Georgia companies accused of federal violations got COVID relief loans

The U.S. Justice Department wants to shut down Atlanta-based EcoVest Capital over allegedly abusive conservation easement transactions “resulting in hundreds of millions of dollars of tax harm,” according to a federal complaint. SPECIAL
The U.S. Justice Department wants to shut down Atlanta-based EcoVest Capital over allegedly abusive conservation easement transactions “resulting in hundreds of millions of dollars of tax harm,” according to a federal complaint. SPECIAL

The U.S. Justice Department wants to shut down Atlanta-based EcoVest Capital for an alleged “abusive tax scheme” involving land preservation deals and overvalued appraisals. At the same time it is suing the company, the federal government just handed it hundreds of thousands of dollars in coronavirus relief funds to help it stay in business through the pandemic.

The loan to EcoVest, funded by the CARES Act's Paycheck Protection Program, is one of several cases where Georgia business received bailouts despite being accused of schemes to cheat consumers, other businesses or even the government itself, a review of federal data by The Atlanta Journal-Constitution found.

Such uses of taxpayer money add to the questions being raised nationwide about the program, which was designed to save jobs after the pandemic pushed the U.S. into recession but which appears to have benefited a number of questionable players. But there may be nothing preventing such loan awards under the hastily-assembled parameters of PPP.

The U.S. Government Accountability Office for weeks has been raising alarms about weaknesses in the program, criticizing the rapid pace of high-dollar sums being handed to millions of companies and nonprofit organizations, with limited safeguards. Nearly 5 million loans have been approved so far, totaling $521 billion. Many of them will not have to be repaid, if the businesses meet government criteria. GAO said that fraud was a significant risk with the program, and already the owner of a Georgia transportation business has been indicted on charges he used funds from a $2 million PPP loan to buy jewelry, lease a Rolls Royce and make child support payments.

» RELATED: Georgia businesses from every corner of economy get relief loans 

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To receive money, loan applicants had to attest that they weren't engaged in any illegal activity under federal, state or local law, but under the eligibility requirements "there's a difference between accusations and convictions," said Stephanie O'Rourk, a partner at CohnReznick public accounting firm.

“There were regulations on eligibility requirements if ownership was convicted of a crime,” O’Rourk said. “But there was nothing about being investigated or having an ongoing investigation.”

Until this week, the public was mostly in the dark about which companies got loans. President Trump's Treasury secretary, Steven Mnuchin, indicated the administration would not identify companies receiving PPP money or how much they requested, calling that "proprietary information" when he testified before the Senate Small Business Committee. But following an outcry from Democrats and Republicans about a lack of transparency on the taxpayer bailout, on Monday the federal Small Business Association released a partial list, which doesn't identify companies taking less than $150,000. It also excluded more than $30 billion in loans that companies returned over eligibility concerns because they could obtain money elsewhere, or because they wanted to avoid public scrutiny, among other reasons.

For those companies listed in the data, SBA only provided the loan amount in ranges, such as “$150,000 to 350,000” or “$5-10 million.” More than 18,000 Georgia companies are identified. Spot checks by the AJC identified several with well-documented histories of legal entanglements with the government.

Ten people have been charged with bilking insurance companies through a scheme using struggling rural hospitals to submit fraudulent claims for urine and blood tests. THE DALLAS MORNING NEWS VIA ASSOCIATED PRESS / NATALIE CAUDILL
Ten people have been charged with bilking insurance companies through a scheme using struggling rural hospitals to submit fraudulent claims for urine and blood tests. THE DALLAS MORNING NEWS VIA ASSOCIATED PRESS / NATALIE CAUDILL

Credit: NATALIE CAUDILL

Credit: NATALIE CAUDILL

The list shows Brookhaven-based LifeBrite Laboratories Inc. received between $1 million and $2 million in April, even though at the time the U.S. Justice Department was pursuing an indictment against the company's owner over an alleged scheme to bilk insurance companies using struggling rural hospitals.

Two LifeBrite hospitals received millions of dollars more in PPP loans. The data shows LifeBrite Hospital Group of Early receiving $2 million to $5 million and LifeBrite Hospital Group of Stokes receiving $1 million to $2 million. The three loans combined will preserve 370 jobs, the data shows.

