United States of America v. William Allan Jones

Background

Relator LLC, a California limited-liability company, brought a qui tam action under the False Claims Act (FCA). It alleged that Creditcorp and William Allan Jones, identified as Creditcorp’s owner, chief executive officer, and director, misrepresented their eligibility, financial need, use of loan proceeds, and payroll costs when applying for and receiving Paycheck Protection Program loans during the COVID-19 pandemic. The government declined to intervene.

The defendants moved to dismiss. The court considered whether the complaint failed to state a claim and whether the FCA’s public-disclosure bar prevented the action.

Failure to State a Claim

The court held that the complaint did not plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b). The court said the complaint improperly grouped Creditcorp and Jones together instead of identifying which alleged fraudulent statements applied to which defendant. It also found that the complaint did not explain how Creditcorp used the loan proceeds.

The court further found that Relator LLC’s calculation concerning the loan amount and reported employees did not add up on its face and lacked the underlying facts needed to evaluate the allegation. The court also held that Jones’s sophistication and wealth were not enough, by themselves, to show that he intended to make false statements. The remaining allegations concerning intent were conclusory. For these reasons, the court found that the complaint did not state a claim with the required specificity.

Public-Disclosure Bar

The court also held that the public-disclosure bar applied. That rule generally requires dismissal of an FCA action based substantially on information previously disclosed through specified public sources, unless an exception applies. The court found that information published on the Small Business Administration’s data website constituted a federal report and publicly disclosed the relevant transactions.

The court emphasized that the website included Creditcorp’s industry classification code, which identified the company as primarily engaged in lending. The court also found that the allegations about economic uncertainty and the loan amount were based on publicly available information, including the company’s reported number of employees, the loan amount listed on the website, and SBA Form 2483. The court concluded that Relator LLC had not supplied genuinely valuable information warranting a reward under the FCA.

Disposition

The court granted the motion to dismiss and dismissed the case with prejudice. It concluded that amendment would be futile because the public-disclosure bar applied. The order was signed by Laurel Beeler, United States Magistrate Judge.