A former sales rep of Blaise Alexander Inc. in Muncy, Pa., has withdrawn a federal lawsuit that accused the 20-store dealership group of violating the False Claims Act in relation to Paycheck Protection Program loans.
The lawsuit, filed in July by Branden Bucher and unsealed in U.S. Middle District Court in Pennsylvania late last month, said the group applied for at least 13 PPP loans and received between $4.65 million and $11.1 million from the Small Business Administration.
Data released by the SBA last week, months after the suit was filed, confirm 13 Blaise Alexander entities with Pennsylvania addresses accepted a total of $6,945,700 in loans.
The lawsuit said, “Blaise Alexander, Inc., was not eligible for such loans due to regulations prohibiting loans to a business of its size.”
However, Bucher’s attorney in a Friday, Dec. 4, notice of dismissal said his client “dismisses all claims” without prejudice in the matter.
In March, the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act, was passed by Congress and signed by President Donald Trump. It enabled the SBA to make loans to eligible small businesses under the PPP. The low-interest loans are forgivable if all employee retention criteria are met and the funds are used for eligible expenses.
To be eligible, a small business could have no more than 500 employees; however, it could have more than that number if it met the SBA industry size standard.
The Williamsport Sun-Gazette reported that the Blaise Alexander group has more than 1,200 employees.
The SBA data show 12 of the group’s entities employing a range of 27 to 159 people, for a total of 737. The 13th, Blaise Alexander Mansfield III Inc., did not have its number of jobs listed.
The lawsuit also claimed that Blaise Alexander spent the PPP funds on payroll as required by the SBA but then “forced its salespersons to reimburse” the dealership for the PPP funds by withholding sales commissions.
Joel Breneman, director of operations for the dealership group, told the newspaper that employees were not asked to return any wages that they received.
“I can confidently say that these allegations are false and this is an attempt by an individual to benefit from a frivolous suit,” Breneman said.
A dealership spokeswoman contacted by Automotive News declined to comment. Bucher’s lawyers did not respond to requests for comment.
Blaise Alexander is not the only dealership that has been accused of fraudulently using PPP loans.
In October, Neyra Motor Cars of Cincinnati was accused of PPP loan fraud by a former sales representative. Jeffrey Mattox claimed he was fired from the dealership after raising concerns that the federal loan was being deducted from his commission.
Marc Spizzirri, senior managing director at B. Riley Advisory Services, which provides advisory services to dealerships, told Automotive News last week that further accusations of loan fraud from within dealerships could be forthcoming.
“With such a high percentage of dealers receiving PPP loans, it is probable that dealerships will continue to be a target for litigation on this issue,” he said.
An Automotive News analysis of data released in summer by the SBA found that new- and used-vehicle dealerships nationwide received between $7.6 billion and $11.89 billion in PPP loans of $150,000 or more in the second quarter, saving more than 740,000 jobs.