A federal judge has ordered a Mississippi trucking company and its owner, Xavier Bailey, to pay more than $482,000 after finding Bailey made false statements in order to obtain funds through the U.S. Small Business Administration’s Paycheck Protection Program (PPP).
The forgivable-loan program was enacted to help struggling businesses pay employees, interest on mortgages, rent and utilities as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Senior U.S. District Judge Glen H. Davidson stated in his Friday opinion that Bailey sought a PPP loan that he “didn’t qualify for by submitting false claims, certifications and information in order to obtain the $143,738 loan.”
“[Bailey’s] claims were ‘factually false’ as the information provided to the government for the loan and reimbursement were inaccurate,” Davidson wrote in his opinion.
Besides ordering Bailey and Bailey’s Trucking to pay nearly $455,313 in treble damages under the False Claims Act, which allows the U.S. government to recover up to three times the amount of the actual damages, Davidson ordered the trucking company owner to pay a civil penalty of $27,015 for two violations of the False Claims Act.
What happened?
Federal prosecutors filed a civil lawsuit against Bailey and his trucking company in June 2022 in the U.S. District Court for the Northern District of Mississippi, alleging the trucking company owner presented a fraudulent claim to obtain a PPP loan from Blue Ridge Bank in April 2021.
According to court filings, Bailey stated that his company was in operation on or prior to Feb. 15, 2020, as required by the CARES Act.
But a business entity search on the Mississippi secretary of state’s database showed Bailey did not register Bailey’s Trucking until December 2020 and did not begin operations until 2021.
On his PPP loan application, Bailey claimed he had nine employees and listed his expenses as $159,823.33 for “wages, tips and other compensation” for his trucking company, which Davidson wrote was inaccurate as Bailey’s company “did not make a dime during that time.”
Bailey also stated that he used 1099 workers that he claimed as employees, which isn’t permitted to receive a PPP loan under the CARES Act.
Davidson wrote that Bailey failed to provide “proof of actual payroll amounts listed on the loan application or any supporting documents.”
According to the Federal Motor Carrier Safety Administration’s SAFER website, Bailey’s Trucking’s authority was granted in January 2021 — listing only one truck — and its authority was revoked two years later in January 2023.
Victoria V. Washington, Bailey’s attorney, declined FreightWaves’ request for comment.
Bailey files suit against PPP lender
In December 2022, Bailey filed a third-party complaint against Blue Ridge Bank, claiming bank officials should have known he didn’t meet the loan requirements to receive the funds.
However, U.S. Magistrate Judge Roy Percy dismissed Bailey’s suit against the bank in January, writing that Bailey and his attorney filed their third-party complaint after the court had extended the deadline multiple times and without first obtaining the court’s leave to file the complaint.
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