Labor Union Agrees to Pay $2 Million to Resolve Allegations of PPP Loan Fraud

BOSTON - The International Brotherhood of Electrical Workers Local 103 (IBEW Local 103), a Dorchester-based union and 501(c)(5) nonprofit organization, has agreed to pay $2,033,205 to resolve allegations that it violated the False Claims Act by obtaining a Paycheck Protection Program (PPP) loan for which it was not eligible.

As part of the settlement, IBEW Local 103 admitted that, in April 2020, it applied for and received a first-round loan before it became eligible. In March 2021, when Congress amended the PPP to allow unions to obtain PPP loans, the union applied for and received a second loan. On its application for the second loan, the union certified that it was eligible for the second loan under the PPP regulations in effect at the time of the application, and that it previously received a loan and used all the loan proceeds before applying for the second loan. Had IBEW Local 103 applied for the first-round loan when it became eligible in March 2021, it would not have spent the proceeds from that first loan before it applied for the second loan.

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. Under the program, if borrowers complied with the program's rules, the SBA forgave their loans. The SBA administered the PPP in two rounds - the first began in April 2020 and the second began in February 2021. Certain nonprofit organizations, including 501(c)(5) organizations like IBEW Local 103, were not eligible to receive loans from either round until March 2021, when Congress amended the PPP. To be eligible for a second loan, an entity, among other things, had to receive a first-round loan and exhaust the funds from that loan prior to applying for a second loan.

The settlement credits IBEW Local 103 for cooperation under the Department of Justice's Guidelines for Taking Voluntary Disclosure, Cooperation and Remediation into Account in False Claims Act Matters.

United States Attorney Leah B. Foley and the U.S. Small Business Administration made the announcement today. Assistant U.S. Attorney Brian M. LaMacchia, Chief of the Affirmative Civil Enforcement Unit handled the matter.