» COMPLETE COVERAGE: Coronavirus in Georgia

In June, the government charged LifeBrite CEO Christian Fletcher with one count of conspiracy to commit health care fraud and wire fraud; one count of conspiracy to commit money laundering; and two counts of substantive money laundering. Nine other people have also been charged in the case.

The government alleged the conspirators obtained urine specimens and other samples for testing through kickbacks paid to recruiters and health care providers, with some of the test not even medically necessary. They then billed insurers through the hospitals for about $1.4 billion for lab tests and were paid about $400 million, the government alleges

Fletcher did not return a call seeking input on this story, but through his attorney he has previously denied the federal charges.

CAN Capital, a Kennesaw-based small business lender, received $2 million to $5 million in May. The federal data show the money will save zero jobs, but a spokesman said in an email that the company has 74 employees and was “able to greatly assist our customer base in accessing the PPP program through approved lenders.”

The loan money went out 11 days after the U.S. Securities and Exchange Commission filed charges accusing the company of misleading investors about an offering that raised $191 million. The SEC complaint says the company failed to disclose its practices of granting forbearances, which resulted in unpaid loan payments and losses to investors.

Without admitting or denying the charges, CAN Capital agreed to a permanent injunction against further fraud or deceit, court records show.

Also receiving millions of dollars, Mar-Jac Poultry, a Gainesville chicken plant, once tried to make a federal Occupational Health and Safety Administration inspector investigating a worker injury put a box over her head to avoid seeing other hazards. The plant also has a history with the U.S. Environmental Protection Agency, accused of multiple Clean Water Act violations in the mid-2010s for allowing waste and manure to wash into a creek that feeds into Lake Lanier.

Mar-Jac Poultry, a Gainesville chicken plant, has tangled in recent years with the U.S. Occupational Health and Safety Administration, the U.S. Environmental Protection Agency and the U.S. Justice Department. It nevertheless received a federal loan to help it through the coronavirus pandemic. This 2003 file photos shows chickens traveling down a conveyor belt at the processing plant. AJC PHOTO / KIMBERLY SMITH
Mar-Jac Poultry, a Gainesville chicken plant, has tangled in recent years with the U.S. Occupational Health and Safety Administration, the U.S. Environmental Protection Agency and the U.S. Justice Department. It nevertheless received a federal loan to help it through the coronavirus pandemic. This 2003 file photos shows chickens traveling down a conveyor belt at the processing plant. AJC PHOTO / KIMBERLY SMITH

Credit: KIMBERLY SMITH

Credit: KIMBERLY SMITH

Less than two years ago, the Justice Department settled a long-standing lawsuit alleging Mar-Jac discriminated against non-U.S. citizens when asking them to prove their work authorization. The company agreed to pay a $190,000 civil penalty in that case, along with nearly $24,000 in back pay to affected employees and applicants.

Under PPP, Mar-Jac received $5 million to $10 million in May, preserving 500 jobs, the SBA data show.

The federal civil case against Atlanta real estate development company EcoVest Capital has been pending for a year and a half. The feds say the company engaged in allegedly abusive conservation easement transactions, which "caused their customers to claim over $1.8 billion of overvalued and improper charitable contribution deductions, resulting in hundreds of millions of dollars of tax harm."

Messages left with the company seeking comment were not returned, but in previous statements the firm has vehemently denied breaking the law. Its PPP loan in April was for $350,000 to $1 million, with 15 jobs retained, the data set says.

It’s possible that such ongoing litigation might not even come up in a company’s PPP application process.

Companies were primarily asked to submit payroll records, along with their own certifications about eligibility, tax records, and other information, said O’Rourk, who co-leads CohnReznick’s SBA Task Force initiative to assist businesses during the pandemic.

“The due diligence, or the underwriting process, for the banks was very fast and furious,” O’Rourk said. “The first tranche went out in two weeks. Banks were processing 45,000 loans in a two-week period of time, so you can imagine how quickly things were looked at.”

OUR REPORTING

A data dump on Monday by the U.S. Small Business Administration revealed the names of 660,000 small businesses receiving loans of $150,000 to $10 million through the federal Paycheck Protection Program, including more than 18,000 recipients in Georgia. Members of The Atlanta Journal-Constitution’s investigative team have since been backgrounding companies on the list. Some were instantly recognizable from recent news coverage, and those companies are highlighted in today’s story.