Complaint against Lake Ridge Parks and Recreation Association, Inc — No. 1:24-cv-00971 (Dkt. 1, E.D. Va.)

Summary

Original complaint, Case No. 1:24-cv-00971-CMH-WEF, Document 1, filed 06/06/24 under seal pursuant to 31 U.S.C. § 3730(b)(2) in the U.S. District Court for the Eastern District of Virginia. Relator Wade Riner sues Lake Ridge Parks and Recreation Association, Inc. under the False Claims Act, 31 U.S.C. §§ 3729-32, on behalf of the United States. The complaint alleges that the defendant, a 501(c)(4) organization, fraudulently applied for a Paycheck Protection Program loan and received hundreds of thousands of dollars in forgivable funding. Count I is presentation of false or fraudulent claims, 31 U.S.C. § 3729(a)(1)(A), and Count II is making or using false statements material to false or fraudulent claims, 31 U.S.C. § 3729(a)(1)(B); the relator demands a jury trial.

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“Complaint against Lake Ridge Parks and Recreation Association, Inc — No. 1:24-cv-00971 (Dkt. 1, E.D. Va.).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/complaint-against-lake-ridge-parks-and-recreation-association-inc-no-1-bddf7a73db/, SHA-256 ec1fcde3b1a20750286718ff59e62b65c8fda529cd21c553665a220ac9864721.

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r' ILED

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Mq JiJ -b P I-
[UNDER SEAL], § ORIGINAL COMPLAINT FOR
§ VIOLATIONS OF FEDERAL
Plaintiff, § FALSE
§ CLAIMS ACT

FILED UNDER SEAL
PURSUANT TO 31 U.S.C.
§ 3730(b)(2)

DO NOT PUT ON PACER

DO NOT PLACE IN PRESS
[UNDER SEAL], BOX

Defendant. JURY TRIAL DEMANDED

RELATOR^S ORIGINAL COMPLAINT
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

UNITED STATES OF AMERICA ex § CIVIL NO. i: an
rel. WADE RINER §

Plaintiff, § RELATOR WADE RINER^S
§ ORIGINAL COMPLAINT
§
§
V.
§
§ FILED UNDER SEAL

§ PURSUANT TO 31 U.S.C. §
§ 3730(b)(2)
LAKE RIDGE PARKS AND
RECREATION ASSOCIATION,INC.

Defendant. JURY TRIAL DEMANDED

RELATOR WADE RINER'S ORIGINAL COMPLAINT
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TABLE OF CONTENTS

I. INTRODUCTION: COVID-19,PPP,AND THE OPPORTUNISTS 1

XL Parties 3

III. Respondeat Superior and Vicarious Liability 4

IV. Jurisdiction and Venue 4

V. Disclosures 4

VI. The Paycheck Protection Program 4

VII. Defendant's Fraud 10

VIII. Actionable Conduct by Defendant 12

A. False Claims Act .12

B. Defendant's Violations of the False Claims Act ..13

C. Defendant's Violations of the False Claims Act are
Material !. 14

IX. Causes of Action ;. 16

A. Count I-Presentation of False or Fraudulent Claims
(31 U.S.C.§ 3729(a)(1)(A)) ..16

B. Count II-Making or Using False Statements Material
TO False or Fraudulent Claims (31 U.S.C.
§ 3729(a)(1)(B)) 18

X. Prayer for Relief 19

XI. Demand for Jury Trial 20
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Plaintiff/Relator Wade Riner("Relator" or "Riner") brings this action pursuant to the False

Claims Act(PGA), 31 U.S.C. §§ 3729-32, and seeks to recover all damages, penalties, and other

remedies established by the FCA on behalfofthe United States of America and on his own behalf.

Relator respectfully shows the following:

L Introduction: Covid-19,PPP,and the Opportunists

1. After the crisis of the COVID-19 Coronavirus pandemic began. Congress passed

the Coronavirus Aid, Relief, and Economic Security Act—more commonly referred to as the

"CARES Act"—in part to provide emergency relief to small businesses facing payroll difficulties

and other concerns meeting their bottom-line in the midst ofthe pandemic. Unfortunately, this aid

also attracted opportunistic actors who received aid that Congress never intended. Congress

created the PPP in March 2020, as part of the Coronavirus Aid, Relief and Economic Security

(CARES) Act, to provide emergency financial support to the millions of Americans suffering the

economic effects caused by the COVID-19 pandemic. The CARES Act authorized billions of

dollars in forgivable loans to small businesses struggling to pay employees and other business

expenses. Throughout 2020 and 2021, PPP loan applicants were required to certify that they were

eligible to receive a PPP loan.

2. Part of the aid in the CARES Act was the Paycheck Protection Program ("PPP"),

which provides forgivable, emergency loans to small businesses that certify to the United States

Small Business Administration that they are qualified to receive the interest-free loan, that their

loan request is necessary for continued operation, and that they will use funds only to pay payroll

expenses, rent, mortgage, interest, or utilities during a covered period.

