Press Release - U.S. ex rel. Jones v. Victory Automotive Group, Inc, et al., No. 8 (2025-01-06)

Document type: Press Release
Date: 2025-01-06
Case: U.S. ex rel. Jones v. Victory Automotive Group, Inc, et al., No. 8

Summary

Exhibit 72, filed January 6, 2025 as Document 66-72 in Case 1:20-cv-00538-JJM-PAS, is a 43-page set of papers from the qui tam case U.S. ex rel. Jones v. Victory Automotive Group, Inc, et al., No. 8:21-cv-1742 (M.D. Fla.). It opens with a Justice Department press release dated October 11, 2023 announcing that Victory Automotive Group Inc. agreed to pay $9 million to resolve False Claims Act allegations tied to a Paycheck Protection Program loan. The release states the company certified fewer than 500 employees while it and its affiliates had more than 3,000, and that its $6,282,362 loan was forgiven in full. The attached settlement agreement sets a Settlement Amount of $9,000,000.00, of which $6,971,256.95 is restitution, with $1,620,000 to relator David Jones, and states it is not an admission of liability. The relator's complaint, dated July 12, 2021, follows.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 1 of 43 PageID
#: 2615

EXHIBIT 72
1/3/25, 12:17 PM Case
Office of Public 1:20-cv-00538-JJM-PAS
Affairs | Victory Automotive Document
Group Inc. Agrees to Pay 66-72
$9 Million to Filed
Settle False 01/06/25
Claims Act Allegations Page
Relating 2
to of 43 PageID
Paycheck Protection Program Loan | United States D…
#: 2616

PRESS RELEASE

Victory Automotive Group Inc. Agrees to Pay $9
Million to Settle False Claims Act Allegations Relating
to Paycheck Protection Program Loan

Wednesday, October 11, 2023 For Immediate Release

Office of Public Affairs

Port Richey, Florida-based automotive management company Victory Automotive Group Inc. (VAG) has agreed to pay $9 million to
resolve allegations that it violated the False Claims Act (FCA) by knowingly providing false information in support of a Paycheck
Protection Program (PPP) loan forgiveness application it submitted.

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide
emergency loans to small businesses suffering economic hardship due to the COVID-19 pandemic. The CARES Act authorized
these businesses to seek forgiveness of the loans if they spent the loan funds on eligible expenses. Only small businesses were
eligible for PPP loans. Whether an applicant qualified as a small business depended on various factors, including the number of
employees, amount of revenues and net worth of the applicant, along with any other corporate affiliates that share common
operational control. When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all
information provided in their loan applications.

VAG’s application for a PPP loan certified it was a small business with fewer than 500 employees. However, VAG shared common
operational control with dozens of automobile dealerships across the country, and VAG and its affiliates had more than 3,000
employees in total. For that reason, VAG was not eligible for the $6,282,362 PPP loan it received, which was later forgiven in full.ȏ

https://www.justice.gov/opa/pr/victory-automotive-group-inc-agrees-pay-9-million-settle-false-claims-act-allegations 1/4
1/3/25, 12:17 PM Case
Office of Public 1:20-cv-00538-JJM-PAS
Affairs | Victory Automotive Document
Group Inc. Agrees to Pay 66-72
$9 Million to Filed
Settle False 01/06/25
Claims Act Allegations Page
Relating 3
to of 43 PageID
Paycheck Protection Program Loan | United States D…

“PPP loans were intended to help small businesses during the #:pandemic,”
2617 said Principal Deputy Assistant Attorney General Brian
M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to holding accountable those who
undermined the purpose of the PPP program and knowingly obtained PPP funds for which they were not eligible.”ȏ

“Even though the PPP Program has ended, our mandate to investigate and redress the harm from improper PPP loans to
companies and sole proprietors continues,” said U.S. Attorney Roger Handberg for the Middle District of Florida. “We will continue
to seek repayment of those loans and, where appropriate, additional sanctions from applicants who obtained a loan to which they
were not entitled.”

“This resolution demonstrates the department’s resolve in pursuing businesses that improperly received pandemic relief funds,”
said Director Michael C. Galdo of the Justice Department's COVID-19 Fraud Enforcement. “I want to thank the Small Business
Association (SBA) and our law enforcement partners for their assistance with the Justice Department’s pandemic fraud
enforcement efforts.”ȏ

“The settlement in this matter demonstrates the excellent results achieved through the combined efforts of SBA and the
Department of Justice to uncover and forcefully respond to PPP misconduct,” said SBA General Counsel Therese Meers. “The
federal government is strongly committed to identifying and aggressively pursuing any instances of fraud or misconduct within
the Paycheck Protection Program.”ȏ

The settlement resolved a lawsuit filed under the qui tam or whistleblower provision of the FCA, which permits private parties to
file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The qui tam lawsuit is
captioned U.S. ex rel. Jones v. Victory Automotive Group, Inc, et al., No. 8:21-cv-1742 (M.D. Fla.). The whistleblower will receive a total
of approximately $1.62 million in connection with the settlement.ȏ

The resolution obtained in this matter was the result of a coordinated effort among the Civil Division’s Commercial Litigation
Branch, Fraud Section and the U.S. Attorney’s Office for the Middle District of Florida, with assistance from the SBA’s Office of
General Counsel and the SBA's Office of Inspector General.

This matter was handled by Senior Trial Counsel Benjamin C. Wei of the Civil Division and Assistant U.S. Attorney Lindsay Saxe
Griffin for the Middle District of Florida, with assistance from Christopher J. McClintock of the SBA.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the
Justice Department in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related
fraud. The task force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors
and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and
incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their
schemes and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the
department’s response to the pandemic, please visit www.justice.gov/coronavirus.

https://www.justice.gov/opa/pr/victory-automotive-group-inc-agrees-pay-9-million-settle-false-claims-act-allegations 2/4
1/3/25, 12:17 PM Case
Office of Public 1:20-cv-00538-JJM-PAS
Affairs | Victory Automotive Document
Group Inc. Agrees to Pay 66-72
$9 Million to Filed
Settle False 01/06/25
Claims Act Allegations Page
Relating 4
to of 43 PageID
Paycheck Protection Program Loan | United States D…
#: 2618COVID-19 government relief programs can be reported by
Tips and complaints from all sources about potential fraud affecting
visiting the webpage of the Civil Division’s Fraud Section, which can be found here. Anyone with information about allegations of
attempted fraud involving COVID-19 can also report it by calling the Justice Department's National Center for Disaster Fraud
(NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form atȏwww.justice.gov/disaster-fraud/ncdf-disaster-
complaint-form.

The claims resolved by the settlement are allegations only. There has been no determination of liability.

Settlement

Updated October 12, 2023

Topics

CORONAVIRUS DISASTER FRAUD FALSE CLAIMS ACT

Components

Civil Division USAO - Florida, Middle

Press Release Number: 23-1118

Related Content

PRESS RELEASE PRESS RELEASE PRESS RELEASE

Government Contractor Booz Allen Agrees to Pay Southern California-Based
Agrees to Pay $1M to $15.875M to Settle False Clinics, Laboratory and
Resolve False Claims Act Claims Act Allegations Their Owners to Pay $10M

https://www.justice.gov/opa/pr/victory-automotive-group-inc-agrees-pay-9-million-settle-false-claims-act-allegations 3/4
1/3/25, 12:17 PM Case
Office of Public 1:20-cv-00538-JJM-PAS
Affairs | Victory Automotive Document
Group Inc. Agrees to Pay 66-72
$9 Million to Filed
Settle False 01/06/25
Claims Act Allegations Page
Relating 5
to of 43 PageID
Paycheck Protection Program Loan | United States D…

Allegations for Submitting #: 2619Holding
Booz Allen Hamilton for False Claims Arising
Fraudulent Bids on Prime Corporation (Booz Allen) has from Kickbacks and Self-
agreed to pay the United States
Vendor Contracts Referrals
$15,875,000 to resolve allegations
that Booz Allen Hamilton
Johnny Buscema Jr. of New Port Mohammad Rasekhi M.D., Sheila
Richey, Florida, and his companies, Engineering Services LLC (BES), a Busheri, Southern California
wholly owned subsidiary...
S.A.F.E. Structure Designs, based Medical Center (SCMC) and R & B
in Las Vegas, and U.S.A. Medical Group Inc., doing business
Manufacturing, based in New Port as Universal Diagnostic
Richey, have agreed to pay... Laboratories (UDL) (collectively,
the defendants), have agreed to...

