Government Programs Fraud

October 13, 2022

Wisconsin-based public relations firm BVK, Inc. has agreed to pay $2.25 million to settle claims that it was ineligible for a second-draw loan that it received under the Paycheck Protection Program.  The second-draw loans had additional eligibility requirements from the first-draw loans, including a requirement that organizations that performed certain work on behalf of foreign governments were not allowed to receive a second-draw loan.  According to a whistleblower, at the time it applied for the second-draw loan, BVK was allegedly performing work on behalf of the government of the Dominican Republic and was thus ineligible for the loan it ultimately received.  USAO EDWI

September 22, 2022

The operations manager for Zieson Construction Company has been sentenced to 8 years in prison, ordered to forfeit over $4.6 million in profits, and ordered to pay restitution of over $600,000 to the IRS and over $82,000 to the Missouri Department of Revenue for his role in a massive fraud scheme.  Using an African American service-disabled veteran as the nominal owner of Zieson, Patrick Michael Dingle obtained approximately $335 million in federal construction contracts that were set aside for small businesses owned and operated by individuals fitting the nominal owner’s profile.  In violation of program rules, however, Zieson was actually controlled by Dingle and his co-conspirators.  Dingle also separately admitted to filing fraudulent business tax returns from 2013 to 2016.  USAO WDMO

August 3, 2022

William Richard “Rick” Carter, Jr. will spend 66 months in prison and pay over $1.3 million in restitution for his scheme to defraud the Alabama State Department of Education, in a conspiracy to commit wire fraud, wire fraud, and aggravated identity theft. Carter and his co-conspirators fraudulently enrolled students in public virtual schools to receive payments from Alabama’s Education Trust Fund, and then took portions of the money for their own use through direct cash payments and payments to third-party contractors owned by the various co-conspirators—William L. (“Trey”) Holladay, III, Gregory (“Greg”) Earl Corkren, David Webb Tutt, and Thomas Michael Sisk.  USAO MDAL

August 2, 2022

Denver Public Schools paid over $2.1 million to resolve a False Claims Act investigation into its misuse of AmeriCorps funds. AmeriCorps funds are used to address critical community needs such as fighting poverty, mentoring youth, and increasing academic achievement. To that end, AmeriCorps provides education awards to their volunteers a/k/a “members” for performing a specified number of service hours in these communities. DPS recruited their existing employees for AmeriCorps programs and double-counted hours spent on their employment duties as being on service, which is disallowed as it deprives the students of the net benefit of the additional support they would have received from non-DPS-employed AmeriCorps members. USAO CO

August 2, 2022

VE Source LLC and its owners, Sherman Barton and Christopher Neary, as well as a related entity, Vertical Source LLC, have together agreed to pay nearly $8 million to resolve claims of violating the False Claims Act.  VE Source had fraudulently obtained more than $16.5 million in contracts with the Department of Agriculture (USDA) and the Defense Logistics Agency (DLA) that were set aside for businesses owned and controlled by service-disabled veterans, which it was not.  USAO NJ

July 21, 2022

Jermaine Rose will spend 2 years in federal prison for abusing his position with the Michigan Unemployment Insurance Agency, using his insider access as a lead claims examiner to approve and release payment on fraudulent UI claims filed by his co-conspirators. In exchange, Rose received kickbacks ranging from $50 to $150 for each fraudulent claim he touched—claims which were submitted using fictitious or stolen identities. Rose, in his plea agreement, acknowledged that he was aware many of the claims he approved were fraudulent. USAO EDMI

July 14, 2022

Bank of America will pay fines totaling $225 million to following federal investigation into its administration of state unemployment insurance and other public benefit programs, which it provided pursuant to contracts with 12 states to deliver benefits through prepaid debit cards. When demand for benefits surged with the COVID-19 pandemic, the Bank adopted automated fraud detection practices which it the government alleged it knew or should have known would lead to its incorrectly freezing or blocking accounts. The CFPB and OCC found that the Bank imposed unreasonable barriers that made it difficult for people to report fraudulent use of their cards or unfreeze their prepaid debit cards, and failed to establish adequate operational processes, risk management, and internal controls. In addition to the penalties – $100 million imposed by the CFPB and $125 million imposed by the OCC – the Bank was ordered to provide redress to consumers and take corrective action with respect to its oversight over the programs.  CFPB; OCC

May 19, 2022

Retailer H&M will pay $36 million to New York State to resolve claims that the company violated a New York law which requires gift card issuers to turn over unused balances on gift cards to the state’s Abandoned Property Fund after five years of inactivity.  The retailer repeatedly lied to the state about its failure to transfer the unused gift card balances as required, and falsely told the state that an out-of-state company was handling its gift cards business. A whistleblower who filed a lawsuit under the New York False Claims Act will receive $7.74 million for bringing H&M’s misconduct to light.  NY