Settlement Agreement — United States and William Philip Werschler et al. (U.S. Attorney's Office, E.D. Wash.)

Summary

Settlement agreement among the United States, acting through the Department of Justice on behalf of the Small Business Administration, and defendants William Philip Werschler, Spokane Dermatology Clinic P.S., Premier Clinical Research L.L.C. and 3rd & Sherman Plaza L.L.C. The United States contends that it has civil claims under the False Claims Act for knowingly submitting false and fraudulent EIDL applications and modification requests between June 2020 and August 2022. The defendants shall pay $1,400,000, of which $700,000 is restitution, and are jointly and severally liable for the entire amount. The defendants admit the facts set forth in Recitals A through J, and the agreement states that it is not an admission of liability by the defendants.

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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
United States Small Business Administration (herein “the United States”), and William
Philip Werschler (herein “Defendant Werschler”), Spokane Dermatology Clinic P.S.,
(herein “Defendant Spokane Dermatology”), Premier Clinical Research L.L.C., (herein
“Defendant PCR”), and 3rd & Sherman Plaza L.L.C. (herein “Defendant 3rd & Sherman”),
(collectively referred to herein, where appropriate, as “Defendants”) through their
authorized representatives. The United States and the Defendants are collectively referred
to herein, where appropriate, as “the Parties.”

RECITALS

A. During the relevant time period, Defendant Werschler was an owner of
Defendants Spokane Dermatology, PCR, and 3rd & Sherman. Defendant Spokane
Dermatology was incorporated in the State a Washington, listing Defendant Werschler as
the only member of the board of directors, and has its principal place of business in the
Eastern District of Washington. Defendant PCR is a limited liability company organized
in the State of Nevada, registered with the Washington Secretary of State as a foreign
company, and has its principal office in the Eastern District of Washington. During the
relevant time period, Defendant PCR had only two governors, Defendant Werschler and
his wife. Defendant 3rd and Sherman is a limited liability company formed in the State of
Washington with its principal place of business in the Eastern District of Washington.
Defendant Werschler and his wife are the sole governors of Defendant 3rd & Sherman, and

its principal place of business is in the Eastern District of Washington. Between March
2020 and March 2023, Carol Casilla was an accountant employed by Defendants and
responsible for accounting and bookkeeping services for the Defendant companies.

B. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was
a federal law enacted on March 27, 2020, designed to provide emergency financial
assistance to the millions of Americans who were suffering the economic effects caused
by the COVID-19 pandemic. One source of relief provided by the CARES Act was the
authorization of COVID-19 related funding for the Economic Injury Disaster Loan (EIDL)
program. EIDL is a Small Business Administration (SBA) program that provides low-
interest funding to small businesses, renters, and homeowners affected by declared
disasters.

te Any funds issued under an EIDL were issued directly by the SBA. EIDL
funds were to be used solely by the company that borrowed the funds as working capital
necessary to carry on that business until resumption of normal operations and for
expenditures necessary to alleviate economic injury caused to that company by the
COVID-19 pandemic. COVID EIDL loan proceeds could also be used to make debt
payments including monthly payments, payment of deferred interest, and pre-payments on
any business debts. EIDL funds were not to be used to pay dividends or other
disbursements to owners, partners, officers or stockholders, except for reasonable -
remuneration directly related to their performance of services for the business. EIDL funds
were further not to be used to refinance long-term debt, expand facilities or acquire fixed

assets. In applying for EIDL funds, borrowers agreed to be bound by the terms of the EIDL

program.
Dz As initially funded, the SBA’s COVID-19 EIDL program had a maximum
loan cap of $150,000. On or about April 6, 2021, the maximum loan cap was raised to
$500,000. Borrowers were allowed to request additional funds at this point in what was
called a “modification” of the original EIDL application up to a total loan amount ‘of the
$500,000 maximum. On or about September 8, 2021, the maximum loan cap was raised
to $2,000,000. Again, borrowers could request additional funds as part of another
modification of the original loan amount, up to the $2,000,000 maximum. In applying for
an EIDL modification, borrowers again agreed to be bound by the terms of the EIDL
program.