January 3, 2025
January 3, 2025 December 26, 2024

Office of Public Affairs Office of Public Affairs Direct Line
U.S. Department of Justice 202-514-2007

950 Pennsylvania Avenue, NW
Department of Justice Main Switchboard
Washington DC 20530
202-514-2000

https://www.justice.gov/opa/pr/victory-automotive-group-inc-agrees-pay-9-million-settle-false-claims-act-allegations 4/4
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 6 of 43 PageID
#: 2620

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is entered into among the United States

of America, acting through the United States Department of Justice and on behalf of the

Small Business Administration (collectively the “United States”), Victory Automotive

Group, LLC, and David Jones (hereafter collectively referred to as “the Parties”), through

their authorized representatives.

RECITALS

A. Victory Automotive Group, LLC, (“VAG”) is a Florida limited liability

company with its principal address in Port Richey, Florida. VAG provides management

services to approximately 42 car dealerships (“Affiliates”) located throughout the United

States.

B. On July 12, 2021, David Jones (the “Relator”) filed a qui tam action in the

United States District Court for the Middle District of Florida captioned United States ex rel.

David Jones v. Victory Automotive Group, LLC, Case No. 8:21-cv-1742-CEH-CPT, pursuant to

the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the “Civil Action”).

C. The United States contends that it has certain civil claims against VAG

arising from a loan under the Paycheck Protection Program, 15 U.S.C. § 636(a)(36) (the

“PPP”), that VAG obtained on April 17, 2020, and for which VAG sought forgiveness on

May 6, 2021, and which was forgiven on June 24, 2021. These civil claims are based on the

alleged “Covered Conduct” described in Paragraph E below.

D. The PPP is a federally guaranteed loan program created in response to the

economic crisis spurred by the COVID-19 pandemic. The program authorizes SBA-

approved private lenders to extend the loans, which were fully guaranteed by SBA. Proceeds
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 7 of 43 PageID
#: 2621

from PPP loans could be used for payroll and other eligible business expenses, such as

mortgage interest, rent, and utilities. If a borrower used at least 60 percent of the proceeds

for payroll and all other remaining proceeds for eligible business expenses, the borrower

could receive loan forgiveness for the full amount of the loan. Only a “small business

concern,” which is defined as a business with 500 or fewer employees or that satisfies the

relevant employee-based or revenue-based size standard for the industry in which the

business operates, is eligible for a PPP loan. To determine size, a business must apply the

affiliation rules under 13 C.F.R. § 121.301(f), which require aggregating the employees and

revenue of related companies. For the PPP, the affiliation rules are waived for any business

concern operating as a franchise so long as it is assigned a franchise identifier code by the

SBA.

E. “Covered Conduct” as used in this Agreement means the following

allegations by the United States, which the United States contends occurred between April

3, 2020, and June 24, 2021:

i. The United States alleges that VAG obtained a PPP loan for $6,282,362

on or about April 3, 2020. VAG was ineligible for this loan because it was

not a “small business concern” due to its size after inclusion of VAG’s

Affiliates. These affiliation rules applied to VAG as it was not operating as

a franchise with a franchise identifier code from SBA. Notwithstanding

the size of VAG after inclusion of its Affiliates, VAG certified in its PPP

loan application that the company was “eligible to receive a loan under

the rules in effect at the time [the] application [was] submitted.”

ii. The United States further alleges that by May 2021, VAG should have

2
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 8 of 43 PageID
#: 2622

known it was ineligible for PPP loans because of its size after inclusion of

its Affiliates. Despite its ineligibility for the PPP loan, VAG applied for

and obtained forgiveness of the full loan amount of $6,282,362 on June

24, 2021.

F. This Settlement Agreement is neither an admission of liability by VAG nor a

concession by the United States or Relator that their claims are not well-founded.

G. Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the

proceeds of this Settlement Agreement and to Relator’s reasonable expenses, attorneys’ fees,

and costs.

To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation

of the above claims, and in consideration of the mutual promises and obligations of this

Settlement Agreement, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

1. VAG shall pay to the United States $9,000,000.00 (the “Settlement

Amount”), of which $6,971,256.95 is restitution, by electronic funds transfer pursuant to

written instructions to be provided by the Civil Division of the United States Department of

Justice no later than 60 days after the Effective Date of this Agreement.

2. Conditioned on the United States receiving the Settlement Amount and as

soon as feasible after receipt, the United States shall pay $1,620,000 to Relator (Relator’s

Share) by electronic funds transfer pursuant to instructions provided by Relator’s counsel.

3. Within 20 days of the Effective Date of this Agreement, VAG shall pay to

Relator’s counsel reasonable expenses and attorney’s fees and costs pursuant to 31 U.S.C.

§ 3730(d) in the amount of $80,000.00 (“Fees Settlement”). The Fees Settlement will be

3
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 9 of 43 PageID
#: 2623

made by electronic funds transfer, pursuant to written instructions provided by Relator’s

Counsel.

4. Subject to the exceptions in Paragraph 6 (concerning reserved claims) below,

and upon the United States’ receipt of the Settlement Amount, the United States releases

VAG, together with VAG’s current and former parent corporations; Affiliates; direct and

indirect subsidiaries; brother or sister corporations; divisions; current or former corporate

owners; and the corporate successors and assigns of any of them (“VAG Releasees”), from

any civil or administrative monetary claim the United States has for the Covered Conduct

under the False Claims Act, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies

Act, 31 U.S.C. §§ 3801-3812; the Financial Institutions Reform, Recovery, and Enforcement

Act of 1989, 12 U.S.C. § 1833a; or the common law theories of breach of contract, payment

by mistake, unjust enrichment, and fraud.

5. Subject to the exceptions in Paragraph 6 below, and upon the United States’

receipt of the Settlement Amount, Relator, for himself and for his heirs, successors,

attorneys, agents, and assigns, releases the VAG Releasees from any civil monetary claim

the Relator has on behalf of the United States under the False Claims Act, 31 U.S.C. §§

3729-3733, for the Covered Conduct or allegations in the Civil Action.

6. Notwithstanding the release given in Paragraph 4 of this Agreement, or any

other term of this Agreement, the following claims and rights of the United States are

specifically reserved and are not released:

a. Any liability arising under Title 26, U.S. Code (Internal Revenue Code);

b. Any criminal liability;

4
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 10 of 43 PageID
#: 2624

c. Except as explicitly stated in the Agreement, any administrative liability

or enforcement right, or any administrative remedy, including the

suspension and debarment rights of any federal agency;

d. Any liability to the United States (or its agencies) for any conduct other

than the Covered Conduct;

e. Any liability based upon obligations created by this Agreement; and

f. Any liability of individuals.

7. Relator and his heirs, successors, attorneys, agents, and assigns shall not

object to this Agreement but agree and confirm that this Agreement is fair, adequate, and

reasonable under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned

upon Relator’s receipt of the Relator’s Share, Relator and his heirs, successors, attorneys,

agents, and assigns fully and finally release, waive, and forever discharge the United States,

its agencies, officers, agents, employees, and servants, from any claims arising from the

filing of the Civil Action or under 31 U.S.C. § 3730, and from any claims to a share of the

proceeds of this Agreement and/or the Civil Action.

