The Rancho Santa Fe Association, which as a 501(c)(4) nonprofit was not eligible to obtain a PPP loan, paid the federal government as part of a larger $5.8 million settlement with other homeowners groups and country clubs across California
The Rancho Santa Fe Association, a nonprofit homeowners group that runs a golf course, tennis club, luxury hotel and other amenities in the exclusive North County community, has paid the federal government more than $2 million to settle allegations that it knowingly defrauded a COVID-era program meant to provide loans to small businesses.
The association’s payment was the second largest among a group of homeowners groups and country clubs across California that were jointly sued by a whistleblower for allegedly violating the False Claims Act by fraudulently obtaining loans through the Paycheck Protection Program. As 501(c)(4) nonprofit organizations, the Rancho Santa Fe Association and other similar groups were ineligible for such loans, having been specifically excluded by Congress.
The whistleblower’s complaint alleged that numerous community associations falsely and fraudulently claimed to be eligible for and in need of PPP loans.
“They did so even though they had millions of dollars in revenue every year that was not reliant on the unpredictable swings of the economy but instead on a simple tool: assessments to their wealthy membership,” the whistleblower complaint alleged. “Many country clubs nationwide acted similarly. Rather than obtain PPP loans as the intended American businesses in need, Defendants approached the program as opportunists. And by fraudulently applying for these PPP loans, the rich got richer while depriving needy Americans of the boost that Congress sought to give them.”
The whistleblower, Wade Riner, filed his lawsuit under a provision of the False Claims Act that allows a private party to file an action on behalf of the United States. Federal prosecutors in San Diego helped negotiate the total settlement of more than $5.8 million, according to the U.S. Attorney’s Office in San Diego. Riner will receive nearly $700,000 for his role as a whistleblower.
While the Rancho Santa Fe Association paid just over $2 million to settle the allegations, the Pine Mountain Lake Association, a homeowners group near Yosemite National Park, paid the largest sum at more than $2.37 million. A pair of golf courses — Glendora Country Club in Los Angeles County and The Palms Golf Club in Riverside County — each paid about $700,000 to settle the allegations.
The whistleblower’s lawsuit alleged that three other homeowners associations in San Diego County also received a combined total of more than $3.4 million in PPP loans even though they were ineligible. The whistleblower voluntarily dismissed those defendants “and the United States consented to dismissal,” a spokesperson for the U.S. Attorney’s Office said.
Courtney LeBeau, president of the Rancho Santa Fe Association’s board of directors, told the Union-Tribune last year that the association applied for its PPP loan on April 7, 2020, in the early days of the pandemic, and did so “in good faith and based on the professional advice and federal guidance available at the time.”
She said the association received verbal direction from a commercial banker to make a wrong selection on the application form. “While we sought to follow guidance, ultimately this error was a contributing factor to the assessment of the penalty,” LeBeau told the Union-Tribune.
She said that every dollar of the loan was accounted for and that funds were used to pay salaries and other expenses.
“The bottom line is that the Association fully cooperated with the civil inquiry by the U.S. Attorney’s Office, and then settled the entire matter promptly and fairly,” LeBeau told the Union-Tribune in a statement Thursday.