Department of Justice Joins Whistleblower Lawsuit Against Pinnacle Bank

Department of Justice Joins Whistleblower Lawsuit Against Pinnacle Bank

We are proud to announce the Department of Justice has decided to intervene in one of our whistleblower cases recently filed against Pinnacle Bank. The facts of U.S. ex rel. Hospitality Management, Inc. v. Pinnacle Bank, which originates in Wyoming, reveal a systematic protocol of fraud and misrepresentation with regard to the funding of “504 loans,” which are administered by the federal Small Business Administration. The plaintiffs in the case originally filed suit under the qui tam provisions of the False Claims Act, which awards whistleblowers a percentage of any amount recouped on behalf of the federal government. The FCA also permits the federal government to intervene in a whistleblower lawsuit and assume a primary role in the litigation process. As demonstrated by the Hospitality Management case, the attorneys of Berger Montague are zealously dedicated to the cause of whistleblower lawsuits and we encourage you to contact us today if you are aware of fraudulent use of federal or state money, particularly in the banking or healthcare industries.

Background of Hospitality Management, Inc. v. Pinnacle Bank

The Small Business Administration (“SBA”) helps Americans achieve their entrepreneurial ambitions by offering start-up loans to cover the costs of acquiring major fixed assets essential to business operation. In order to qualify for a loan from the SBA, when a borrower is ready to start his business, he must be able to contribute approximately ten percent of the costs to open. He must also secure a loan from a private lender covering approximately 50 percent of the costs of the project. The SBA covers the remaining 40 percent of the costs through a loan obtained through a Certified Development Company (CDC), which is thereafter assigned to the SBA. In terms of loan priority, the private loan is in the primary position and the SBA’s loan assumes a secondary, subordinate position. As such, the SBA takes great precautions in extending credit and expects private lenders to fully examine and analyze the creditworthiness of every small business borrower.

The allegations of the lawsuit against Pinnacle state that Pinnacle made false certifications to the SBA with regard to borrowers’ financial situations, thereby defrauding the SBA out of loan money and, ultimately, the costs associated with loan default. Specifically, Pinnacle is alleged to have made false assertions to the SBA regarding the following:

  • It had no knowledge of any un-remedied substantial and adverse changes in a borrower’s financial condition since the date of the application for the 504 Loan;
  • Borrowers’ loan status as being current and otherwise not in default, and;
  • Pinnacle’s assertion that it had disclosed to the SBA and CDC all material information known pertaining to the 504 Loan.

Counsel for the qui tam plaintiffs applauded the Department of Justice for intervening, stating “[t]he attorneys and investigators in the District of Wyoming and at the Small Business Administration have moved very swiftly and have been diligent in investigating the allegations in the complaint….Banks like Pinnacle have a responsibility to follow the law, and their failure to do so has cost the government millions of dollars.”

Contact a Whistleblower Attorney Today

You do not need to be a high-profile, white-collar executive to have knowledge of potential fraud and misuse of taxpayer money. If you suspect misconduct at your place of employment, by your healthcare provider or in conjunction with any loans procured through the federal government, you may be a prime candidate for as a qui tam plaintiff. For more information or to speak to an attorney, contact Berger Montague today.

By |2022-04-20T10:41:12-04:00October 8th, 2013|False Claims Act Legal News|