3. The PPP loans were originally intended to help traditional small businesses niake

it through the economic downturn that came as a consequence ofthe pandemic. The key: the small

1
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businesses that fiieled our economy. Congress also allowed a limited set ofnonprofit organizations

to apply as well (specifically those designated as 501(c)(3) organizations under the nation's tax

laws), but others wanted in. Numerous trade groups and similar associations lobbied Congress to

be added as entities eligible for PPP loans.

4. In December 2020, Congress passed and the President signed into law amendments

to the CARES Act(the Economic Aid Act)that allowed several specified nonprofit groups to apply

for PPP loans, including housing cooperatives, nonprofit news organizations, and IRS 501(c)(6)

organizations. Community associations, social advocacy organizations, and many other

organizations that were not organized for profit were still not included as eligible entities in the

amendments for PPP loans. The list of eligible recipients expanded only one more time near the

end ofthe final PPP application period—^when the American Rescue Plan Act of2021 was signed

into law on March 11, 2021 and included most 501(c) organizations as "additional covered

nonprofit entities" but explicitly excluded 501(c)(4) organizations.

5. Despite the industry's recognition that Congress had not allowed their participation
I

in the Paycheck Protection Program, numerous ineligible entities not organized for profit applied

for PPP loans anyway, falsely certifying to the United States that they were eligible for funding

and that they needed the loans after also certifying in the Application that "1 have read the

statements included in this form, including the Statements Required by Law and Executive Orders,

and I understand them." Rather than obtain PPP loans as the intended American businesses in

need. Defendant approached the program as an opportunist.

6. The Defendant 501(c)(4) organization fraudulently applying for a PPP loan

received hundreds of thousands of dollars in forgivable funding, directly depriving the United
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States ofhundreds ofthousands of dollars and preventing worthy and needy small businesses jfrom
j

receiving congressionally approved loans.

7. As Acting Assistant Attorney General Brian M.Boynton has explained,"PPP loans

were intended to provide critical relief to small businesses so that they could pay employees and

maintain operations," and the Department of Justice is "committed to pursuing those who

knowingly violated the requirements of the PPP or other Covid-19 assistance programs and

obtained relieffunds to which they were not entitled"—^particularly, with the assistance ofqui tarn

relators.

n. Parties !

8. PlaintifCTlelator Wade Riner is a regular homeowner and investor. A corporation

with which Riner is the officer and principal in turn owns multiple homes in Florida. Through

ownership of these homes, Riner is a member of the Hunters Run Property Owners Association,
I

Inc., and he was a member of the Boca West Master Association, Inc. until the fourth quarter of

2021. Through his membership in these homeowners associations in Florida, he learned that his

homeowners associations had applied for millions of dollars of federal relief through PPP loans,

even though they did not qualify for such loans under the CARES Act. Riner subsequently learned

that his own homeowners associations and numerous others defrauded the United States
j

government by falsely certifying they were eligible for PPP loans that they were not, in fact,

eligible for. Riner is intimately familiar with the finances and organization of these particular

homeowners associations as well as homeowners associations in general, including details of how

such community associations are governed and how they raise funds through their memberehip

and other sources of liquidity.
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9. Lake Ridge Parks and Recreation Association, Inc. is a 501(c)(4) organization

located at 12350 Oakwood Dr., Lake Ridge, Virginia 22192.

III. Respondeat Superior and Vicarious Liability

10. Any and all acts alleged herein to have been committed by Defendant |Were
committed by officers, directors, employees, representatives, or agents who at all times acted on

behalf of the named Defendant and within the course and scope of their employment or agency.

IV.Jurisdiction and Venue

11. Jurisdiction and venue are proper in the Eastern District of Virginia, pursuant to the

False Claims Act (31 U.S.C. §§ 3729-33), because Relator's claims seek remedies on behalf of

the United States for multiple violations of31 U.S.C. §§ 3729-30,and the Defendant can be found

in this district. Because Defendant can be found in this state, personaljurisdiction is also proper.

V. Disclosures

12. As required by 31 U.S.C. §§ 3730(b) and (e), Relator submitted an Original

Disclosure Statement to the Attorney General of the United States and the United States Attorney

for the Eastern District of Virginia, as well as all material evidence and information, prior to filing

and serving this Original Complaint.

VI.THE Paycheck Protection Program

13. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the

"CARES Act"), Pub. L. 116-136, 134 Stat. 281, created the PPP, initially making $349 billion in

forgivable loans available to small businesses impacted by the COVlD-19 pandemic. The U.S.

Small Business Administration ("SBA") administers the PPP, promulgates the rules j and
regulations governing the PPP, and guarantees all PPP loans made by lenders.
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14. The PPP allowed small businesses (less than 500 employees) to obtain forgivable

loans of up to $10 million, at 1% interest, to cover payroll costs, rent, mortgage interest, utilities,

and other overhead expenses for a "covered period." CARES Act § 1102(a)(2)(36)(D)-(E), 134

Stat. at 288-90.