8. Conditioned upon Relator’s receipt of the Fees Settlement, Relator, for

himself, and for his heirs, successors, attorneys, agents, and assigns, releases the VAG

Releasees, and their officers, agents, and employees, from any liability to Relator arising

from the filing of the Civil Action, or under 31 U.S.C. § 3730(d) for expenses or attorneys’

fees and costs.

9. VAG waives and shall not assert any defenses VAG may have to any criminal

prosecution or administrative action relating to the Covered Conduct that may be based in

whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth

5
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 11 of 43 PageID
#: 2625

Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth

Amendment of the Constitution, this Agreement bars a remedy sought in such criminal

prosecution or administrative action.

10. The VAG Releasees fully and finally releases the United States, its agencies,

officers, agents, employees, and servants, from any claims (including attorneys’ fees, costs,

and expenses of every kind and however denominated) that the VAG Releasees have

asserted, could have asserted, or may assert in the future against the United States, its

agencies, officers, agents, employees, and servants, related to the Covered Conduct or the

United States’ investigation or prosecution thereof.

11. The VAG Releasees fully and finally release the Relator from any claims

(including attorneys’ fees, costs, and expenses of every kind and however denominated) that

the VAG Releasees have asserted, could have asserted, or may assert in the future against

the Relator, related to the Civil Action and the Relator’s investigation and prosecution

thereof.

12. This Agreement is intended to be for the benefit of the Parties only.

13. Upon receipt of the payment described in Paragraph 1, above, the Parties

shall promptly sign and file in the Civil Action a Joint Stipulation of Dismissal of the Civil

Action pursuant to Rule 41(a)(1). The dismissal will be with prejudice as to the Relator and

with prejudice to the United States only as to the Covered Conduct.

14. Except as outlined above and specifically reserved in Paragraph 3, each Party

shall bear its own legal and other costs incurred in connection with this matter, including

the preparation and performance of this Agreement.

6
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 12 of 43 PageID
#: 2626

15. Each Party and signatory to this Agreement represents that it freely and

voluntarily enters this Agreement without any degree of duress or compulsion.

16. This Agreement is governed by the laws of the United States. The exclusive

jurisdiction and venue for any dispute relating to this Agreement is the United States

District Court for the Middle District of Florida. For purposes of construing this Agreement,

this Agreement shall be deemed to have been drafted by all Parties to this Agreement and

shall not, therefore, be construed against any Party for that reason in any subsequent

dispute.

17. This Agreement constitutes the complete agreement between the Parties. This

Agreement may not be amended except by written consent of the Parties.

18. The undersigned counsel represent and warrant that they are fully authorized

to execute this Agreement on behalf of the persons and entities indicated below.

19. This Agreement may be executed in counterparts, each of which constitutes

an original and all of which constitute one and the same Agreement.

20. This Agreement is binding on VAG’s successors, transferees, heirs, and

assigns.

21. This Agreement is binding on Relator’s successors, transferees, heirs, and

assigns.

22. All parties consent to the United States’ disclosure of this Agreement, and

information about this Agreement, to the public.

23. This Agreement is effective on the date of signature of the last signatory to the

Agreement (Effective Date of this Agreement). Facsimiles of signatures shall constitute

acceptable, binding signatures for purposes of this Agreement.

7
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 13 of 43 PageID
#: 2627

TI IE UNITBD STATUS OF AMERICA

DA'rED: 11-7,'l->i;J •Y: _tt~..__ _C..
.,,- _ ~___
,..;;._
~AMINC. WEJ
54!niot Trial Counsel
CommM;liill Litigation Bra.nch
Ci\l~I Divisron
Un ired St.ale~ Depa nimcnl of Justice
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 14 of 43 PageID
#: 2628

PUt:J!NDANT

Victory Automotive Grou , LLC

DATED: ¥!1/'Jev: ~ - - < >--=-:...,..;,;;___.;,-~
; ( c , ~ LDS
Couriscl fur Victory Automotive Croup, LLC
Case 1:20-cv-00538-JJM-PAS Document 66-72 Filed 01/06/25 Page 15 of 43 PageID
#: 2629
RELATOR

j
'i
I
.I
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 1
Pageof 16
28 of 43
PageID 1
PageID
#: 2630
r I

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

Case No. 8: 'Z.1-c.v - n 41.- C.E. ti - ~ i'T
UNITED STATES OF AMERICA ex rel.
[UNDER SEAL] Complaint for Violations of the
Federal False Claims Act, 31
Plaintiffs, U.S.C. § 3729 et seq.
V.
FILED UNDER SEAL
PUSUANT TO 31 U.S.C. §
[UNDER SEAL] 3730(b)(2)
Defendants. Jury Trial Demanded
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 2
Pageof 17
28 of 43
PageID 2
PageID
#: 2631
•

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

UNITED STATES OF AMERICA

ex rel. DAVID JONES

11250 Homewood Lane
Auburn, California 95603

Plaintiff,

VICTORY AUTOMOTIVE GROUP, LLC

Registered Agent: Case No. - - - - - - -
Eric E. Cappo
46352 Michigan Avenue Complaint for Violations of the
Canton, Michigan 48188 Federal False Claims Act, 31
U.S.C. § 3729 et seq.
-and-
FILED UNDER SEAL
JEFFREY EUGENE CAPPO PUSUANT TO 31 U.S.C. §
3730(b)(2)
46352 Michigan Avenue
Canton, Michigan 48188 Jury Trial Demanded

-and-

CAPPO MANAGEMENT XXV, LLC

Registered Agent:
Eric Eugene Berglands-Cappo
8442 US Highway 19
Port Richey, Florida 34668

-and-

DOWNTON FORD SALES, CAPPO
MANAGEMENT IX, INC., CAPPO
MANAGEMENT XII, INC., CAPPO
MANAGEMENT XXIII, INC., CAPPO
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 3
Pageof 18
28 of 43
PageID 3
PageID
#: 2632

MANAGEMENT XXVI, INC., CAPPO
MANAGEMENT XXVII, INC., CAPPO
MANAGEMENT XXVIII, INC., CAPPO
MANAGEMENT XXIX, INC., CAPPO
MANAGEMENT XXXI, INC., CAPPO
MANAGEMENT XXXIII, INC., CAPPO
MANAGEMENT XXXIV, INC., CAPPO
MANAGEMENT XXXV, INC., CAPPO
MANAGEMENT XL, INC., CAPPO
MANAGEMENT XLI, INC., CAPPO
MANAGEMENT XLV, INC. , CAPPO
MANAGEMENT XLVI, INC., CAPPO
MANAGEMENT XLVIII, INC. , CAPPO
MANAGEMENT XLIX, INC., CAPPO
MANAGEMENT LI, INC., CAPPO
MANAGEMENT LIII, INC., & CAPPO
MANAGEMENT LIV, INC.

Registered Agent:
InCorp Services, Inc.
5716 Corsa Avenue, Suite l I 0
Westlake Village, California 91362

-and-

CAPPO MANAGEMENT, INC., CAPPO
MANAGEMENT XVIII, INC., CAPPO
MANAGEMENT XX, INC. , CAPPO
MANAGEMENT XXII , INC., CAPPO
MANAGEMENT XXIV, INC. , & CAPPO
MANAGEMENT XXXII, INC.

Registered Agent:
Rodney A. Fields, Esq.
620 Market Street, Floor 5
Knoxville, Tennessee 37902

-and-

CAPPO MANAGEMENT II, INC, CAPPO
MANAGEMENT VI, INC., CAPPO
MANAGEMENT XVII, INC., & CAPPO
MANAGEMENT XXX, INC.,
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 4
Pageof 19
28 of 43
PageID 4
PageID
#: 2633

Eric E. Cappo
46352 Michigan Avenue
Canton, Michigan 48188

-and-

CAPPO MANAGEMENT VII, INC. & CAPPO
MANAGEMENT XLIV, INC.

