California Rehab Center to Pay $1.5M for Keeping Two Paycheck Protection Loans

A California rehabilitation center operator knowingly received more than one Paycheck Protection Program loan prior to Dec. 31, 2020, and was ordered pay the $1.5 million in damages and penalties, a court found.

The U.S. District Court for the Central District of California granted summary judgment to the U.S. against JMG Investments Inc., a California corporation that runs a rehabilitation center, and its owner, Jeffrey Schwartz, finding that they violated the False Claims Act.

PPP loans were intended to provide relief to small businesses. The emergency loan program established by Congress in March 2020 under the Coronavirus Aid, Relief and Economic Security Act. It is administered by the U.S. Small Business Administration and was intended to support small businesses struggling to pay employees and other business expenses during the COVID-19 pandemic. PPP loan applicants in 2020 were required to certify that they would not receive more than one PPP loan prior to Dec. 31, 2020.

In August 2024, the government filed a complaint against JMG Investments and Schwartz alleging that they violated the False Claims Act when Schwartz, on behalf of JMG Investments, improperly received two PPP loans in 2020 and knowingly retained the proceeds of the duplicate loan. According to the Department of Justice’s complaint, Schwartz and JMG Investments failed to repay the duplicate loan, which resulted in a loss to the SBA when it purchased the loan guaranty on the duplicate loan.

The court ruled that the government had shown it was entitled to judgment on all claims asserted against the defendants and it awarded the government summary judgment.