15. PPP loans were processed and approved by qualified lenders that the SBA
I

approves. Lenders issued PPP loans without the SBA's prior review or express and individualized

approval, but they agreed to be responsible for determining borrower eligibility under the SBA's

criteria. They were "deemed to have been delegated authority by the[SBA]Administrator to rnake

and approve covered loans." CARES Act § 1102(a)(2)(36)(F)(ii), 134 Stat. at 290.

16. For processing the PPP loans, the SBA reimbursed participating lenders with a

processing fee equal to the amount of5% ofloans up to $350,000; 3% of loans between $350,000

and $2,000,000; and 1% on loans of at least $2,000,000. See CARES Act § 1102(a)(2)(36)(P), 134

Stat. at 293. Additionally, although the lenders funded the PPP loans with their own funds, the

SBA 100% guaranteed these loans.

17. PPP loans are also subject to complete forgiveness. CARES Act § 1106, 134 Stat.

at 297-302. And within 90 days of which forgiveness is given, the SBA remits to the lender the

full amount of forgiveness, plus any accrued interest. Id. § 1106(c)(3), 134 Stat. at 298.

18. The PPP was a program under the Small Business Act, Section 7(a). Generally

speaking, a key eligibility requirement for Section 7(a) SBA loans is that the applicant be a

business operating for profit.

19. Pursuant to the CARES Act,PPP loans were originally available only to a "business

concern, nonprofit organization, veterans organization,[] Tribal business," or sole proprietorship

that employed no more than 500 employees. See CARES Act § 1102(a)(2)(36)(D), 134 Stat. at

5
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288. Nonprofit-organization eligibility, however, was limited by the statutory definition of

"nonprofit organization": the only nonprofits that were generally eligible were 501(c)(3)

organizations that are tax exempt. Id. § 1102(a)(2)(36)(A)(viii).

20. Eligibility for PPP is also spelled out in Interim Final Rule #1 published in the

Federal Register on April 15, 2020 (answering the question, "How do 1 determine if I am

ineligible?"). As it stated:"Businesses that are not eligible for PPP loans are identified in 13 CFR

120.110 and described further in SBA's Standard Operating Procedure (SOP)50 10 Subpart B,

Chapter 2, except that nonprofit organizations authorized under the Act are eligible." 85 Fed. Reg.

20812.

21. Meanwhile, 13 CFR § 120.100 states that an entity must be "organized for profit"

to be eligible for SBA loans (including PPP loans), and 13 CFR § 120.110 specifically states that

"non-profit businesses" are ineligible. 13 CFR § 120.110 specifically excludes other types of

entities, including "[pjrivate clubs and businesses which limit the number of memberships for

reasons other than capacity." 13 CFR § 120.110(i). As stated in the administrative notes interpreting

the rationale behind 120.110(i),"to be eligible for SBA financial assistance, the products and services

of a business must be available to the general public." 60 Fed. Reg. 64356, 1995 WL 739731, at

*64360 n.3(Dec. 15, 1995). The clear intent of Congress and the SBA,therefore, was to limit SBA

loans, including PPP loans, to for-profit businesses and not private clubs like housing associations,

condominium associations, country clubs, and more.

22. Applicants for PPP loans were required to certify to a participating SBA-approved

lender and to the SBA that they are eligible to receive the loan under the rules in effect at the time

oftheir application. For example,the April 2020 SBA Form 2483(the PPP application at the time)

required applicants to certify as follows:
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Paycheck Protection Progiam
BorroTver Application Form

By Signing Bdow.Yon Make the FoUomng Representations. Aathorizarions. and Ceitificariops

CERTinCATIONS AND AUTHORIZATIONS

I certify that
• I have read the statements included in this form, mriitrting the Statements Required by Law and Executive Orders,and I understand th^tn
• The Af^licant is digible to receive a loan under die rulesin effect at the time dus application is sidnnitted that have been issued bjydte
Small Rrsiness Admiaistiation(SBA)inqtlementing the Paychedc Protection Program under Division A,Tide I ofthe Coronaviius
Aid,ReheL and Ecrmomic Security Act(CARES Act)(the Paycheck Protecticin Program Rnle). i
• The Aji^licant(1)is an independent contractor, eitgible self-enqrioyed individnaL or sole proprietor or(2)enqrloys no more
than the greater of500 m enqrloyees or. if^rphcable, the size standard in number of enqrloyees established by die SBA in 13
C.F.R. 121.201 fin the.'^hcant's industry.
• I will comply, whenever applicable, with the dvil rights and other limitations in this form.
• All SBA loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the
Paycheck Prmection Program Rule.
• To the extent fisasible,I will purchase(mly American-made equipment and products.
• The i^licant is not engaged many activity that is illegal under federal state or local law.
• Any loan received by the Applicant under Section 7(b)(2) ofthe Small Business Act between January 31, 2020 and .(^nil 3.2020 was
for a purpose other than paying payroll costs and other allowable uses loans under die Paycheck Protection Program Rule.