Registered Agent:
InCorp Services, Inc.
176 Mine Lake Court, Suite I 00
Raleigh, North Carolina 27615

-and-

CAPPO MANAGEMENT XLVII, INC. &
CAPPO MANAGEMENT Lil, INC.

Registered Agent:
InCorp Services, Inc
44 School Street, Suite 505
Boston, Massachusetts 02108

-and-

CAPPO MANAGEMENT X, INC.

Registered Agent:
Susan Barker
4901 West McGalliard Road
Muncie, Indiana 47304

-and-

CAPPO MANAGEMENT XV, INC.

Registered Agent:
David A. Jesse
625 Burr Oak Drive
Tipp City, Ohio 45371

-and-

CAPPO MANAGEMENT xxxvn, INC.
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 5
Pageof 20
28 of 43
PageID 5
PageID
#: 2634

Registered Agent:
CT Corporation Systems
2 North Jackson Street, Suite 605
Montgomery, Alabama 36104

-and-

CAPPO MANAGEMENT XX.XVIII, INC.

Registered Agent:
CT Corporation Systems
1999 Bryan Street, Suite 900
Dallas, Texas 75201

-and-

CAPPO MANAGEMENT L, INC.

Registered Agent:
InCorp Services, Inc.
99 Washington Avue, Suite 805A
Albany, New York 122 10

Defendants.
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 6
Pageof 21
28 of 43
PageID 6
PageID
#: 2635

1. INTRODUCTION

1. Qui Lam Relator David Jones, by his attorney, individually and on behalf of the

United States of America, files this Complaint against Defendants Victory Automoti ve Group,

Downton Ford Sales, Cappo Management, Inc. , Cappo Managements TI, VI , VII , IX, X, XII, XV,

XVII , XX, XXJI-XXXV, XXXVII , XXVIII, XL, XLI, and XLIV- LIV (collectively "Corporate

Defendants") and Jeffrey Eugene Cappo (all , collectively, " Defendants") to recover damages,

penalties, and attorneys' fees for violations of the Federal False Claims Act, 3 1 U.S.C . §§ 3729-

32 ("FCA" or "False Claims Act").

2. Defendants violated the FCA by certify ing that Corporate Defendants were

eligible to receive Paycheck Protection Program ("PPP") loans and knowingly concealed

Corporate Defendants' obligation to repay those loans. These certifications and acts of

concealment were a material fact relied upon by the Small Business Administration ("SBA") in

approving the loan applications and loan forgiveness applications.

3. Defendants are liable for: ( 1) the amount of first draw PPP fun ds received by

Victory Automotive Group for which it was ineligible; (2) the amount of first draw PPP funds

received by the Corporate Defendants as a corporate group over $20 million to the extent they

have certified authorized use of those funds when applying for forgiveness or for second draw

loans; (3) the an1ount of second draw PPP funds received by the Corporate Defendants to the

extent they have certified authorized use of first draw funds when applying for second draw

loans; and (4) the fu ll amount of loan processing fees paid by the SBA to Lenders for loans

disbursed and/or forgiven due to the fraudulent conduct alleged herein.
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 7
Pageof 22
28 of 43
PageID 7
PageID
#: 2636

II. JURISDICTION AND VENUE

4. This Court has subject matter jurisdiction over thi s action pursuant to 31 U .S.C. §

3732(a), 28 U.S.C. § 133 1, and 28 U.S.C. § 1367.

5. This Cou11 has personal jurisdiction over the Defendants pursuant to 31 U.S.C. §

3 732(a) because the corporate defendants conduct business within this j udicial di strict.

6. Venue is proper in this Court under 28 U.S.C. § 1391 (c) and 28 U.S.C. 2732(a)

because the Defendants maintai n an office and conduct business in this judicial district.

7. Relator Jones is the "original source" of this information within the meaning of3 1

U.S.C. § 3730(e)(4)(B), and to his knowledge of the information contained herein has not been

publicly disclosed.

111. THE PARTIES

8. Relator Jones is a citi zen of the United States and a resident of Auburn,

California.

9. Jones was hired by Victory Automotive Group as Corporate Finance Director in

or around March 20 13.

I 0. In 20 14, Jeffrey Cappo promoted Jones to General Manager of Auburn Honda,

assumed name of Cappo Management XII, Inc.

11. In or around August 2020, Jones was terminated.

12. Defendant Victory Automotive Group ("Victory HQ") is a limited liability

company incorporated in M ich igan. It acts as the de facto corporate headquai1ers for the

association of forty-three car dealerships across the country.

13. Defendant Jeffrey Eugene Cappo is a resident of Michigan.

2
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 8
Pageof 23
28 of 43
PageID 8
PageID
#: 2637

14. Jeffrey Cappo is the CEO of Victory Automotive Group.

15. Defendants Downton Ford Sales, Cappo Management, Inc. Cappo Managements,

II, VI , Vll , IX, X, XII, XV, XVII, XX, XXII-XXXV, XXXVII. XXVIII , XL, XLJ , and XLIV-

LIV ("Dealership Entities") are entities incorporated across 12 states, with Jeffrey Cappo listed

as an officer or registered agent for each entity.

16. Between all affi liate companies owned or managed by Jeffrey Cappo, Corporate

Defendants collectively employ approximately 2,602 employees.

17. The Dealership Entities operate under fictitious names as car dealerships. Each

Dealership Entity operates under a Dealer Agreement or a Dealer Sales and Service Agreement

with the carmaker(s) for whom they sell new cars.

18. As the General Manager for Cappo Management XII, Inc. (doi ng business as

Auburn Honda), Relater Jones was an employee of Victory HQ and received paychecks from

Victory HQ, not the Dealership Entity. Each Dealership Entity has a similar management

structure, with upper management of each dealership being employed and paid directly by

Victory HQ.

19. Victory HQ does not functi on as a dealership and does not sell cars directly. It

does not have a Dealer Agreement or a Dealer Sales and Service Agreement with any carmaker.

IV. LEGAL BACKGROUND

A. The Federal False Claims Act ("FCA")

20. The False Claims Act imposes liabi lity on any person who knowingly presents or

causes to be presented a false or fraud ulent claim for payment or approval. 31 U.S.C. §

3729(a)(I )(A).

3
Case
Case 8:21-cv-01742-CEH-UAM
1:20-cv-00538-JJM-PAS Document
Document 1 Filed
66-72 07/19/21
Filed 01/06/25Page 9
Pageof 24
28 of 43
PageID 9
PageID
#: 2638

21. The False Claims Act imposes liability on any person 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)(l )(B).

22. The f alse Claims Act imposes liabili ty for knowingly making, using, or causing

to be made or used, a false record or statement material to an obligation to pay or transmit money

or property to the Government, or knowingly concealing or knowingly and improperly avoiding

or decreasing an obligation to pay or transmit money or property to the government. 31 U. S.C. §

3 72 9(a)(l )(G).

23. The term " knowingly" as used in the FCA means that a person, w ith respect to

information, (i) has actual knowledge of the information, (ii) acts in deliberate ignorance of the

truth or fal sity of the information ; or (iii) acts in reckless di sregard of the truth or fal sity of the

information. 31 U.S.C. § 3729(b). No proof of specific intent to defraud is required to show that

a person acted knowingly under the FCA. Id.

24. Any person who violates the FCA is liable for civil penalties between $ 11 ,665.00

and $23,331.00 per fa lse claim prior to November 2, 201 5, as adjusted for inflati on, plus three

times the amount of damages that the Government sustains as a result of the defendant's actions.

