Lafontaine Management Settles Alleged Loan Fraud Case for $1.5 Million

A Michigan auto group has agreed to pay $1.5 million to settle allegations of fraud related to a COVID-era Paycheck Protection Program loan, federal authorities announced Monday.

LaFontaine Management Inc., an entity affiliated with the LaFontaine Automotive Group’s network of dealerships across Michigan, allegedly violated the False Claims Act by making false statements to the U.S. Small Business Administration to obtain PPP funding for which it was ineligible.

According to federal officials, LaFontaine Management received a $1 million PPP loan in April 2020 but falsely certified its eligibility for both the loan and subsequent loan forgiveness. The government contends that LaFontaine Management, when combined with its affiliates, exceeded the 500-employee limit for PPP eligibility and was not operating as a franchise with an SBA franchise identifier code—both requirements under the program’s rules.

The Paycheck Protection Program was established by Congress in March 2020 as part of emergency financial assistance measures to help American businesses weather economic hardships caused by the COVID-19 pandemic. The program offered forgivable loans to eligible small businesses, with specific requirements regarding company size and structure.

“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. Gordon, Jr. for the Eastern District of Michigan. “We will continue to vigorously pursue allegations against companies and individuals who obtained COVID-19 relief funds that they didn’t deserve.”

The settlement resolves a previously sealed lawsuit filed under whistleblower provisions of the False Claims Act. These provisions allow private citizens to file lawsuits on behalf of the government for false claims and receive a portion of any recovery. The whistleblowers in this case, identified as Patricia Lesko and Bram Lesko, will receive a combined 15% of the settlement amount.

SBA General Counsel Wendell Davis emphasized the collaborative nature of such investigations, noting they 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 operates numerous dealerships throughout Michigan and has grown to become one of the state’s largest family-owned dealer networks. The group represents multiple automotive brands and has expanded significantly in recent years.

This settlement comes amid ongoing federal efforts to address widespread fraud in pandemic relief programs. The Justice Department has pursued numerous cases involving PPP fraud since the program’s inception, with billions in fraudulent claims identified across the country. Small business loan programs were particularly vulnerable to abuse during the pandemic’s early days, when the government prioritized getting money out quickly to struggling businesses.

The auto industry faced significant challenges during the pandemic, with dealerships experiencing disrupted supply chains, inventory shortages, and changing consumer buying patterns. Many dealerships turned to federal assistance programs to maintain operations during uncertain economic conditions.

Federal authorities noted that the settlement involves allegations only, with no determination of liability made in the case. LaFontaine Management has not publicly commented on the settlement as of press time.

The case was filed in the Eastern District of Michigan under the caption U.S. ex rel. Patricia Lesko and Bram Lesko v. Lafontaine Management, Inc., Case No. 2:23-cv-13130.