Pennsylvania Dealer Group Accused of PPP Fraud, Extorting Cash From Staff

When the United States announced it would be offering payroll relief to the countless small businesses it impacted with government shutdowns intended to combat COVID-19 earlier this year, everyone breathed a sigh of relief into their mask. Unfortunately, the Paycheck Protection Program (PPP) became a confusing bureaucratic mess almost instantly. It wasn’t clear how companies would account for part-time or contracted employees, numerous banks denied help to those with less than stellar financial histories, and the application website repeatedly crashed — which was awful for a service that was designed to accommodate candidates on a first-come-first-serve basis.

There were also numerous provisions that allowed big business to take advantage if their individual locations were small enough and loopholes for companies that weren’t even required to shut down operations. Criticisms understandably began to surface, followed by months of commercials asking concerned citizens to report instances of fraud. One such example came into focus this week after a former sales representative for a Pennsylvania-based dealership group launched a federal lawsuit against their ex-employer alleging that it had violated the False Claims Act in relation to PPP.

While Automotive News estimated U.S. car dealerships received between $7.6 billion and $11.89 billion in PPP in the second quarter of 2020, likely saving at least 740,000 jobs, it also used data compiled data from the Small Business Association (SBA) to explain some of the inconsistencies it had seen between applicants. This week, it also highlighted the case in Pennsylvania.

The lawsuit, filed in July by Branden Bucher and unsealed in U.S. Middle District Court in Pennsylvania late in November, said Blaise Alexander Inc. and the group’s 20 stores applied for a minimum of 13 PPP loans and received between $4.65 million and $11.1 million from the SBA. Data released by the Small Business Administration last week confirmed that the matter, showing 13 Blaise Alexander entities with Pennsylvania addresses accepting $6,945,700 in government loans.

While that doesn’t necessarily mean it has acted illegally, the suit claims the dealer group should never have been eligible due to its size. The Blaise Alexander group is reported to have more than 1,200 employees (SBA reports closer to 750) but PPP restricts access to forgivable loans to firms with fewer than 500. And here’s where things start getting weird. Initially, the language in the relief bill made it seem as though franchise owners with fewer than 500 employees per location were eligible. But the lawsuit takes a major detour when it accuses the dealer group of actively forcing the sales team to reimburse it for the PPP funds by withholding sales commissions.

From Automotive News:

“[Blaise Alexander’s] conduct undermines a core purpose of the CARES Act — to put money in the pockets of employees,” the lawsuit said.

Joel Breneman, director of operations for the dealership group, told the newspaper that employees were not asked to return any wages that they received.

“I can confidently say that these allegations are false and this is an attempt by an individual to benefit from a frivolous suit,” Breneman said.

A dealership spokeswoman contacted by Automotive News declined to comment. Bucher’s lawyers did not respond to requests for comment.

While the alleged employee reimbursement plan is a new trick, Blaise Alexander is hardly the first company to be accused of PPP fraud. Neyra Motor Cars of Cincinnati was also accused of PPP loan fraud by a former sales representative in October. But automotive dealerships were among the largest recipients of COVID-related funding in 2020, making them prime targets for anybody hunting for financial misdoings. Meanwhile, the whole of the automotive industry had taken in an estimated $132 billion in government loans by July, with numerous entities being forced to give some of that back after people became outraged. For example, both AutoNation and Penske Automotive applied for PPP and took heat for it for being so large. Though it could be argued that they did indeed need the money, especially after the layoffs commenced.

[Image: LM Photos/Shutterstock]