31 U.S.C. § 3729(a), 28 C.F.R. § 85.5.

B. The Paycheck Protection Program ("PPP")

25. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") is a law

intended to address the economic fallout of the COVID-1 9 pandemic in the United States.

26. The CARES Act resulted in, inter alia, the Paycheck Protection Program.

Coronavirus A id, Relief, and Economic Security Act, No. 116-136 (March 27, 2020).

4
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 10
01/06/25 Pageof 25
28 of 43
PageID 10
PageID
#: 2639

27. The PPP is a loan program designed to provide eligible businesses low-interest

rate loans guaranteed by the Small Business Administration (SBA) with suppo11 from the

Department of the Treasury.

28. This program provides small businesses with funds to pay up to 24 weeks of

payroll costs including benefits.

29. The PPP is similar to ex isting SBA Loan Programs. However, the CARES Act

suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, as

defined in the Small Business Act. I 5 U.S.C. § 632(h).

30. The PPP section of the CARES Act expanded eligibility for SBA loans beyond the

limitations of the Small Business Act. 15 U. S.C. §§ 632, 636.

31. The following entities affected by Coronavirus (COVID-19) may be eligible:

1. Any small business concern that meets SBA's size standards (either the

industry based size standard or the alternati ve size standard);

11. Any business, 501(c)(3) non-profit organization, 501 (c)(l 9) veterans

organization, or Tribal business concern (sec. 31 (b)(2)(C) of the Small

Business Act) with the greater of:

a. 500 empl oyees, or

b. That meets the SBA industry size standard if more than 500;

111. Any business with a [North American Industry Classificati on System

("NA1CS")] Code that begins with 72 (Accommodations and Food Services)

that has more than one physical location and employs less than 500 per

location;

1v. Sole proprietors, independent contractors, and self-employed persons.

5
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 11
01/06/25 Pageof 26
28 of 43
PageID 11
PageID
#: 2640

32. The size of a business concern is determined under the SBA's size standards as

they apply to the "concern whose size is at issue and all of its domestic and foreign affiliates."

13 C.F.R. § 121.301(f)(6) (emphasis added).

33. Entities that are applicants for a PPP loan submit their Borrower Application

Form to a federally insured depository institution, federally insured credit union, or a Farm

Credit System ("Lender") which processes the loan application and fu nds the loan.

34. The SBA guarantees I 00% of the outstanding balance. and that guarantee is

backed by the full faith and credit of the United States. I 5 U.S.C. § 636(a)(2)(F).

35. For its work to process the application and fund the loan, the SBA pays the

Lender a processing fee based on the size of the loan funded by the Lender. SBA will pay lenders

fees for processing First Draw PPP loans in the followi ng amounts: Five (5) percent for loans of

not more than $350,000; Three (3) percent for loans of more than $350,000 and less than

$2,000,000; and One (1 ) percent for loans of at least $2,000,000. 15 U.S.C. § 636(a)(36)(P).

36. To be eligible for loan forgiveness, borrowers must complete SBA Form 3508 or

SBA Form 3508EZ to calculate eligible payroll and nonpayroll costs.

37. Borrowers must certify that the dollar amount for which forgiveness is requested:

1. Was used to pay costs that are eligible for forgiveness (payroll costs to

retain employees; business mortgage interest payments; business rent or

lease payments; or business utility payments);

11. Includes all applicable reductions due to decreases in the number of full-

time equivalent employees and salary/hourly wage reductions;

111. Includes payroll costs equal to at least 60% of the forgiveness amount; and

6
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 12
01/06/25 Pageof 27
28 of 43
PageID 12
PageID
#: 2641

1v. Does not exceed eight weeks' w01th of 2019 compensation for any owner-

employee or self-employed individual/general partner, capped at $15,385

per indi vidual or, if a 24-week covered period applies. does not exceed 2.5

months' worth of2019 compensation for any owner-employee or self-

employed indi vidual/general partner, capped at $20,833 per individual.

SBA Form 3508 " Paycheck Protection Progran1 Loan Forgiveness Application" (June

2020).

38. Additionally, borrowers must certify that:

1. They have submitted to the Lender the required documentation verify ing

payroll costs, the existence of obligations and service (as applicable) prior

to February 15, 2020, and eligible business mortgage interest payments,

business rent or lease payments, and business uti lity payments; and

11. The information provided in the application and the information provided

in all supporting documents and forms is true and correct in all material

respects.

Id.

39. An entity can al so be eligible for a PPP loan as a small business concern if, as of

March 27, 2020:

a. The maximum tangible net worth of the business is not more than $15 m illion;

and

b. The average net income after Federal income taxes (excluding any can y-over

losses) of the business for the two fu ll fi scal years before the date of the

application is not more than $5 million.

7
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 13
01/06/25 Pageof 28
28 of 43
PageID 13
PageID
#: 2642

Small Bus. Admin, " Paycheck Protection Program Loans Frequently Asked Questions

(FAQs)" (June 25, 2020).

40. In December 2020, the Economjc Aid to Hard-Hit Small Businesses, Nonprofits,

and Venues Act modified and extended the PPP. Consolidated Appropriations Act, 2021 , Pub. L

116-260, tit. III, sec. 311 (to be codified as amended at 15 U.S.C. § 636(a)(37)).

41. To be eligible to receive a second draw loan, an entity must employ not more than

300 employees or not more than 300 employees per location for a discrete group of industries. 15

U.S.C. § 636(a)(37)(A)(iv).

42. In addition, a borrower must have "experienced a revenue reduction in 2020

relative to 2019" of at least 25% in order to be eligible. Paycheck Protection Program Second

Draw Loans, 86 Fed. Reg. 3,712, 3,713 (Jan. 14, 202 1) (to be codified at 13 C.F.R. pts. 120,

121 ).

43. The Second Draw of the PPP does not all ow for any additional size standards by

which an entity can be eligible to receive a loan and requires that the e ligibility standard must be

met by the applicant together with its affiliates.

44. To receive a Second Draw Loan, an applicant must submit SBA Forn1 2483-SD,

Second Draw Borrower Application Form.

45. Applicants must indicate if the Applicant or any of the Applicant's owners have

common management with or own another business.

46. The authorized representative of the Applicant must certify that the applicant is

eligible to receive a Second Draw Loan and that together with its affiliates, the Applicant

employs no more than 300 employees.

8
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 14
01/06/25 Pageof 29
28 of 43
PageID 14
PageID
#: 2643

47. The authorized representative of the Applicant must also certify in good faith that

before the Second Draw Loan is disbursed that Applicant wi ll have used the fu ll loan amount of

the fi rst draw loan only for eligible expenses.

48. The SBA adj usted the fees to be paid to lenders for the processing Second Draw

PPP Loans to the following amounts:

(i) for a Second Draw PPP Loan of up to (and including) $50,000, in an amount

equal to the lesser of:

(A) 50 percent of the balance of the financing outstand ing at the time of

disbursement of the loan ; or

(B) $2,500; and

(i i) for a Second Draw PPP Loan of more than $50,000, in an amount that is:

(A) 5 percent of the balance of the financing outstanding at the time of

disbursement of the loan for a loan up to (and includ ing) $350,000; and

(B) 3 percent of the balance of the financing outstand ing at the time of

disbursement of the loan for a loan above $350,000.

SBA Interim Final Rul e, "Business Loan Program Temporary Changes; Paycheck Protection

Program Second Draw Loans" 86 Fed. Reg. 3,712, 3,721-3,722 (Jan. 14, 202 1) (to be codified at

13 C.F.R. §§ 120-1 2 1).

C. SBA Exceptions and Limitations on Affiliation and Loan Eligibilit)1

49. SBA Fom1 2483, which all applicants must submit to be considered for a PPP

loan, requires an indication of Yes or No to the question: "Is the Applicant or any owner of the

Applicant an owner of any other business, or have common management with, any other

business? If yes, list all such businesses and describe the relationship on a separate sheet

9
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 15
01/06/25 Pageof 30
28 of 43
PageID 15
PageID
#: 2644

identified as addendum A." SBA Form 2483, "Paycheck Protection Program BoJTower

Application Form" (April 2020).