23. PPP applications additionally required applicants' authorized representatives to

specifically certify that all information provided on the application is true and accurate in all

material respects as well as to certify their understanding that a false statement made in order to

obtain a guaranteed loan from the SBA is punishable under the law. Again, from the April 2020

SBA Form 2483:

I fhtfiier certify that die information provided in dus application and the information provided in all sqiporting docunren^ ami
fmms is true and accurate in all material rejects. I understand diatknowingfy making a &lse statement to obtam a guaranteeo loan
fipom SSA is punisbable under die 1aw|inchidiiig under 18USC 1001 and3571 by inqHisomnent ofnot more dian five years anid/'or a
fine ofiqi to $250,000; under 15 USC (545 by imprisonment ofnot more dian two years and/or a fine ofnot more than S5.000; md,if
submitted to a federally insured institution, under 18 USC 1014 by imprisonmem of not more than thirty years and/or a fine of not
more than Sl.OOO.OOO.

24. Finally, when PPP loan recipients apply for forgiveness of their loan, they must

further certify, through their authorized representative, that they have "complied with all

requirements in the Paycheck Protection Program Rules," including the statute passed in the

CARES Act and the subsequent amendments. From SBA Form 3508S:
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Bv Signing Below. Yon Make the Foilomng Rgpresentations and Certifications on Behalf of the Borrower:
The Authorized Representative ofthe Borrower certifies to all of the below by initialing next to each one.
The Borrower has conq>lied with all requirements in the Paycheck Protection Program Rules (Sections 7(a)(36),
(7Xa)(37), and 7A of die Small Business Act, the PPP interim final rules, and guidance issued by SBA through the date
ofthis ^iplication). including the rules related to:
• ebgible uses ofPPP loan proceeds;
• the amount ofPPP loan proceeds that must be used for payroU costs (including proprietor expenses for
Borrowers that applied for loans using SBA Forms 2483-C or 2483-SD-C);
• the calculation and doaimentation ofthe Borrower's revenue reduction (if^iplicable); and
• the calculation of die Borrower's Requested Loan Forgiveness Amount
Information regarding these requirements may be found in die Form 3S08S Instructions and the Paycheck Protection
Program Rules. I

25. The PPP was originally funded by Congress with $349 Billion, but the funds were

depleted on April 16, 2020—only weeks after the CARES Act passed. On April 24, 2020, the

President signed the Paycheck Protection Program and Health Care Enhancement Act, Pub. L.
I

116-139,134 Stat. 620, whereby Congress allocated an additional $320 Billion in funding.

26. Congress further expanded the PPP at the end of 2020 in the Economic Aid Act,

which was included as part of the Consolidated Appropriations Act, 2021, Pub. L. 116-260. The

Consolidated Appropriations Act, 2021, added $284.5 Billion to the PPP. Additionally, the Act
j
allowed certain entities to obtain "second draw"PPP loans. By May 5,2021,these additional funds

had also been depleted.

27. Further amendments in the Consolidated Appropriations Act, 2021 made several

other specified nonprofit organizations eligible for PPP loans—specifically, "housing

cooperatives," nonprofit news organizations, and IRS 501(c)(6) entities, but not other nonprofit

organizations such as homeowner associations and other community associations. See Pub. L. 116-

260, §§ 311(a), 317, 318. This is despite the fact that many community associations lobbied

Congress for their explicit inclusion.

28. Congress expanded the list of eligible recipients one last time near the end of the

final PPP application period—^when the American Rescue Plan Act of 2021 was signed into law

on March 11, 2021 and included most 501(c) organizations as "additional covered nonprofit

8
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entities." Yet, Congress still explicitly excluded 501(c)(4) organizations—the only 501(c) status

for which a homeowners association or condominium association might be eligible. Thus, 501(c)4

organizations have never been eligible. See 86 Fed. Reg. 15083 (explaining that the American

Rescue Plan Act changes only "apply to PPP loans approved, and loan forgiveness applications

submitted, on or after March 11,2021").

29. For entities that applied for a second-draw PPP loan, they again were required to

certify their eligibility under the effective rules. From SBA Form 2483-SD:

Paycheck Protection Program
Second Draw Borrower Application Form
Revised .March 18. 2021

By Signing Below.Yon Make the Following Representations..Anthorizations. and Certifications

I certify that:

