Herb Chambers Agrees to Pay $11.8 Million to Resolve Allegations of PPP Loan Fraud

BOSTON – Herbert G. Chambers, several of his companies and James Duchesneau, one of the companies’ Officers, have agreed to pay approximately $11.8 million to resolve False Claims Act allegations that the companies falsely certified to the United States Small Business Administration (SBA) their eligibility for Paycheck Protection Program (PPP) loans.

Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 29, 2020 to provide emergency financial assistance to the millions of Americans who were suffering the economic effects of the COVID-19 pandemic. The CARES Act authorized forgivable loans to small businesses for job retention and certain approved expenses through the PPP. On April 30, 2020 the SBA published an Interim Final Rule (IFR) to preserve the limited resources available to the PPP program. The IFR established that businesses that were part of a single corporate group could not receive more than $20 million in PPP loans. The IFR applied to any loans that were not fully disbursed as of April 30, 2020.

The United States contends that the SBA’s IFR applied to the companies Mr. Chambers owned. The United States further contends that eight companies owned by Mr. Chambers were not eligible for the PPP loans because the SBA had already funded over $20 million to other Chambers-owned businesses. As detailed in the settlement agreement, Mr. Chambers and his companies admit that the eight companies had applied for, but not yet received, funding for PPP loans as of April 30, 2020 (when SBA published the IFR). A bank canceled the unfunded loans because of the $20 million cap. Several months later, the eight companies reapplied for the PPP loans from a different bank. That second bank funded the loans.

Mr. Chambers and the companies cooperated with the government’s investigation under the Department of Justice’s Guidelines for Taking Voluntary Disclosure, Cooperation and Remediation into Account in False Claims Act Matters

“The Paycheck Protection Program was created to provide a financial lifeline to small businesses struggling to stay afloat during the unprecedented COVID crisis – not to serve as a funding mechanism for companies that sought to evade program limits,” said United States Attorney Leah B. Foley. “Today’s resolution demonstrates our office’s unwavering commitment to protecting taxpayer-funded relief programs and holding accountable those who misuse them.”

“Today’s settlement resolves allegations that Herb Chambers and his companies tried to game the system that was set up to keep struggling businesses afloat,” said Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. “When fraudulent applications wrongly drain a program set up to offset economic upheaval, it’s a blow to the folks who truly need help. The FBI will continue to work with our partners to identify and investigate anyone who tries to defraud federal government programs in this way.”

U.S. Attorney Foley, FBI SAC Cohen and the U.S. Small Business Administration made the announcement today. Assistant U.S. Attorneys Charles B. Weinograd and Alexandra Brazier of the Affirmative Civil Enforcement Unit handled the matter.