50. Agency guidance specified that "applicants in SBA's Business Loan Programs

(whi ch include the PPP) are subject to the affili ation rule conta ined in 13 CFR § 12 1.30 1." SBA

Interim Final Rule "Business Loan Program Temporary Changes; Paycheck Protection

Program." 85 Fed. Reg. 20,8 19 (April 15, 2020).

5 1. Entities that have the power to control another are affi liates of one another.

Entities that are controlled by the same third party are also affi li ates of each other as well as of

the third patt y. 13 C.F.R. § 12 1.30 1(f).

52. Entities ai·e affiliates of one another if a principal of an entity controls the

management of another. Affi liation between entities also arises if a single individual controls the

management or Board of D irectors of those entities. 13 C.F.R. § 12 1.301 (f)(3).

53 . The CARES Act waived the§ 12 1.103 affi liation provisions for a limited

category of business concerns: businesses in the Accommodation and Food Services sector as

determined by their No1t h Am erican Industry Classification System (NAICS) code; businesses

operating as a franchise that are listed in the SBA's Franchise Directory; and businesses receiving

financial assistance from a licensed Small Business Investment Company (SBIC). 15 U.S.C.

§636(a)(36)(D)(iv).

54. The Economic Aid Act preserved these affi li ation waivers for the purposes of PPP

Second Draw Loans while still applying the revised size standard. 15 U.S.C.A. §636(3 7)(E).

55. On the First Draw PPP Loan BoJTower Application Form, the Applicant must

indicate yes or no if it is a frai1chise that is listed in the SBA's Franchise Directory. The Applicant

10
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 16
01/06/25 Pageof 31
28 of 43
PageID 16
PageID
#: 2645

is not required to li st the Franchise Identified Code issued by the SBA on this form. SBA Form

2483, " Paycheck Protection Program Borrower Application Form" (April 2020).

56. On the Second Draw PPP Loan Borrow Application Form, the Applicant must list

its SBA Franchise Identifi er Code if it is a franchise listed in SBA's Franchise Directory. SBA

Form 2483-SD, " Second Draw Borrower Application Form" (March I 8, 2021).

57. Agency guidance clarified the boundaries of affiliation rules as applied to PPP

loans:

[B]usinesses that are part of a single co rporate group shall in no
event receive more than $20,000,000 of PPP loans in the
aggregate. For purposes of this limit, businesses are pa.ii of a single
corporate group if they are majority owned, directly or indirectly, by
a common parent.

SBA's affiliation rules, which relate to an applicant's eligibility for
PPP loans, and any waiver of those rules under the CARES Act,
continue to apply independent of this limitation. Businesses are
subject to this limitation even if the businesses are eligible for
the waiver-of-affiliation provision under the CARES Act or are
otherwise not considered to be affiliates under SBA's affiliation
rules.

SBA Interim Final Rule "Business Loan Prograi11 Temporary Changes; Paycheck Protection

Prograin-Requirements-Corporate Groups and Non-Bai1k and Non-Insured Depository

Institution Lenders" 85 Fed. Reg. 26,324 at 26,325 (May 4, 2020).

58. This rul e specifies that applicants have the responsibili ty to notify the Lender if

they have applied for, have received, or expect to received PPP loans in excess of the $20 million

limit per corporate group. "Failure by the applicant to do so will be regarded as a use of PPP

funds for unauthorized purposes." Id. (emphasis added).

11
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 17
01/06/25 Pageof 32
28 of 43
PageID 17
PageID
#: 2646

59. A similar rule exists for Second Draw PPP loans. Businesses that are pa11 of the

same corporate group "shall in no event receive more than $4,000,000 of Second Draw PPP

Loans in the aggregate." SBA Interim Final Rule "Business Loan Program Temporary Changes;

Paycheck Protection Program Second Draw Loans" 85 Fed. Reg. 3,712 at 3 720 (Jan. 14, 202 1).

V. FACTUAL ALLEGATIONS

60. Prior to April 8, 2020, Defendant Victory Automotive Group subm itted its

Borrower Application form , SBA Form 2843 the Bank of Ann Arbor to apply for a PPP loan. To

be approved for a loan, an authorized representative of Victory HQ ce11ified that it, as the

Applicant, was eligible to receive a PPP loan under the SBA rules at the time and by meeting the

applicable size standard.

6 1. Between April 7 and April 13, 2020, all Corporate Defendants were approved for

PPP loans by the same Lender, the Bank of Ann Arbor. Collectively, Corporate Defendants were

approved for over $32 milli on in PPP loans.

Date Loan
Business Name State Zip Lender
Approved Amount
CAPPO MANAGEMENT, Bank of Ann
4/7/2020 $660,463 TN 38555
INC. Arbor
CAPPO MANAGEMENT II, Bank of Ann
4/7/2020 $255,244 MI 48162
INC. Arbor
CAPPO MANAGEMENT VI, Bank of Ann
4/8/2020 $504,633 MI 48 170
INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $392,228 NC 27949
VII, INC. Arbor
CAPPO MANAGEMENT IX, Bank of Ann
4/9/2020 $685,2 10 CA 94010
INC. Arbor
CAPPO MANAGEMENT X, Bank of Alm
4/9/2020 $401,654 IN 47304
INC. Arbor
CAPPO MANAGEMENT Bank of Aim
4/7/2020 $533,270 CA 95603
XII, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/8/2020 $373,020 OH 448 70
XV, INC. Arbor

12
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 18
01/06/25 Pageof 33
28 of 43
PageID 18
PageID
#: 2647

CAPPO MANAGEMENT Bank of Am1
4/8/2020 $408,764 MI 48188
XVII, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $552,932 TN 38501
XVIII, INC. Arbor
CAPPO MANAGEMENT Bank of Am1
4/7/2020 $343,328 TN 37055
XX, INC Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $507,946 TN 38305
XXII, INC. Arbor
CAPPO MANAGEMENT Bank.of Ann
4/9/2020 $954,517 CA 95073
XXIII, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $407,33 1 TN 37660
XXIV, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $718,926 FL 34668
XXV, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $837,742 CA 94066
XXVI, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $832,475 CA 92675
XXVII, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $590,315 CA 94945
XXVIII , INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $ 1, 181 529 CA 95825
XXIX, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $267,965 Ml 48160
XXX, INC. Arbor
CAPPO MANAGEMENT Bank.of Ann
4/8/2020 $873,629 CA 93003
XXXJ, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $45 l ,280 TN 38555
XXXII, INC, Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $1,001 ,482 CA 95630
XXXIII, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/8/2020 $85 1,415 CA 93230
XXXIV, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $4 12,185 CA 95448
XXXV, INC. Arbor
CAPPO MANAGEMENT Bank of Ann
4/ 10/2020 $3 11 ,122 AL 35218
XXXVII, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $436,192 TX 75605
XXXVIII, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $ 1,263,196 CA 94 109
XL, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/8/2020 $730,823 CA 90605
XLI, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/8/2020 $304,970 NC 28470
XLIV, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/ 10/2020 $856,868 CA 90605
XLV, LLC Arbor

13
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 19
01/06/25 Pageof 34
28 of 43
PageID 19
PageID
#: 2648

CAPPO MANAGEMENT Bank of Ann
4/9/2020 $762,670 CA 94066
XLVJ, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/10/2020 $685,634 MA 2188
XLVU, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/7/2020 $753 ,677 CA 92832
XLVIII, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $580.5 15 CA 95037
XLIX, LLC Arbor
CAPPO MANAGEMENT L, Bank of Ann
4/9/2020 $303,423 NY 14424
LLC Arbor
CAPPO MANAGEMENT LI, Bank of Ann
4/ 13/2020 $1.059,145 CA 91601
LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $676,243 MA 2301
LII, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/10/2020 $750,716 CA 93955
LIU, LLC Arbor
CAPPO MANAGEMENT Bank of Ann
4/9/2020 $315,466 CA 93955
LIV, LLC Arbor
DOWNTOWN FORD Bank of Ann
4/7/2020 $933,632 CA 95811
SALES Arbor
VICTORY AUTOMOTIVE Bank of Ann
4/8/2020 $6,282,362 MI 48188
GROUP, LLC Arbor

62. Each Corporate Defendants' application listed the corporation's individual places

of business as its address, but the applications were filled out and submitted by the main Victory

Automotive office in Canton, Michigan.

