A federal court has ordered JMG Investments Inc., a Woodland Hills-based rehabilitation center, and its owner Jeffrey Schwartz to pay over $1.5 million to the United States for violating the False Claims Act related to COVID-19 business loans.
United States District Judge Michael W. Fitzgerald issued the summary judgment on January 15, requiring Schwartz and his company to pay $1,565,294.38 in damages and penalties after finding they knowingly received and kept more than one Paycheck Protection Program (PPP) loan before December 31, 2020. PPP rules at that time prohibited applicants from obtaining multiple loans prior to this date.
“Every pandemic relief dollar improperly used was money other businesses needed to stay afloat,” said First Assistant United States Attorney Bill Essayli. “My office will continue tracking down individuals and companies who unlawfully took advantage of COVID-19 government aid.”
“PPP loans were intended to provide critical relief to small businesses,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “The department is committed to pursuing those who knowingly violated the requirements of the PPP and obtained relief funds to which they were not entitled.”
“The favorable ruling in this case is the product of enhanced efforts by federal agencies such as the Small Business Administration working with the Department of Justice and other Federal law enforcement agencies to recover the product of this fraud as well as penalties,” said SBA General Counsel Wendell Davis.
The PPP was created in March 2020 under the CARES Act by Congress and administered by the U.S. Small Business Administration (SBA) to help small businesses cover payroll and expenses during the COVID-19 pandemic. Applicants had to certify eligibility, including confirming they would not receive more than one loan before December 31, 2020.
In August 2024, federal prosecutors filed a complaint alleging that Schwartz applied for two PPP loans for JMG Investments Inc., violating program rules, then retained both loans instead of repaying one as required. This resulted in a loss when SBA purchased a guarantee on one duplicate loan.
The lawsuit was brought under qui tam provisions allowing private parties—known as whistleblowers—to sue on behalf of the government for false claims; these parties may share in any recovery from such lawsuits. The whistleblower's share in this case has yet to be determined.
This case involved cooperation between several federal offices: attorneys from the Civil Division’s Commercial Litigation Branch, Fraud Section; U.S. Attorney’s Office for the Central District of California; SBA’s Office of General Counsel; and Office of Inspector General participated in handling it.
The U.S. Attorney's Office for the Central District of California serves more than 19 million residents across seven counties from its main office in Los Angeles and additional locations in Santa Ana and Riverside. The office prosecutes criminal cases, handles civil matters for the government, works with law enforcement partners at all levels, supports victim assistance programs, provides resources for reporting crimes, and leads community outreach initiatives focused on public safety.
Tips about suspected fraud involving COVID-19 relief programs can be reported through various channels listed by federal authorities.
