As President of the Tellico Village Board of
Directors, it is my duty to inform the property owners that
an issue has arisen with the Paycheck Protection Program
(PPP) loan that the POA received back in 2020. The history
is as follows.
On March 27, 2020, President Trump signed
the CARES Act into law. Part of this Act included the PPP
program, which was intended to provide emergency assistance
for small businesses affected by the pandemic. The PPP
program was administered through the Small Business
Administration (SBA) and authorized lenders. A primary
purpose of this PPP program was to allow small businesses to
protect and retain employees.
In late March 2020, the POA, through its
then CFO and Controller, began working directly with an
SBA-authorized lending institution (Lender) to evaluate the
POA’s eligibility for a PPP loan. These former POA employees
engaged significantly with Lender to review the applicable
Regulations for PPP loans and interim federal guidance.
Pursuant to the guidance of Lender and Lender’s outside
counsel, the POA submitted an application for a PPP loan on
April 15, 2020, in the amount of $1,184,200.
The POA’s application for the loan was
submitted through Lender’s online portal in good faith based
upon the recommendation from Lender and the limited federal
guidance available at the time. Lender was one of the
particular lenders authorized by the SBA to administer the
PPP program. Ultimately, the POA’s loan was processed and
approved by Lender as the agent for the SBA.
A key provision of the PPP program allowed
participants to have their loans forgiven upon completion of
certain reporting requirements. One of the primary
requirements was that participants retain their existing
employees and use the loan proceeds for payroll and other
authorized expenditures. Through careful management, the POA
was able to retain all 236 of its employees during the
pandemic.
On November 2, 2020, the POA submitted
documentation to request forgiveness of its PPP loan to
Lender. This application was approved by Lender, and the
POA’s PPP loan, plus applicable lender fees and accrued
interest in the amount of $1,225,793, was ultimately
forgiven by the SBA.
Nearly three (3) years later, on November
27, 2023 the POA received a letter from the U.S. Department
of Justice (DOJ) claiming that the POA was not eligible for
this PPP loan as it did not meet the criteria for an
eligible “nonprofit organization” or “other business
concern” under applicable PPP
Regulations. The letter further indicated
that a formal investigation had already been initiated.
Although the investigation was confidential,
it apparently was evaluating whether the POA violated the
Federal False Claims Act (FCA) by applying for a loan it was
not technically eligible for. Because the investigation
remained confidential, the POA was prohibited by the DOJ
from disclosing it to anyone other than the POA’s directors,
executive management, and legal counsel. Pursuant to an FCA
claim, the POA could have potentially been liable for treble
damages of up to $3,677,379.00, plus civil penalties,
attorneys’ fees, and interest.
Upon receipt of this letter, the POA
immediately contacted our attorney, and his law firm
commenced an investigation into this issue. After thorough
investigation and review, the firm determined that the POA
was indeed not eligible for PPP loan funding as it did not
constitute either a “nonprofit organization” or “other
business concern” under applicable PPP
Regulations and SBA guidance.
In January of 2024, the POA authorized our
attorney to enter into negotiations with the DOJ to attempt
to settle this matter. After several meetings with the DOJ,
the DOJ agreed to accept the amount of $1,361,922.22 as full
and final settlement of the matter. This settlement includes
all interest and other expenses arising out of forgiveness
of the POA’s PPP loan.
Our investigation into this matter revealed
that hundreds of POAs and private country clubs around the
country are being investigated for similar applications.
Many of these investigations have already been settled. In
fact, in one settlement in California, a POA repaid its PPP
loan plus a $500,000 penalty.
This settlement, which does not include any
legal penalty or enhanced damages, reflects the POA’s good
faith efforts to evaluate its eligibility for the PPP loan
under rapidly changing guidelines, its reliance upon an
authorized SBA lender, and its timely cooperation in
resolving this matter. After
evaluating, investigating, and discussing
this matter, the POA Board has voted to approve this
settlement. The repayment will be made out of the POA funds
once the settlement is processed by the DOJ, and the POA
Board is now
communicating this information to our
property owners as soon as it was legally permitted to do
so.
Robert Brunetti
President TVPOA Board of Directors