63. Victory Automotive Group directly employs and pays the salary of management

positions at each Dealership Entity. .Jeffrey Cappo is an officer or registered agent for Victory

Automotive and each individual Dealership Entity. Victory Automotive also exercises direct

financial control over the operations of each Dealership Entity.

64. Due to this common ownership and control , Victory Automotive and each of the

Dealership Entities are affiliates under 13 C.F.R. § 121.301 .

65. Of the Corporate Defendants, the dealerships that operate in the various states

have franchise agreements with the automobile makers for whom they sell cars. As such, the

14
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 20
01/06/25 Pageof 35
28 of 43
PageID 20
PageID
#: 2649

dealerships as affiliates might otherwise have failed to qualify for PPP loans due to their size but

meet the franchi se exception under the CARES Act.

66. owever. Victory Automotive Grou does not sell cars and does not operate

nder a franchise agreement. As such Victory Automotive does not qualify for PPP funds under

licable small business size standards used by the SBA for purposes for the PPP and

does not fall into any applicable exceptions.

67. Therefore. Victory Automotive was not eligi le to receive a PPP loan in the

amount of $6 282 362.

68. As a result of Victory Automotive's fraudulent PPP loan, the Bank of Ann Arbor

received a I% loan processing fee from the SBA in the amount of $62,823.

69. Once each Dealership Entity received the PPP loan funds, Victory HQ removed

the funds from the Dealership accounts. From that point forward, Victory Automotive controlled

the use and disbursement of the PPP fund s entirely, and the dealership management did not have

visibility into how the money was used.

70. On April 28, 2020, the SBA published an immediately effective interim final rule

that established, inter alia, a safe harbor for borrowers that had certified that the loan request was

necessary to support the ongoing operations of the Applicant. Any borrower who repaid the loan

in full by May 7, 2020, would be deemed to have made the required certification in good faith.

SBA Interim Final Rule "Business Loan Program Temporary Changes; Paycheck Protection

Program-Requirements-Promissory Notes, Authorizations, Affiliation, and Eligibility" 85 Fed.

Reg. 23,450, 23,451. (April 28, 2020).

71. In subsequent rules, the SBA extended the safe harbor deadline to May 14, 2020,

and then to May 28, 2020. See SBA Interim Final Rule " Business Loan Program Temporary

15
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 21
01/06/25 Pageof 36
28 of 43
PageID 21
PageID
#: 2650

Changes; Paycheck Protection Program-Requi rements-Extension of Limited Safe Harbor With

Respect to Certification Concerning Need for PPP Loan Request" 85 Fed. Reg. 29,845 (May 19,

2020) and SBA Interim Final Rule "Business Loan Program Temporary Changes; Paycheck

Protection Program-Second Extension of Limited Safe Harbor With Respect to Certification

Concerning Need for PPP Loan and Lender Reporti ng" 85 Fed. Reg. 31,357 (May 26, 2020).

72. On May 4, 2020, the SBA issued an immediately effective interim final rule that

placed a cap on the amount of PPP loans a single corporate group could receive at $20 million.

The Agency specified that applicants had the responsibility to notify lenders if they had received

PPP loans in excess of this amount. SBA Interim Final Rule "Business Loan Program Temporary

Changes; Paycheck Protection Program-Requirements-Corporate Groups and Non-Bank and

Non-Insured Depository Institution Lenders" 85 Fed. Reg. 26,324, 26,325 (May 4, 2020).

73. The Agency gave notice that failure to notify lenders of loans received in excess

of thi s rule would be regarded as " use of PPP funds for unauthorized purposes [and would mean

that] the loan will not be eligible for forgiveness." Id.

74. Upon information and belief, none of the Corporate Defendants withdrew or

cancelled their PPP loans with Bank of Ann Arbor due to Defendants' corporate group receiving

PPP loans in excess of $20 mi llion, or otherwise notified the lender that the affiliated entities

collectively received loans in excess of $20 million.

75. As such, the Corporate Defendants improperly retained approximately $5,723,775

in PPP funds over the $20 mi llion co llective cap.

76. For processing all Corporate Defendants' PPP loans, the Bank of Ann Arbor

received a 1-5% loan processing fee per loan for processing the falsely retained PPP funds from

the SBA in the amount of at least $377,880.

16
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 22
01/06/25 Pageof 37
28 of 43
PageID 22
PageID
#: 2651

77. As of May 2021 , publicl y available records on FederalPay.org suggest that at least

12 of the Corporate Defendants have appli ed for and received forgiveness of their First Draw

PPP loans. It is Relater Jones' understanding that all Corporate Defendants have applied fo r or

intend to apply for forgiveness of First Draw PPP loans.

78. On or around January 3 1, 202 1, Cappo Management IX was approved for a

Second Draw PPP loan of $685,210 by lender Bank of Ann Arbor.

79. On or around February 6, 202 1, Cappo Management Xll was approved for a

Second Draw PPP loan of $533,270 by lender Bank of Ann Arbor.

80. On or around February 12, 202 1, Cappo Management XXIII and Cappo

Management XXVI were approved for Second Draw PPP loans of $954,517 and $837,742

respectively by lender Bank of Ann Arbor.

81. In order to have been approved for these Second Draw loans, all four entities were

required to certify that they had received a First Draw loan and that the full amount of that loan

would have been used only for el igible expenses prior to the disbursement of the Second Draw

loan.

82. These four Cappo entities could not have truthfully certified that their First Draw

PPP loans were used for an authorized purpose in accordance with the SBA's May 4, 2020

Interim Final Rule "Business Loan Progran1 Temporary Changes; Paycheck Protection Program-

Requirements-Corporate Groups and Non-Bank and Non-Insured Depository Institution

Lenders" that clarified that, failure by the applicant to notify the Lender if they have applied for,

have received, or expect to received PPP loans in excess of the $20 million limit per corporate

group will be regarded as a use of PPP funds for unauthorized purposes. See 85 Fed. Reg. 26,324

at 26,325.

17
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 23
01/06/25 Pageof 38
28 of 43
PageID 23
PageID
#: 2652

83. For processing Cappo Management IX, XII, XX III. XXVI's PPP loans, the Bank

of Ann Arbor received loan processing fees from the SBA in the amount of $90,322.

COUNTI
Violations of the False Claims Act, 31 U.S.C. § 3729(a){l)(A)
Submitting False Claims for Payment
(against Victory Automotive Group, Jeffrey Cappo, and Corporate Recipient Defendants)

84. Relator Jones incorporates all the allegations set forth in the foregoing paragraphs

as though fully alleged herein.

85. The False Claims Act imposes liability on any person who knowingly presents or

causes to be presented a false or fraudulent claim for payment or approval. 31 U .S.C. §

3729(a)(1 )(A).

86. Defendants knowingly presented or caused to be presented to the Small Business

Administration a claim for approval of a First and/or Second Draw PPP loan for which they were

ineligible.