• I have read the statements included in this form,tm-inrfmg the Statements Required by Law and ExecutiYX Orders, and I understand ttwn
• The A(q[ilicant is dig^ to receive a loan under the rules in eObct at the time diistqipiicatian is submitted diat have been issued by the!
BtBinessAdmxnistrati(mCSBA)anddieI>ep3rtinenlcffoeTieassty(Tieasoi]^in]plemeclingSecondI>rawPa|ychedrPti)teclioaFlogt3mI
tntder Diviston A.Title I of the Cmooavims Aid, RfKef, and Economic Secunfy Act(CARES ActX foe Economic Aid to Haid-Hlt Snb
BosinfSBts. Nprggofits,and Venues Act,and Title V offoe American RescaePlan Act of2021(foe Paycheck Protection Progam Rules).|
• The i^bcant,together with its affiliates(if<^licable).(1)is an independent contractor. seif-enq>loyed individual, or sole proprietor wifo no
employees;(2)employs no more than 300 enqrloyees;(3)if NAICS 72, employs no more than 300 employees per jfoysical locatioo;(4)if a
news organizatitm that is m^ority owned or controlled by a NAICS code SllllOorSlSl business, a norqnofit public broadcasting errtity with
a trade or business under NAICS code 511110 m 5151, or an hrtemet-only news or periodical publisher assigned NAICS code 519130 and
engaged in foe collection arui distributum of local or r^ional and national news and infonration. employs no mme than 300 enqrloyees per
location; or(5)ifa 501(cX3)organizalion. an eligible 501(cX6)organization, other eligible 501(c)organization, eligible destination marketing
organization, errqrloys no more foan 300 enqrloyees per physiml location.

• I will comply, whenever ^licable, with the dvil rights and ofoer limitations m fois form.
• All loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paychedr Protection
Program Rules including the prohibition <m using loan {noceeds for keying activities and expenditures. If Ai^licant is a news organization that
became eligible for a loan under Section 317 ofthe Economic Aid to Hard-Hit Small Businesses. Nmqirofits,a^Venues.Act. proceeds oftlm loan
will be used to support esqrenses at the conqxment offoe business concern that produces or distributes locally focused or emergency infomuition.
If the Applicant is an hilemet-only news or periodical publisher that became eligible for a loan under Section 5001 offoe American Rescue Plan
Act of 2021. foe proceeds of the loan will be used to stpport expenses at the cmnponent offoe business or organization foat so{q>ort5 local or
r^ionalnews. j
• I understand that SBA encourages the purchase, to foe extent feasible, of American-made equipment and products.
• The.^licant is not engaged in any activity that is illegal under federal, state or local bw.

I
30. Additionally, second-draw PPP applications continued to require another
i

certification that all information provided on the application is true and accurate in all material

respects as well as to certify their understanding that a false statement made in order to obtain a

guaranteed loan from the SBA is punishable imder the law. From SBA Form 2483-SD:
Case 1:24-cv-00971-CMH-WEF Document 1 Filed 06/06/24 Page 13 of 24 PageID# 13

I fiofliercnt^lliatlbeinfimmtioa provided in tins ^licaticm and fteiafbixiiatioa provided in all sqppQitix^ documents and fiams is tnie
and acairate inan naateri;die^)ect8.1\mder5tand thatknowing^nBkinga&lse statementtooblainagoatagteedloanfiomSBAispnm^iable
under tbe law.including under 18U.S.C. 1001 and 3571 by inqnisonmentofnct more flian five years and'or a fine ofup to $250,000; under
15 U.S.C. 645 by inquisomnent of not more tban two years and/or a fine of not mote llian S5.000: and. if submitted to a federally insured
institution, under IS use 1014 by inqirisanmenlofnot mote than thirty years and/or a fine ofnot mote dian $1,000,000.

31. Finally, qui tarn lawsuits are an appropriate remedy for violations ofthe PPP rules

and regulations. In remarks given on February 17, 2021, for example. Acting Assistant Attorney

General Brian M. Boynton explained: "It is clear to me and my colleagues in the Civil Division-

and I'm sure to all of you-that the False Claims Act will play a significant role in the coming years

as the government grapples with the consequences of this pandemic." As he further pointed out,

"[t]he vast majority ofthe funds distributed under these programs have gone to eligible recipients.

Unfortunately, some individuals and businesses applied for-and received- payments to which they

were not entitled." Accordingly,''qui tarns will continue to be an essential source of new leads,
i
and the Department[ofJustice] will continue to rely on whistleblowers to help root out the misuse

and abuse oftaxpayer funds."

VII. Defendant's Fraud

32. Defendant knowingly told the SBA and participating lenders that it was a qualified
I

entity to receive a PPP loan, even though it is a 501(c)(4) organization that was never eligible. Its

fraud deprived the United States of the ability to loan appropriated fimds to qualified businesses,

as the funding for PPP loans ran out shortly after Defendant applied for its loan.

33. Defendant's false certification that it was qualified occurred despite it knowing or

recklessly disregarding the fact that it was an ineligible 501(c) organization when it applied. The

SBA published—and later updated, upon congressional amendments—fi-equently asked questions

(FAQs)for the PPP loans, including an answer for"Who is Eligible." 501(c)(4)organizations were

never listed in the answer to that question.