E. On or about June 11, 2020, the SBA approved an EIDL request submitted
on behalf of Defendant 3rd & Sherman in the amount of $150,000. On or about, April 26,
2021, a modification request was submitted by Ms. Casilla on behalf of Defendant 3rd &
Sherman seeking additional EIDL funds up to a total of $500,000. On or about November
22, 2021, the SBA partially approved the modification request, and $260,200 was
disbursed by the SBA to Defendant 3rd & Sherman’s Mountain West Bank account on or
about November 24, 2021.

F. On or about August 4, 2020, the SBA approved an EIDL request submitted
on behalf of Defendant Spokane Dermatology in the amount of $150,000. On or about
June 15, 2021, a modification request was submitted by Ms. Casilla on behalf of Defendant
Spokane Dermatology seeking additional EIDL funds up to a total of $500,000. On or
about October 1, 2021, the SBA approved the modification request and $350,000 was
disbursed by the SBA to Defendant Spokane Dermatology’s Riverbank account on or about

October 5, 2021.
G, On or about November 27, 2020, the SBA approved an EIDL request
submitted on behalf of Defendant PCR in the amount of $150,000. On or about April 26,
2021, a modification request was submitted by Ms. Casilla on behalf of Defendant PCR
seeking additional EIDL funds up to a total of $500,000. On or about July 24, 2021, the
SBA approved the modification request and $350,000 was disbursed by the SBA to
Defendant PCR’s Mountain West Bank account on or about July 27, 2021.

H. On or about September 12, 2021, a second EIDL modification request was
submitted by Ms. Casilla on behalf of Defendant PCR seeking additional EIDL funds up
to a total of $2,000,000. On or about January 9, 2022, the SBA approved the second
modification request and $1,500,000 was disbursed by the SBA to Defendant PCR’s
Mountain West Bank account on or about January 11, 2022.

I. On or about January 27, 2022, Defendant Werschler, under the name of
Pure Performance Motorsports L.L.C., signed a buyet’s order to purchase a 2011 Porsche
911 GT3 in the total amount of $163,687.50 and a buyer’s order to purchase a 1997 Porsche
Carrera in the total amount of $88,687.50. The total purchase price for both vehicles was
$252,375.00. Defendant Werschler used Riverbank Loan No. 729, a line of credit in his
own name, to fund the purchase. On or about January 31, 2022, Defendant Werschler
caused a wire transfer of $252,375.00 to complete the purchase of the two vehicles. On or
about January 31, 2022, check number 5402 was drawn from Defendant PCR’s Mountain
West Bank account in the amount of $252,375.00 and used to repay Riverbank Loan No.
729 on or about February 2, 2022.

J. On or about July 11, 2022, Defendant Werschler signed a real estate

purchase and sale agreement for 324 and 328 S. Grant Street, Spokane, Washington, listing
the buyer as Defendant 3rd & Sherman. On or about July 29, 2022, a wire transfer was
completed from Defendant PCR’s Mountain West Bank account in the amount of
$533,143.13 to fund the purchase. On August 2, 2022, a second wire transfer was
completed from Defendant PCR’s Mountain West Bank account in the amount of $20,000
for additional costs associated with the purchase. On July 29, 2022, a statutory warranty
deed was executed granting 324 and 328 S. Grant Street, Spokane, to Defendant 3rd &
Sherman.

K. The United States contends that it has certain civil claims against the
Defendants under the False Claims Act, codified at 31 U.S.C. § 3729-3733, and the
common law, as specified below, for knowingly submitting and causing to be submitted
false and fraudulent EIDL applications and modification requests and subsequent use of
the funds between June 2020 and August 2022, including through conduct attributable to
Carol Casilla based upon imputed liability. This conduct, together with the conduct set
forth in Recitals A through J above, is referred to herein as the Covered Conduct.

Lis The Defendants admit, acknowledge, and accept responsibility for the facts
set forth in Recitals A through J above, and agree that those facts are true and accurate.
The Parties agree that this Agreement is not an admission of liability by the Defendants,
nor is it an admission by the United States that its claims are not well-founded. The United
States Attorney’s Office for the Eastern District of Washington agrees that it will not use
or seek to admit this Agreement or any negotiations leading to its execution in United States
y. William Philip Werschler, at al., Eastern District of Washington Case No. 2:24-cr-
00141-RLP. Defendants expressly reserve the right to contest the admissibility of this

Agreement and negotiations in any proceeding.
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. The Defendants shall pay $1,400,000 (the Settlement Amount) to the United
States, of which $700,000 is restitution. The Defendants are jointly and severally liable
for the entire Settlement Amount. The Settlement Amount shall be paid by the Defendants,
or any one of them or any combination of them, by electronic funds transfer pursuant to
written instructions to be provided by the United States no later than 60 days after the
Effective Date of this Agreement. This period can be extended to 90 days by written
agreement of the Parties.

pa Subject to the exceptions in Paragraph 3 (concerning reserved claims)
below, and upon the United States’ receipt of the Settlement Amount, the United States
releases the Defendants, and any applicable authorized representatives, employees,
owners, shareholders, and agents, 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; or the common
law theories, including but not limited to, fraud, breach of contract, payment by mistake,
or unjust enrichment.

