THE DETROIT CLUB OWNERS AND OPERATORS SETTLE FALSE CLAIMS ACT ALLEGATIONS FOR $357,669

DETROIT – Acting United States Attorney Julie A. Beck announced today that the owners and operators of The Detroit Club agreed to pay $357,669 to the United States to resolve allegations that they violated the False Claims Act.  The settling parties are Detroit Management Corporation, Lynn Kassotis, Citi Investment Group Corporation, and Emre Uralli (collectively, Defendants).

Congress created the Paycheck Protection Program (PPP) in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act, to provide emergency financial assistance to American businesses suffering from the economic effects of the COVID-19 pandemic.  The PPP was administered by the United States Small Business Administration (SBA), but the loans were issued by private lenders, with the SBA guaranteeing the loans. Under the PPP, eligible small businesses could receive forgivable loans to cover expenses like payroll and lease payments.  To obtain a PPP loan, an organization submitted an application, which required the applicant to certify, among other things, that it was eligible for the loan and that it would use the proceeds for eligible purposes.

During the COVID-19 pandemic, Defendants applied for two PPP loans related to the operation of The Detroit Club – a hotel, social club, and restaurant in Downtown Detroit. Under the program rules, PPP loans were forgivable if the proceeds were spent on eligible expenses during a period of up to 24 weeks after the loan was issued.  Here, the first draw loan, which was applied for on April 4, 2020, was for $348,400.  The second draw loan, which was applied for on February 16, 2021, was for $410,546. Defendants certified that all their PPP loan proceeds were spent on eligible expenses and, as a result, both loans were fully forgiven.  The United States contends that Defendants did not spend all their PPP funds on expenses that were eligible for forgiveness.  Specifically, the United States contends that Defendants obtained forgiveness of $167,040 for building lease expenses that were not eligible for forgiveness under the applicable rules.

“The False Claims Act is an important tool to deter and hold accountable those who defraud the government,” said Acting U.S. Attorney Julie A. Beck for the Eastern District of Michigan.  “Entities who took advantage of the COVID-19 pandemic to commit fraud against the government will be vigorously investigated by our office.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act.  Under these provisions, a private party may file an action on behalf of the United States and receive a portion of any recovery.  The whistleblower will receive $71,533.96 from the settlement.  The qui tam case is captioned United States ex rel. Decker v. Detroit Club Management Corporation, et al., case no. 23-cv-10209 (E.D. Mich.).   

The matter was handled by Assistant United States Attorney John Postulka from the U.S. Attorney’s Office for the Eastern District of Michigan.   

The claims resolved by the settlement are allegations only; there has been no determination of liability.