Two Michigan nonprofits must repay $225K in False Claims Act violation lawsuit
The Michigan Education Association (MEA), the state's largest labor union for educators, and its affiliate the Michigan Education Special Services Association (MESSA) agreed to settle in a recent False Claims Act violation lawsuit.
The Mackinac Center for Public Policy (MCPP), the group that brought the case to court, says MEA and MESSA should be held accountable for applying for and accepting COVID-era federal loans they did not qualify for.
The loans were part of the Paycheck Protection Program (PPP), a COVID-era safety net that certain small businesses and nonprofits could apply for.
MCPP says the union's loan prevented other qualified businesses from getting assistance.
"The average applicant was getting about 125K [dollars]. These two entities combined took 12.5 million [dollars]," said Patrick Wright, the Vice President for Legal Affairs at MCPP. "That essentially meant that they squeezed a hundred applicants out, and a hundred businesses and their workers were not able to get protection."
Despite being nonprofits and having their PPP application approved, the suit identified MEA and MESSA as ineligible for the emergency loans.
However, the labor union says the allegations that MEA intentionally violated the False Claims Act are frivolous. The labor union denies wrongdoing and emphasized that they repaid their loans with interest in 2020.
"Based on the rules published at the time by the federal government, MEA and our bank believed we were fully eligible for the [Paycheck Protection Program]," said Doug Pratt, a spokesperson for the Michigan Education Association. "As time went on and those financial uncertainties faded, we repaid the loan with interest."
Wright's group filed its lawsuit more than a year after MEA and MESSA paid back their loans with interest.
"The principle that these kinds of places shouldn't hop to the front of the line, take money that wasn't intended for themselves, and only pay it back later if they feel like they don't need it is one I think is worth defending," said Wright.
Collectively, MEA and MESSA will pay the U.S. government $225,887 in settlement.
Pratt says the nonprofits agreed to settle to prevent wasting additional federal resources on a potentially lengthy litigation.