3. Notwithstanding the releases given in Paragraph 2 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;

e 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;

é, Any liability based upon obligations created by this Agreement;

f. Any liability of individuals or entities other than the Defendants.

4, The Defendants waive and shall not assert any defenses they 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 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. This waiver is limited solely to the defenses expressly

referenced above; Defendants do not waive any other defenses to any criminal prosecution

or administrative action.

3: The Defendants fully and finally release 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 Defendants 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’ civil investigations or prosecution thereof.

6. a. Unallowable Costs Defined: All costs (as defined in the Federal
Acquisition Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of the Defendants,
and its present or former officers, directors, employees, shareholders, and agents in
connection with:

(1) the matters covered by this Agreement,

(2) the United States’ audit and civil and criminal investigations
of the matters covered by this Agreement;

(3) the Defendants’ investigation, defense, and corrective
actions undertaken in response to the United States’ audit
and civil or criminal investigations in connection with the
matters covered by this Agreement (including attorneys’
fees);

(4) __ the negotiation and performance of this Agreement;

(5) the payments the Defendants make to the United States
pursuant to this Agreement

are unallowable costs for government contracting purposes (hereinafter referred to as
Unallowable Costs).

b. Future Treatment of Unallowable Costs: Unallowable Costs will be
separately determined and accounted for by the Defendants, and the Defendants shall not

charge such Unallowable Costs directly or indirectly to any contract with the United States.
c. Treatment of Unallowable Costs Previously Submitted for Payment:

Within 90 days of the Effective Date of this Agreement, the Defendants shall identify and
repay by adjustment to future claims for payment or otherwise any Unallowable Costs
included in payments previously sought by the Defendants or any of their subsidiaries or
affiliates from the United States. The Defendants agree that the United States, at a
minimum, shall be entitled to recoup from the Defendants any overpayment plus applicable
interest and penalties as a result of the inclusion of such Unallowable Costs on previously-
submitted requests for payment. The United States, including the Department of Justice
and/or the affected agencies, reserves its rights to audit, examine, or re-examine the
Defendants’ books and records and to disagree with any calculations submitted by the
Defendants or any of their subsidiaries or affiliates regarding any Unallowable Costs
included in payments previously sought by the Defendants, or the effect of any such
Unallowable Costs on the amount of such payments.

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

8. Each Party shall bear its own legal and other costs incurred in connection
with this matter, including the preparation and performance of this Agreement.

9, Each Party and signatory to this Agreement represents that it freely and
voluntarily enters in to this Agreement without any degree of duress or compulsion.

10. 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 Eastern District of Washington. 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.

11. This Agreement constitutes the complete agreement between the Parties.
This Agreement may not be amended except by written consent of the Parties.

12. The undersigned counsel represent and warrant that they are fully
authorized to execute this Agreement on behalf of the persons and entities indicated below.

13. This Agreement may be executed in counterparts, each of which constitutes
an original and all of which constitute one and the same Agreement.

14. This Agreement is binding on the Defendants’ successors, transferees, heirs,
and assigns.

15. All parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.

16. 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.

THE UNITED STATES OF AMERICA

Richard R. Barker
Acting United States Atto:
Eastern Distei

Assistant United States Attorney

10
DEFENDANT PCR

Y : William Phillip Werschler
Governor of Premier Clinical
Research LLC

Approved as to form only, not as a
Paty to the Agreement:—~_

Gawx Van Wert
Counsel for Defendant Premier

Clinical Research LLC
DEFENDANT 38” & SHERMAN
+ William Phillip Werschler
Governor of 3rd & Sherman Plaza
LLC

Approved as.to form only, n not as a

Ronald A. Van Wert
Counsel for Defendant 3rd &
Sherman Plaza LLC


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