Vestal Company and Owner to Pay $130,000 to Resolve False Claims Act Allegations

ALBANY, NEW YORK - M Squared Staffing LLC, the former operator of the Vestal Coal House in Vestal, New York, and its owner, Mark Mushalla, will pay $130,000 to resolve allegations that they violated the False Claims Act by falsely certifying that the restaurant was eligible to receive funding from the federal Restaurant Revitalization Fund (RRF).

"The Restaurant Revitalization Fund was created to support certain small businesses facing the economic hardships of the COVID-19 pandemic," said First Assistant U.S. Attorney John A. Sarcone III. "By falsely certifying that a permanently closed restaurant was eligible for funding, Mark Mushalla caused his company to obtain funds for which it was not eligible and undermined the integrity of this critical relief program. Our office remains committed to enforcing the False Claims Act and holding accountable those who misrepresent their eligibility for federal funding."

Congress enacted the American Rescue Plan Act in March 2021, as a continuation of the federal government's efforts to provide relief to American individuals and businesses suffering the economic and public health effects of the pandemic. The Act allocated $28.6 billion to the RRF, which allowed the United States Small Business Administration (SBA) to award grants to qualifying restaurants and other eligible entities based on pandemic-related revenue losses. Businesses that were permanently closed were not eligible for RRF funding.

M Squared operated a café and events center at the Vestal Coal House, located at 204 Stage Road in Vestal, New York, pursuant to a license agreement with the Town of Vestal. The license agreement expired on December 31, 2020. After the license agreement expired, M Squared vacated the Coal House location and removed the restaurant equipment from the premises.

As part of the settlement agreement, M Squared and Mushalla admitted that the Vestal Coal House had permanently closed before M Squared applied for RRF funding. On May 4, 2021, M Squared applied to SBA for an RRF grant on behalf of the business identified in the application as "M Squared Staffing LLC, doing business as Vestal Coal House." Mushalla completed and signed the application on behalf of M Squared.

The application specifically asked whether the applicant's business was permanently closed and instructed applicants to answer "No" only if the business was temporarily closed or actively working on opening. M Squared, through Mushalla, falsely answered "No." Although M Squared remained a legal entity, the Vestal Coal House had permanently ceased operations and was not eligible to receive an RRF grant.

Based on the admitted facts, the United States contends that M Squared and Mushalla knowingly caused false claims to be made to SBA and knowingly made false statements material to false claims paid by SBA by falsely certifying that the applicant business had not permanently closed and was eligible to receive an RRF grant.

This matter arose from a qui tam complaint filed in the United States District Court for the Northern District of New York. The False Claims Act allows private individuals to file suit on behalf of the United States for false claims and share in any recovery. Under the settlement agreement, the relator will receive $13,000. The settlement is captioned United States ex rel. Howitt v. M Squared, et al., No. 5:24-cv-0262 (N.D.N.Y.).

The investigation and resolution of this matter were the result of a coordinated effort between the United States Attorney's Office for the Northern District of New York, SBA Office of Inspector General, and SBA Office of General Counsel. The United States was represented by Assistant United States Attorneys Adam J. Katz and Christopher R. Moran.