Law firms, lobbyists caught up in PPP scandal

Two Sacramento lobbyists with California Advisors LLC agreed to pay $580,000 in damages and penalties to resolve allegations that they engaged in fraud related to the federal Paycheck Protection Program.

Earlier this month, attorney Lisa Bloom and her firm agreed to $274,000 in fines and repayment for misusing so-called PPP funds. The settlement followed a whistleblower case filed by another prominent California attorney.

The billions in loans from the U.S. Small Business Administration have proven to be a boon for many law firms -- and a problem for some. Scores of firms across the nation now advertise that they offer defense for clients accused of PPP fraud. Many defendants argue that they misunderstood the rules of the program or broke them inadvertently.

But recent months have also seen a wave of attorneys facing fines, disbarment and criminal prosecution for alleged misuse of PPP funds they and their firms received from the federal government. Earlier this summer, two Atlanta attorneys were sentenced for a PPP fraud scheme that netted nearly $15 million.

In a news release on Monday, Phillip A. Talbert, the U.S. Attorney for the Eastern District of California, said two partners with California Advisors "knowingly made false statements in certifying the business's eligibility" when they received forgiveness for $144,340 in loans.

"The Paycheck Protection Program was a vital resource to struggling small businesses during the darkest hours of the COVID-19 pandemic," Talbert said. "This office will continue to investigate businesses who took advantage of these funds at the expense of other small businesses."

Neither of the accused, Delaney Hunter and William Gonzalez, are attorneys. But the firm includes two attorneys among its partners, which is common among lobbying firms. Both took on those roles after the company received the loans.

"We respect the settlement," Hunter said in an email. "When the DOJ contacted us that there was a problem we worked diligently and collaboratively with the U.S. Attorney to resolve the matter. We are glad there is now resolution and are moving forward. The partners that were elevated in 2021 were not a part of the decision-making process."

Talbert's office confirmed the settlement only named Hunter and Gonzalez. The settlement agreement stated they made false statements that violated the federal False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 when the company obtained forgiveness for loans. The agreement calls for Hunter and Gonzalez to each pay $25,000 from personal funds.

Data compiled by Thomson Reuters Legal found law firms across the nation took in $12 billion in these government loans, which they could apply to have forgiven. Many of these firms still cut staff.

In California, more than 2,000 law firms, legal aid organizations and individual attorneys accepted more than $1 billion in PPP loans, according to data compiled by Josh Gerben, founder of Gerben IP in Washington, D.C. This included 41 large law firms that accepted at least $3 million; 14 of these accepted between $5 million and $10 million, according to Gerben's figures.

On Aug. 15, the U.S. Department of Justice announced The Bloom Firm had settled allegations it provided false information when it requested loan forgiveness. Founder Lisa Bloom and her husband, Braden Pollock, must personally pay over $70,000 under the agreement.

In a statement sent by Steve Conlon, a paralegal with the firm, The Bloom Firm said it voluntarily agreed to resolve the dispute with prosecutors.
"The money we received all went to our employees -- not a penny went to ownership or management -- which the government concedes," the statement read. "The government contends, though, that four employees we gave PPP payroll money to were not the proper type of employees to receive the funds, since they were not lawyers, even though they performed vital work for us at that time, such as assistance with case intake and IT assistance with the pandemic transition to becoming fully remote. We strongly disagree with this interpretation of the law and know that we did nothing wrong."

According to the department's news release, the Bloom case grew out of a qui tam lawsuit filed by Liberty Law Office Inc., which will receive about $44,000 in connection with the settlement. U.S. ex rel. Liberty Law Office Inc. v. The Bloom Firm, 2:21-cv-06279-MEMF-PD (C.D. Cal., filed Aug. 4, 2021).