ALEXANDRIA, Va. – Three homeowners’ associations and a private club have paid a combined $2,691,673 to settle allegations that they violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 by knowingly making false statements and certifications in their applications for Paycheck Protection Program loans.

Congress created the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide forgivable loans to qualified businesses to maintain payroll and operations during the COVID-19 pandemic. Each PPP loan was calculated based on the applicant’s average monthly payroll and number of employees. Under the CARES Act, certain entities organized under Section 501(c) of the Internal Revenue Code were not eligible for PPP loans. Moreover, under the Small Business Administration’s regulations, private clubs that limit the number of memberships for reasons other than capacity were ineligible for PPP loans.

Heritage Hunt Homeowners Association, Inc. is an age-restricted community located in Gainesville that obtained a PPP loan of $397,600 in April 2020. Heritage Hunt paid $425,000, of which $255,000 was restitution, to settle allegations that it knowingly made, or knowingly caused to be made, false statements and certifications about its employee count, average monthly payroll, use of its PPP loan proceeds, and eligibility for its PPP loan.

Lake Caroline Property Owners Association is a homeowners’ association in Ruther Glen that was organized as a 501(c)(7) tax-exempt organization when it applied for a PPP loan of $169,400 in May 2020. Lake Caroline paid $225,000, of which $178,932.81 was restitution, to settle allegations that it knowingly made, or knowingly caused to be made, false certifications about its eligibility to receive a PPP loan and economic necessity for a PPP loan.

The Commonwealth Club, Inc. is a private club located in Richmond that restricted its membership. The Commonwealth Club obtained first and second-draw PPP loans totaling $1,615,050 in April 2020 and March 2021, respectively. The Commonwealth Club paid $1,676,117, of which $1,257,221.28 was restitution, to settle allegations that it knowingly made, or knowingly caused to be made, false certifications about its eligibility to receive a PPP loan.

Villages of Kiln Creek Owners’ Association is a community in Newport News that obtained a second-draw PPP loan of $772,156 in March 2021. The Villages of Kiln Creek paid $365,556, of which $228,472.38 was restitution, to settle allegations that it knowingly made, or knowingly caused to be made, false statements about its industry code under the North American Industry Classification System (NAICS code). The United States alleged Villages of Kiln Creek falsely stated in its PPP application that its applicable NAICS code was 722511, which was the industry code for full-service restaurants. The United States further alleged that Villages of Kiln Creek’s false statement about its NAICS code caused its PPP loan to be overstated by $228,472.38.

This settlement arises in connection with a lawsuit filed under the whistleblower provision of the False Claims Act, United States ex rel. Riner v. Lake of the Woods Ass’n et al. A whistleblower suit, or qui tam action under the False Claims Act, is commenced by an individual filing a complaint under seal in the U.S. District Court and providing a copy of the complaint and evidence to the U.S. Attorney’s Office. The whistleblower received 10% of the government’s recovery.

The resolution obtained in this matter was the result of a coordinated effort between the U.S. Attorney’s Office for the Eastern District of Virginia and the Small Business Administration.

This matter was investigated by Assistant U.S. Attorney Tanya Kapoor and Forensic Auditor Peter Melaragni.

Related court documents and information from the civil lawsuit can be accessed on PACER by searching for Case No. 1:23-cv-1558.

A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia.

The civil claims settled are allegations only; there has been no determination of civil liability.