Lexington Business Owner and Business Agree to Pay $860,000 to Resolve Improper Paycheck Protection Program Loan

LEXINGTON Ky. - A Lexington-based shared workspace management and consulting firm, Workspace Strategies, and one of its owners, Karen Condi, agreed to pay the United States $860,779.50 to resolve allegations that it improperly obtained, and received forgiveness for, Paycheck Protection Program (PPP) loans from the U.S. Small Business Administration (SBA) for which it was not eligible.

Congress created the PPP in March 2020 to provide emergency financial assistance to small American businesses struggling to pay employees and other expenses during the COVID-19 pandemic. Under the PPP, eligible small businesses could receive forgivable loans guaranteed by the SBA through two rounds of funding, referred to as First Draw and Second Draw PPP loans. When applying for PPP loans, borrowers were required to certify that they were eligible for the requested loans and that the information they provided was true and accurate. Regulations provided various requirements for use of PPP funds, including limitations on the manner in which the loans could be utilized. Borrowers who applied for Second Draw loans also were required to certify that they experienced at least a 25% reduction in quarterly gross receipts as a result of the pandemic.

Workspace Strategies applied for, received, and obtained forgiveness for First and Second Draw PPP loans collectively valued at nearly $600,000. The settlement resolves allegations that Workspace Strategies and Condi falsely certified that loan proceeds would be and were utilized for payroll expenses and other permissible purposes. In fact, Workspace Strategies and Condi allegedly used a portion of the proceeds for impermissible purposes, including for Condi's personal benefit. Further, the settlement resolves allegations that Workspace Strategies and Condi falsely certified that Workspace Strategies' gross receipts fell at least 25% as a result of the pandemic in its Second Draw PPP loan application. Based on these false certifications, Workspace Strategies received loans for which it was ineligible and received forgiveness of loan funds to which it was not entitled.

"Our office is committed to holding accountable businesses and individuals who improperly obtained or used COVID-19 relief funds," said First Assistant United States Attorney Paul McCaffrey. "The loans were intended to help eligible small businesses survive the pandemic. When business owners misspend those funds, or businesses falsely certify their eligibility for pandemic relief, it is critically important that we recover taxpayer dollars."

"This settlement demonstrates the excellent results achieved through the combined efforts of SBA and the Department of Justice to forcefully respond to PPP misconduct," said SBA's General Counsel Wendell Davis. "Misallocation and misuse of federal funds undermines SBA and the entire federal government's pandemic relief efforts, and SBA continues to devote a major effort alongside our partners at DOJ to investigate abuse and recover funds on behalf of the American people."

The Government's work in this investigation illustrates its commitment to combatting COVID-19 fraud. The United States encourages anyone with information about potential fraud involving COVID-19 to report it by calling the Department of Justice's National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form. PPP recipients also may voluntarily disclose self-discovered evidence of fraud involving the PPP to U.S. Attorney's Offices.

The settlement resolves a lawsuit brought by a private citizen under the qui tam provisions of the False Claims Act. Under those provisions, a private party can file a civil action on behalf of the United States, thereby bringing allegations of fraud to the Government's attention, and share in any financial recovery. As part of this resolution, the individual who filed the qui tam complaint will receive a portion of the settlement proceeds. This case is captioned United States ex rel. Emily Parker v. Condi Management Group, LLC, d/b/a Workspace Strategies and Karen Condi, Case No. 5:23-CV-00030-KKC.

This matter was handled by Assistant U.S. Attorney Benjamin Long, with assistance from the SBA's Office of General Counsel. The claims resolved by the settlement are allegations only, and there has been no determination of liability.

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