United States Files False Claims Act Complaint Against Founder of Cannabis Companies for Illegally Obtaining Pandemic Loans

Summary

The United States filed a False Claims Act complaint against Laurie Holcomb of Huntington Beach, California, founder of multiple cannabis companies, alleging that she illegally obtained five pandemic-related loans, securing $1.4 million in Paycheck Protection Program loans and their forgiveness by falsely certifying that the businesses were not involved in illegal activity. The loans went to Gold Flora LLC, GF Distribution LLC, Gold Flora Partners LLC and Black Lion Farms LLC, which cultivated, distributed and sold recreational cannabis, illegal under federal law as a Schedule I controlled substance; SBA rules generally excluded such businesses even where state law permitted the trade. The government intervened in the qui tam case U.S. ex rel. Aidan Forsyth v. Gold Flora LLC, et al., No. 23cv1962-W (MMP) (S.D. Cal.); the claims are allegations only.

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SAN DIEGO – The United States has filed a complaint under the False Claims Act (FCA) against Laurie Holcomb, founder of multiple cannabis companies, alleging that she illegally obtained five pandemic-related loans from the federal government. The United States alleges that Holcomb secured $1.4 million in federally-guaranteed Paycheck Protection Program loans, and subsequent forgiveness of the loans, by falsely certifying under penalty of perjury on loan applications that the businesses were not involved in illegal activity. In fact, Holcomb and her companies were engaged in the cultivation, distribution, and retail sale of recreational cannabis and cannabis products, which is illegal under federal law. Congress created the Paycheck Protection Program, or PPP, in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial support to eligible small businesses experiencing economic hardship caused by the COVID-19 pandemic. The Small Business Administration (SBA) administers the PPP. Due to its status as a Schedule I controlled substance under the United States Controlled Substances Act, the manufacture, distribution, dispensation, and possession of cannabis, with the exception of use in federal government-approved research, is illegal under federal law. SBA eligibility rules generally excluded a business from eligibility for PPP loans if the business engaged in activities involving federally illegal cannabis, even if state law permitted cultivation or sale. The government’s complaint alleges that Ms. Holcomb, a resident of Huntington Beach, California, obtained loans for the following businesses she founded and controlled: Gold Flora LLC; GF Distribution LLC; Gold Flora Partners LLC; and Black Lion Farms LLC - collectively known as the “Gold Flora Companies”. The Gold Flora Companies have since filed for receivership in California State Superior Court. As alleged in the United States’ complaint against Ms. Holcomb, the Gold Flora Companies’ petition in support of receivership stated that Gold Flora LLC and Black Lion Farms LLC, along with other affiliate entities, could not file for bankruptcy protection due to the illegality of cannabis under federal law. The United States filed its complaint in a lawsuit originally brought under the qui tam or whistleblower provisions of the False Claims Act. Under the act, a private party can file an action on behalf of the United States and receive a portion of any recovery. The act permits the United States to intervene in such lawsuits, as it has done in this case. The qui tam case is captioned U.S. ex rel. Aidan Forsyth v. Gold Flora LLC , et al., No. 23cv1962-W (MMP) (S.D. Cal.). This matter is being handled by Assistant U.S. Attorney Joseph P. Price Jr. Tips and complaints from all sources about potential fraud affecting COVID-19 government relief programs can be reported by visiting the webpage of the Civil Division’s Fraud Section, which can be found here . The claims asserted in the complaint are allegations only. There has been no determination of liability

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