Auto Dealer in Metro Detroit Pays $1.5 Million to Settle Federal PPP Fraud Allegations

Michigan auto dealer LaFontaine Management has agreed to pay $1.5 million to settle allegations that it violated the False Claims Act by submitting false statements to secure a Paycheck Protection Program (PPP) loan, federal authorities announced Monday.

The company, affiliated with the prominent LaFontaine Automotive Group network of dealerships across metro Detroit, obtained a $1 million PPP loan in April 2020 during the early stages of the COVID-19 pandemic. Prosecutors allege the company falsely certified its eligibility for both the initial loan and subsequent loan forgiveness.

According to the U.S. Attorney’s Office for the Eastern District of Michigan, LaFontaine Management failed to disclose that it had more than 500 employees when counting affiliated businesses—a threshold that would have disqualified the company from receiving the funds. Federal regulations specifically stated that businesses operating as franchises with employee counts exceeding this limit were ineligible for first-draw PPP loans.

“Even though the PPP Program has ended, our mandate to investigate and redress the harm from fraudulent and improper PPP loans continues,” said U.S. Attorney Jerome F. Gorgon, Jr. “We will continue to vigorously pursue allegations against companies and individuals who obtained COVID-19 relief funds that they didn’t deserve.”

The settlement comes amid ongoing federal efforts to recoup billions in pandemic relief funds obtained through fraudulent means. The Paycheck Protection Program, launched in 2020 as part of the CARES Act, provided nearly $800 billion in potentially forgivable loans to small businesses to help maintain payrolls during pandemic-related shutdowns.

The investigation resulted from collaboration between the Small Business Administration’s Office of General Counsel and the U.S. Attorney’s Office, with additional information provided by private individuals who uncovered potentially fraudulent conduct.

“Investigations like this one reflect collaboration of the Small Business Administration, including SBA’s Office of General Counsel, and the U.S. Attorney’s Office, as well as the work of private individuals who uncover fraudulent conduct to recover funds obtained through fraud,” said SBA General Counsel Wendell Davis.

In response to the settlement, LaFontaine Automotive Group issued a statement acknowledging the repayment while denying any wrongdoing. The company emphasized that all PPP loan proceeds were used for proper purposes and that it had cooperated with authorities from the beginning of the investigation.

“LaFontaine Automotive Group has promptly and swiftly agreed to pay back the money requested by the government related to the Paycheck Protection Program,” the statement read. “All PPP loan proceeds were used for proper purposes, and there has never been any allegation to the contrary.”

The automotive group pointed to rapidly evolving federal guidance during the early stages of the PPP program as a contributing factor, particularly regarding the definition of affiliated entities. LaFontaine claims it relied on professional accountants to interpret regulations throughout the application process.

“LaFontaine retained professional accountants to interpret the regulations and advise it through the application process. Based on that guidance, LaFontaine submitted what it believed to be a fully compliant application, which was then approved,” the company stated.

The settlement agreement includes no determination of liability, and LaFontaine continues to deny liability, wrongdoing, fraud, or misrepresentation in the matter.

The case highlights the ongoing scrutiny of PPP loans, particularly those received by larger businesses with multiple affiliations or access to other capital sources. Federal prosecutors have made pandemic fraud enforcement a priority, with the Justice Department pursuing hundreds of cases nationwide involving potentially fraudulent PPP applications.

LaFontaine Automotive Group remains one of Michigan’s largest family-owned dealership networks, with locations throughout the southeastern and central regions of the state representing multiple automotive brands.