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34. The Defendant's false certifications to the SBA and the lenders were material,

because the SBA and lenders were relying on the honesty of applicants to process PPP loans as

quickly as possible in order to get relief to American businesses as Congress intended.

35. Moreover, the Defendant, building on this fraud, has already applied for loan

forgiveness from the United States and had its loan forgiven in full, thus directly depriving the
1

United States of the full amount ofthe loan and the interest accrued on the loan. The forgiveness

given is equal to hundreds of thousands for Defendant.

36. The damages suffered by the United States extended beyond the simple amount of

the loan. The damages also include the Government's other incidental expenses supporting the

particular PPP loan. For example. Defendant induced the United States to pay fees to banks and

other financial institutions in order to execute this fraudulent loan.

37. Defendant knowingly and falsely certified that it was "eligible to receive a loan

under the rules in effect at the time th[e] application is submitted." Defendant applied for and

received a loan in violation of the EGA as summarized in the following table:

#of Date Amount of
Entity Loan(s) Loan
Defendant Loans Loan(s) Loan
Type Amount Forgiven?
Rec'd Approved Forgiven
Lake Ridge Parks and
501(c)(4) 1 $602,355 3/17/2021 Yes $607,391
Recreation Association, Inc.

38. Lake Ridge Parks and Recreation Association, Inc.("Lake Ridge") applied for and

received a PPP loan of $602,355, approved on March 17, 2021. Lake Ridge knew it was an

ineligible 501(c)(4) entity at the time it applied for the PPP loan. In its 2020 and 2021 IRS Form

990s, for example. Lake Ridge listed itself as a 501(c)(4) tax-exempt organization, which was

never eligible to receive a PPP loan.(Exhibit 1). Thus,Lake Ridge knowingly and falsely certified

11
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that it was "eligible to receive a loan under the rules in effect at the time th[e] application is

submitted." Lake Ridge has applied for forgiveness for its loan, and the United States forgave the

loan in the amount of$607,391 (including interest).

Vni. Actionable Conduct by Defendant

A. False Claims Act

39. This is an action to recover damages and civil penalties on behalf of the United

States and the Relator arising from false or fraudulent statements, claims, and acts by Defendant

made in violation of the False Claims Act, 31 U.S.C. §§ 3729-32.

40. The FCA provides that any person who:

(A) knowingly presents, or causes to be presented, a false claim or
fraudulent claim for approval;[or]
(B)knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim;

is liable to the Government for a civil penalty not less than $11,665 and not
more than $22,331 for each such claim, plus three times the amount of
damages sustained by the Government because of the false or fraudulent
claim.

31 U.S.C. § 3729(a)(1).
41. The FCA defines "claim" as:

(A)[] any request or demand, whether under a contract or otherwise, for
money or property and whether or not the United States has title to the
money or property, that—

(i)is presented to an officer, employee,or agent ofthe United States;
or

(ii) is made to a contractor, grantee, or other recipient, if the money
or property is to be spent or used on the Government's behalf or to
advance a Government program or interest, and if the United States
Government—

(31) provides or has provided any portion ofthe money or
property requested or demanded; or
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(II) will reimburse such contractor, grantee, or other
recipient for any portion of the money or property which is
requested or demanded. ...

31 U.S.C. § 3729(b)(2).

42. The FCA allows any persons having knowledge of a false or fraudulent claim

against the Government to bring an action in federal district court for themselves and for the
I
I

Government and to share in any recovery as authorized by 31 U.S.C. § 3730.

43. Based on these provisions, Relator Riner, on behalf ofthe United States and on his
i

own behalf, seeks through this action to recover damages and civil penalties arising from

Defendant's violations ofthe False Claims Act.

B. Defendant's Violations of the False Claims Act

i. Presentation of False or Fraudulent Claims(31 U.S.C.§ 3729(a)(1)(A))

44. In 2021, Defendant knowingly presented false and fraudulent claims for payment

and approval directly to its lenders, deputized agents of the United States government, which

falsely stated that it was an eligible entity for a PPP loan and that it needed the loan in order to

support its ongoing operations. The falseness of these claims was exacerbated when Defendant

applied for forgiveness of its loan and falsely certified that it complied with all the requirenients

of the PPP Rules.

45. Due to Defendant's actions. Defendant borrowed hundreds ofthousands of dollars

of a forgivable loan that, even if paid back, is also set at a below-market interest rate. This loan

was disbursed at the expense of countless United States businesses who qualified for PPP loans

but could not apply because Congress's funding ran out. Additionally, the United States has paid
I

hundreds ofthousands of dollars to lenders for the forgiven loan, which is now lost. Accordingly,

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the United States has suffered actual damages and is entitled to recover treble damages plus a civil

monetary penalty for each false claim.

ii. Making or Using—or causing to be made or used—^False Records or
Statements Material to False or Fraudulent Claims(31 U.S.C.§ 3729(a)(1)(B))

46. In 2021, Defendant made, used, or caused to be made or used, false records or

statements material to false or fraudulent claims paid or approved by the Government.

