary judgment on 
its claims. 
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Dated: November 17, 2025  
Respectfully submitted, 
 
BRETT A. SHUMATE 
Assistant Attorney General, Civil Division 
BILAL A. ESSAYLI 
First Assistant United States Attorney 
DAVID M. HARRIS 
Assistant United States Attorney 
Chief, Civil Division 
HUNTER B. THOMSON 
Acting Chief, Civil Fraud Section 
PAUL B. LA SCALA 
Assistant United States Attorney 
JAMIE ANN YAVELBERG 
COLIN M. HUNTLEY 
JARED S. WIESNER 
PADEN GALLAGHER 
Attorneys, Civil Division 
 
 
 
 /s/ Paden Gallagher                                                            
PADEN GALLAGHER 
Trial Attorney 
 
Attorneys for the United States of America 
 
 
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Certificate of Compliance under L.R. 11-6.2 
Counsel of record for the United States, certifies that this brief contains 6,989 
words, which complies with the word limit of L.R. 11-6.1. 
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