The recent $2.4 million settlement involving the Harvard Club of Boston offers a clear reminder that federal pandemic relief programs remain under intense scrutiny and that missteps by businesses and organizations can lead to significant civil liability under the False Claims Act (FCA).
The Core Legal Issues
At the heart of the case is the Paycheck Protection Program (PPP), created under the CARES Act to provide forgivable loans to eligible small businesses during the COVID-19 pandemic. Longstanding Small Business Administration (SBA) rules expressly exclude certain entities from federal loan programs, including private membership clubs that restrict membership and patronage for reasons other than capacity. According to the Department of Justice (DOJ), the Harvard Club fell squarely within that exclusion.
Despite this, the Club certified its eligibility when applying for a PPP loan and later obtained full loan forgiveness. The government alleged that these certifications were false and material to the SBA’s decision to approve and forgive the loan—key elements of an FCA violation. Even without allegations of criminal intent, false certifications alone can trigger substantial civil penalties, treble damages, and reputational harm.
False Claims Act and Whistleblower Exposure
This matter puts a spotlight on the risk posed by the FCA’s qui tam provisions. A private whistleblower brought the case on behalf of the United States and will receive over $247,000 as a share of the recovery. Employees, competitors, and insiders are often the source of FCA investigations, making compliance failures especially dangerous for organizations that rely on government funds.
DOJ Options Matter
Notably, the settlement credits the Harvard Club for cooperation under the DOJ’s voluntary disclosure, cooperation, and remediation guidelines. This is a reminder that entities facing potential FCA exposure have options. Early internal investigation, voluntary disclosure, document preservation, and strategic engagement with the DOJ can significantly affect outcomes, sometimes reducing penalties or avoiding criminal charges altogether.
Experienced Counsel Is Critical
PPP, fraud, and FCA cases sit at the intersection of regulatory law, civil enforcement, and potential criminal exposure. An attorney experienced in white collar defense and false claims matters can assess eligibility issues, manage whistleblower risk, conduct privileged internal reviews, and advise on whether and how to approach the DOJ. Counsel can simultaneously help clients navigate parallel civil and criminal investigations while protecting their rights and business interests.
The Harvard Club settlement carries an important lesson about how informed legal strategy can shape resolution when federal authorities come calling. At Dhar Law, LLP, our experienced criminal and civil defense attorneys have a reputation for our extensive experience with complex white collar criminal cases that very often intersect with civil claims. Contact a member of our experienced criminal and civil defense team to learn more about how we can protect your rights and your business if you have exposure surrounding potential charges of PPP Loan Fraud.
