LaFontaine Management Agrees to Pay $1.5 Million in PPP Loan Fraud Settlement

In a significant development for pandemic-era loan enforcement, LaFontaine Management Inc., which oversees the prominent LaFontaine Automotive Group in Metro Detroit, has agreed to pay $1.5 million to resolve allegations of Paycheck Protection Program (PPP) loan fraud.

Federal authorities claim the company violated the False Claims Act by submitting false statements to the Small Business Administration (SBA) to secure a $1 million PPP loan in April 2020, at the height of the COVID-19 pandemic’s initial economic disruption.

According to the U.S. Attorney’s Office, LaFontaine Management falsely certified its eligibility for both the loan and subsequent loan forgiveness. Prosecutors allege the company failed to disclose that, together with its affiliates, it employed more than 500 workers – exceeding the size threshold for PPP eligibility. Additionally, the company was not operating as a franchise with an SBA-assigned franchise identifier code, another requirement under the program’s guidelines.

“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. in a statement. “We will continue to vigorously pursue allegations against companies and individuals who obtained COVID-19 relief funds that they didn’t deserve.”

The Paycheck Protection Program was created in March 2020 as part of the CARES Act, offering forgivable loans to help small businesses maintain their workforce during the unprecedented economic challenges brought on by the pandemic. The program distributed nearly $800 billion to businesses nationwide before ending in May 2021.

This case adds to the growing list of PPP fraud investigations that have intensified as government agencies work to recover improperly obtained funds. The Department of Justice has made pandemic fraud a priority, with hundreds of cases being pursued across the country involving billions in potentially fraudulent loans.

The LaFontaine settlement resolves a lawsuit initially filed by two whistleblowers under the “qui tam” provisions of the False Claims Act. These provisions allow private citizens to file lawsuits on behalf of the government against those who have defrauded federal programs and to receive a portion of any recovered funds. In this case, the whistleblowers will share 15% of the $1.5 million settlement.

SBA General Counsel Wendell Davis highlighted the collaborative nature of such investigations: “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.”

The LaFontaine Automotive Group is one of Michigan’s largest family-owned dealership groups, operating numerous locations throughout Metro Detroit and representing multiple automotive brands. This settlement comes as the automotive retail sector continues to navigate significant changes, including inventory challenges and shifting consumer buying patterns following the pandemic.

The case underscores the ongoing scrutiny of pandemic relief programs and serves as a reminder that federal authorities remain committed to investigating potential fraud even as the programs themselves have concluded. Experts anticipate continued enforcement actions as government agencies work through thousands of flagged applications and whistleblower claims related to pandemic relief funds.

For businesses that received PPP loans, this case highlights the importance of accurate certification and compliance with all program requirements, as authorities continue to review how these emergency funds were distributed and used during the crisis.