47. Defendant knew that its application falsely certified that it was an entity eligible to
i
receive a PPP loan and that it falsely certified that the PPP loan was necessary to support ongoing

operations. Beyond Defendant's own direct claims. Defendant's false statements knowingly

caused these false claims, which were material to the lenders' eventual claims to the United ^tates
for additional interest and loan-forgiveness reimbursement.

48. Due to Defendant's actions. Defendant borrowed hundreds ofthousands of dollars

of a forgivable loan that its lenders' then received payments for administering and reimbursing.

The United States disbursed this money to the lenders at the expense of countless United States

businesses who qualified for PPP loans but could not apply because Congress's funding ran out.

Additionally, the United States has paid hundreds of thousands to lenders for the forgiven loan,

which is now lost. Accordingly, the United States has suffered actual damages and is entitled to

recover treble damages plus a civil monetary penalty for each false claim.

C. Defendant's Violations of the False Claims Act are Material.

49. A false or fraudulent claim under subsection(a)(1)(A)or a false record or statement

under subsection (a)(1)(B) subjects a defendant to liability if it is material. The False Clainis Act

defines "material" as "having 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).

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50. The United States set up a multi-part process of reliance on others in order to

expeditiously execute the PPP program and keep the economy on track despite the COVID-19

Pandemic, First, Congress and the SBA authorized certain lenders to issue PPP loans without the

Government's prior review or express approval. Second, although lenders were delegated the

responsibility for determining borrower eligibility, the lenders were directed to use forms

promulgated by the SBA that included numerous certifications—including a certification of

eligibility.

51. The lenders—and thus by extension the United States Government—relied heavily

on these certifications. Indeed, when the PPP was originally funded with $349 Billion, those funds

were depleted less than three weeks after the CARES Act first passed. Lenders and the United

States Government instinctively relied on applicants' promises of eligibility, particularly when no

data submitted on the application obviously indicated ineligibility.

52. In particular, to process loans so quickly, lenders utilized an automated tool that

compared loan data against publicly available information and identified anomalies that may

indicate non-compliance purely based on this data. See SBA Procedural Notice, No. 5000-20092

(Feb. 10,2021).' This data was largely limited to information about the number ofemployees and
payroll size of applicant companies, which were key components to qualifications as well , The
I

automated tool's focus on this data, however, meant that qualifications such as the fact that bnly

certain types of entities were less noticeable and more tied to applicants' certification that they

qualified for the PPP loan in the first instance.

' Available at https://www.sba.gov/sites/default/files/2021-02/Procedural%20Notice%205000-20092%20-
%20Revised%20PPP%20Procedures%20to%20Address%20Hold%20Codes-508_0.pdf.

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53. The SBA sometimes conducted additional data analysis beyond the automated tool

in order to identify noncompliant applicants. But again, their data analysis was limited to the data

available and necessarily was unable to catch entities that applied for PPP loans but were not

qualified organizations. Again, the SBA relied on the certifications of applicants that they were

qualified for SBA loans.

54. By making false and fraudulent misrepresentations that it was qualified for a PPP

loan and that it complied with all PPP requirements, the Defendant here took advantage of the

automated tool and data analyses used by lenders and the United States Government in order to

defraud those institutions. Defendant's certification of qualification and compliance,
!

notwithstanding its knowledge that it did not qualify due to its 501(c) status, not only had the

natural tendency to influence the award and forgiveness of the PPP loan but in fact did so.

Defendant's fraudulent and false certifications specifically evaded the compliance measures used

by the United States Government and participating lenders. Had Defendant told the truth, and

noted that it lacked qualification (or even that its qualification was questionable) due to its 501(c)

status, it would not have received a PPP loan or forgiveness for that loan.

IX.Causes of Action

A. Count I-Presentation of False or Fraudulent Claims(31 U.S.C.§ 3729(a)(1)(A))

55. Relator alleges and incorporates by reference each and every allegation contained

in paragraphs 1-43, 44-45, and 49-54 ofthis Complaint.

56. In 2021, Defendant knowingly presented or caused to be presented false or

fraudulent claims for payment or approval to the United States Government for a PPP Loan! and

forgiveness of its PPP Loan.

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57. Specifically, Defendant submitted or caused the submission of false or fraudulent

claims when it applied for a PPP loan and falsely and fraudulently stated that it was an eligible

entity for a PPP loan even though it knew that it was ineligible. Defendant was ineligible subject

to SBA Section 7(a)generally as well as the CARES Act and the Small Business Administration's

guidance and regulations more specifically.
I

58. The false PPP application was a "claim" under the FCA because it was a "request

or demand ... for money or property ... that" was "presented to an officer, employee, or agent of

the United States." 31 U.S.C. § 3729(b)(2)(A)(i)(emphasis added). Indeed, it was a request for

money submitted directly to financial institutions as agents ofthe United States. Altematively, the

PPP application was a claim because the financial institutions were "contractor[s], grantee[s], or

other recipient[s]" of money who would be "reimburse[d] ... for any portion of the money or

property which [wa]s requested or demanded." Id. § 3729(b)(2)(A)(ii).