87. Defendants ' knowingly false certifications on Corporate Defendants PPP loan

application were material to the government's decision to award them First and Second Draw

PPP loans intended for small businesses in an amount exceeding $35 million. When submitting

the application, an applicant company must certify that it is elig ible and that all information

included in the application form is true and accurate in all material respects.

88. But for Defendants' submission of their false claims, the SBA would not have

approved the loans.

89. But for Defendants' submi ssion of their fa lse claims, the SBA would not have

paid the Lender the processing fee of the loan appl ications.

18
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 24
01/06/25 Pageof 39
28 of 43
PageID 24
PageID
#: 2653

90. The United States of America has been damaged by all aforementioned

misrepresentations and fai lures to comply with requisite laws and regulations by paying

Defendants approximate ly $12,006, 137.

91. Accordingly, the United States government is entitled to treble damages under the

False Claims Act, in an amount to be determined at trial, plus a civi l penalty for each false claim

presented or caused to be presented by Defendants.

COUNT II
Violations of the False Claims Act, 31 U.S.C. § 3729(a)(l)(B)
Creating a False Record or Statement Material to a False Claim
(against all Defendants)

92. Relator Jones incorporates all the allegations set forth in the foregoing paragraphs

as though fully alleged herein.

93. The False Claims Act imposes liability on any person who knowingly makes,

uses, or causes to be made or used a false record or statement material to a false or fraudulent

claim paid or approved by the United States government. 31 U.S.C. § 3729(a)(1 )(B).

94. Defendants knowingly made or caused to be made false records or statements to

support a false claim submitted to the Lender and the SBA for approval of First and Second

Draw PPP loans.

95. The false records and statements Defendants made were used to support false

claims Defendants subm itted to the United States government.

96. Defendants' creation of knowingly false loan applications supported the Bank of

Ann Arbors claims to the SBA for loan processing fees for loans that were falsely or fraud ulently

obtained by Defendants.

19
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 25
01/06/25 Pageof 40
28 of 43
PageID 25
PageID
#: 2654

97. The United States of America has been damaged by all aforementioned

misrepresentations and fai lures to comply with requisite laws and regulations by paying Bank of

Ann Arbor approximately $2 10,382 in loan processing fees for illegitimate PPP loans.

98. Accordingly, the United States government is entitled to treble damages under the

False Claims Act, in an amount to be determined at trial, plus a civil penalty as deemed

appropriate.

COUNTIII
Violations of the False Claims Act, 31 U.S.C. § 3729(a)(l)(C)
Conspiracy to Violate the False Claims Act
(against all Defendants)

99. Relators Jones incorporates all of the allegations set forth in the foregoing

paragraphs as though fully alleged herein.

100. The False Claims Act imposes liability on any person who conspires to comm it a

violation of the False Claims Act. 31 U.S.C. § 3729(a)(l)(C).

101. All defendants conspired to violate the False Claims Act.

102. As set forth more fully above, Jeffrey Cappo directed or knowingly allowed

direction to be given to Corporate Defendants to each apply for a First and/or Second Draw PPP

loan and ce11ified or caused to be certified the applications containing false statements.

103. The United States of America has been damaged by the aforementioned

misrepresentation in a dollar amount to be detennined at trial of approximately $36 mi llion.

104. According ly, the United States government is entitled to treble damages under the

False Claims Act, in an amount to be determined at trial, plus a civil penalty as deemed

appropriate.

20
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 26
01/06/25 Pageof 41
28 of 43
PageID 26
PageID
#: 2655

COUNTIV
Violations of the False Claims Act, 31 U.S.C. § 3729(a)(l)(G)
Improper Avoidance of Obligation to Government
(against all Defendants)
105. Relator Jones incorporates all of the allegations set forth in the foregoing

paragraphs as though fully alleged herein.

106. The False Claims Act imposes liability on any person who knowingly makes,

uses, or causes to be made or used, a false record or statement material to a n obligation to pay or

transmit money or propetty to the Government, or knowingly conceals or knowingly and

improperly avoids or decreases an obligation to pay or transmi t money or property to the

Government. 31 U.S.C. § 3729(a)(l)(G)

107. Defendants knowingly concealed or knowingly and improperly avoided an

obligation to pay money to the government when they falsely certified compliance with the PPP

program in applying for forgiveness of their PPP loans.

108. As set forth more fully above, Defendants knowingly concealed their affil iation

and failed to return the PPP loans received in error for the purpose of decreasing their obligation

to pay money to the government.

109. But for Defendants' concealment, the SBA would not have forgiven the Corporate

Defendants' obligation to repay the PPP loans including interest and would not have approved

Defendants' Second Draw PPP loans.

11 0. The United States of America has been damaged by the aforementioned

misrepresentations in a dollar amount to be determined at trial.

111. Accordingly, the United States government is entitled to treble dan1ages under the

False Claims Act, in an amount to be determined at trial, plus a civil monetary penalty as deemed

appropriate.

21
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 27
01/06/25 Pageof 42
28 of 43
PageID 27
PageID
#: 2656

PRAYER FOR RELIEF

WHEREFORE, Relator Jones, acting on behalf of and in the name of the United States of

America, and on his own behalf, prays that judgment will be entered against Defendants for

violations of the Federal False Claims Act, 31 U.S.C. § 3729 et seq. as follows:

a) That fo r violati ons of the False Claims Act, 31 U.S.C. § 3729, et seq. , thi s Comt enter

Judgment against the Defendants in an amount equal to tlu·ee times the amount of damages

the United States Government has sustai ned because of the Defendants' actions, plus a civil

penalty of between $11 ,665-$23,33 l for each action in violation of3 1 U.S.C. § 3729;

b) That Relator be awarded the maximum amount allowed pursuant to 31 U.S.C. § 3730(d),

including the costs and expenses of this action and reasonable attorneys' fees;

c) That a trial by jury be held on all issues;

d) That, in the event the United States Government elects to intervene in and proceed with

this action, Relator be awarded between 15% and 25% of the proceeds of the action or of

any settlement in accord with 3 1 U.S.C. § 3730(d)(l);

e) That, in the event that the United States Government does not proceed with this action,

Relator be awarded between 25% and 30% of the proceeds of the action or of any

settlement in accord with 31 U.S.C. § 3730(d)(2);

f) That, pursuant to 3 1 U.S.C. § 3730(c)(5), Relator be awarded a share of any alternate

remedy that the United States Government elects to pursue;

g) That permanent injunctive rel ief be granted to prevent any recun-ence of the False Claims

Act conduct described above for which redress is sought in this Complaint;

h) That the United States and the Relator be awarded prej udgment and post judgment interest;

and

22
Case
Case 8:21-cv-01742-CEH-UAMDocument
1:20-cv-00538-JJM-PAS Document 1
66-72FiledFiled
07/19/21 Page 28
01/06/25 Pageof 43
28 of 43
PageID 28
PageID
#: 2657

i) That the United States Government and Relater receive all other relief, both in law and

equity, to which they may reasonably be entitled.

JURY DEMAND

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Relater Jones hereby

demands a jury trial.

July 12, 2021 Respectfully Submitted,

R.Sott Oswald, (Bar no. 15843 7)
The Employment Law Group, P.C.
1717 K St, NW, Suite 1110
Washington, D.C. 20006
(202) 261-2813
(202) 261-2835 (facsimile)
soswald@employmentlawgroup.com

Attorney for Qui Tam Relater

File and source

File: us_v_ocean_state__docket-63399938__doc-66_att-72__id-440767176__Exhibit_72.pdf
Size: 6,079,234 bytes
SHA-256: d50904b18baebb212aa085a5434d88c408e4000e6400ff447619754e9bca66a0
Our copy: us_v_ocean_state__docket-63399938__doc-66_att-72__id-440767176__Exhibit_72.pdf
Original: storage.courtlistener.com