59. Defendant also submitted or caused submission of a claim when it applied for

forgiveness of its PPP loan and falsely and fraudulently certified that it complied with all the

requirements ofthe PPP Rules, even though it knew it did not.

60. The application for forgiveness was likewise an additional claim because

Defendant further "request[ed] or demand[ed]" money or property from the United States, similar

to the initial PPP loan applications. 31 U.S.C. § 3729(b)(2)(A).

61. The United States Government, unaware of the material falsity of the claims made

or caused to be made by Defendant, approved, paid, and participated in payments made by the

Government's fiscal intermediaries for a loan that was not allowed and in loan forgiveness|that
otherwise was not allowed.

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62. By reason ofthese payments, approvals, and loan forgiveness, the Government has

been damaged in an amount yet to be determined. Accordingly, the United States suffered actual
I

damages and is entitled to recover treble damages plus a civil monetary penalty for each

presentment of a false claim.

B. Count II-Making or Using False Statements Material to False or Fraudulent
Claims(31 U.S.C.§ 3729(a)(1)(B))

63. Relator alleges and incorporates by reference each and every allegation contained

in paragraphs 1-43,46-48, and 49-54 ofthis Complaint.

64. In 2021, Defendant knowingly made, used, or caused to be made or used, false

records or statements material to false or fraudulent claims paid or approved by the Government.

65. Defendant's statements of eligibility in its PPP application were false. Defendant

knew that these statements were false because Defendant knew that it was not eligible to receive

a PPP loan.

66. Defendant's statements in its application for forgiveness that it complied with all

the requirements of the PPP Rules were false. Defendant knew that these statements were false

because it knew it was ineligible for a PPP loan.

67. Defendant's false statements herein were material to its false and fraudulent claims

for payment and approval that would be made to the United States Government in conjunction I
I

with its statements. The statements also made the financial institutions' claims for payment jand
i

reimbursement ofloan money false and were material to those false claims, as well.

68. Defendant's false statements were material because the Government's lending

agents—and by extension the United States Government itself—^heavily relied on these

certifications in processing PPP loans as quickly as possible with the assistance of an automated

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tool that itself would trust these certifications. Defendant's false statements thus not only had the

natural tendency to influence the award and forgiveness ofPPP loans but in fact did so.

69. The United States Government, unaware of the material falsity ofthe claims made

or caused to be made by Defendant due to these material statements, approved, paid, and

participated in payments and forgiveness for loans that were not allowed.

70. But for Defendant's use ofthe materially false statements, the PPP loans would not

have been paid.

71. Because of its false or fraudulent statements. Defendant earned hundreds of

thousands of dollars through PPP loans to which they are not legitimately entitled. The ultimate

submission to the federal Government of claims for payment was a foreseeable consequence of

this fraud. As a result, the United States has suffered substantial damages and is entitled to recover

treble damages and civil monetary penalties.

X. Prayer FOR Relief

72. WHEREFORE, Riner respectfully requests the Court enter judgment against

Defendant for violations of the EGA and award the following:

a. Damages in the amount ofthree times the actual damages suffered by the United
j
States as a result of Defendant's conduct;

b. Civil penalties against Defendant up to the maximum allowed by law for each

violation of 31 U.S.C. § 3729;

c. The maximum award Relator may recover pursuant to 31 U.S.C. § 3730(d);

d. All costs and expenses of the litigation, including attorneys' fees and costs of

court; and

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e. All other relief on behalf of Relator or the United States that the Court deems
I

just and proper. ^
XI.Demand for Jury Trial

73. Pursuant to Federal Rule of Civil Procedure 38, Relator demands a trial by jury.

Respectfully submitted,

Randall C. Owens
TX State Bar No. 15380700
Michael Adams-Hurta
TX State Bar No. 24097860
Wright Close & Barger,LLP
One Riverway, Suite 2200
Houston, Texas 77056
Telephone:(713)572-4321
Telecopier:(713)572-4320
owens@wrightclosebarger.com
hurta@wrightclosebarger.com

Alexander P. Faig
VSB No. 96248
Moore,Christofe & Siddiqui,PLLC
526 King Street, Suite 506
Alexander, Virginia
Telephone:(703)535-7809
Facsimile:(571)223-5234
afaig@moorechristoff.com
Michael Adams-Hurta
TX State Bar No. 24097860

Attorneysfor Relator Wade Riner

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CERTIFICATE OF SERVICE

I hereby certify that on June 6, 2024, a true and correct copy of this Original Complaint
was forwarded to the United States Attorney's Office for the Eastern District of Virginia and the
Department of Justice in Washington, D.C. via certified mail, return receipt requested.

/s/ Randall C. Owens
Randall C. Owens

Alexander P. Faig

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