NYC PPP Loan Fraud Attorneys.

The second-draw PPP application asked one question that choose, and the government reproduces it at paragraph 48 of its complaint against Michael Shabsels: is the applicant or any owner of the applicant an owner of any other business, or have common management, including a management agreement, with any other business. A few lines below it, the form required a list of owners above twenty percent. Those two fields carry the evidence in every case on this page. The pages competing with this one tell you to get your bank statements together, which is advice for a case the Civil Frauds Unit is not bringing against operating businesses here.

What the ownership box does

A second-draw loan was held to $2 million per applicant, and a corporate group, meaning businesses majority-owned by a common parent, was capped at $4 million in the aggregate, which the complaint cites to 86 Fed. Reg. 3716. A business with 300 or fewer employees qualified, and the count included every affiliate, foreign ones too. The ownership answer was the input to both tests, and a wrong answer is a false record under 31 U.S.C. 3729(a)(1)(B) even where the loan was inside the cap, which is why footnote 6 of the complaint seeks damages from the five Shabsels companies whose loans were within the $4 million. Eligibility does not cure a false answer.

The 2020 application, the 2021 application, and the email between them

Michael Shabsels and his brother owned twenty-seven camps, from Maine to Illinois through SIMAD Holdings. In 2020, on the first-draw applications, SIMAD was on the form as owner for six companies the complaint names at paragraph 70: Green Lane, Club Getaway, IAFA, Mesorah, WM Camp, and Mohawk. The first-draw cap for a group was $20 million, which the group never approached, so the truth had no price.

On January 11, 2021, a banker told him the second-draw cap for a group was $4 million, and he wrote to his accountants that afternoon asking whether the group could still borrow $20 million. On January 12 an accountant replied that the cap was $2 million per company and $4 million per group, and added that he knew it was not the answer Shabsels wanted. Shabsels wrote back understood and thank you, which the complaint quotes at paragraph 66 because it proves knowledge. Between January 19 and February 8 the second-draw applications for the same six companies went in with the majority owner gone and the other-business box answered no, and the complaint counts more than twenty applications answered that way. The group borrowed seventeen million dollars.

The applications went to nine banks, a table at paragraph 71, and every bank's share stayed under $4 million except one, so no lender knew what the other eight had lent. The SBA had it once, which is paragraph 120: when Achim applied listing only the brothers, the SBA denied the loan because it already had SIMAD and Damis Holdings on file as owners. He gave the system the ownership it already knew, but the other-business box kept its no.

What the government needed to prove knowledge was documents he had signed himself. For a client with more than one entity, the first-draw application is the first document we ask for, because the government already has both and will lay them side by side. [EDITOR: In the matters you've handled, did the affiliation question surface from the lender's file, from the SBA's system, or from a relator?]

Two clothing companies, one theory

Alice + Olivia applied for a $2 million second-draw loan in January 2021 and reported 293 employees, which is seven under the line. On the forgiveness application a year later the count had dropped to 271, and the February settlement for $3.2 million includes an admission that, counting domestic and foreign affiliates, the company had more than 300. Lafayette 148 in Brooklyn had a $2 million second-draw loan of its own and settled with the Eastern District in May for $3 million on the same theory. Both are real companies with real payroll, and neither settlement mentions how the money was spent, because the eligibility failure made spending irrelevant.

Nobody knows your structure but you

That is the objection we hear, and it is right for about half the people who could file. Winston & Strawn wrote in March that data-mining relators working from public loan records are the new threat, and in the two largest New York PPP civil matters of 2026 the whistleblower was not a stranger. The Shabsels relators are named, which is unusual to see: Karla and Ivan Bellotto, who each owned 18.75% of Kiwi Operatingco, the company behind Kiwi Country Day Camp in Carmel, New York, and who filed under seal on August 28, 2024. The government stepped in on August 24, 2026, so twenty-four months passed between the filing and the day he learned of it. Only someone inside knows that SIMAD exists, or which twenty-percent owner is missing, and a relator is paid fifteen to thirty percent of the recovery, which on a $13 million case is a better return than the camp. If you have partners, the ones you have fallen out with know what the box says.

Half of treble

The number on a False Claims Act complaint is three times the loss plus a penalty for every false claim, and each application and each forgiveness request is a claim. The Shabsels complaint prints every figure: over $13 million improperly obtained, which trebles to $39 million before penalties. The loss is larger than the loan, because the government adds the lender's fee and interest to forgiveness, so Mohawk Day Camp's $2 million loan becomes $2,084,164.38 at paragraph 77, and every dollar the government paid out, including to the bank, lands on your side. Knowing, under paragraph 53, includes reckless disregard and deliberate ignorance, so the government only has to show you did not look.

What companies end up paying is a fraction of that, and the fraction is visible in the two clothing cases. Alice + Olivia's $2 million loan trebles to $6 million, and the company paid $3.2 million, which is just over half of exposure. Lafayette 148, same loan, paid $3 million, fifty percent. Nobody should build a strategy on two numbers, but half of treble is where we would open with the Civil Frauds Unit, and no competing page prints it because the releases give the settlement and not the ratio.

The letter most people actually got

Most people reading this have not been sued. They got a letter about collections, and the sentence in the SBA's April 24 release that explains what that letter means is the one nobody quoted: of the 562,000 borrowers referred to the Treasury that day, $22.2 billion in all, fewer than 1,000 had ever been investigated by the SBA's inspector general, and dividing those numbers means you get one investigated borrower for every 560 referred. For most of the 562,000, the government wants the money back, collections is nearly certain because the referral is required by statute once a loan is 120 days past due, and a case is something under 0.2% of the list has faced. We will say that plainly, and for most of those borrowers the right response is a dispute or a payment plan and not a federal defense firm.

Two things keep us from leaving it there. The same list went to the Justice Department the same day, so the letter also means your loan is on a list a prosecutor could open. And a dispute is a statement, so if yours explains your ownership structure to argue eligibility, you have answered the box in writing, in a document the agency will keep. Treat it as a debt, dispute the amount if the amount is wrong, and leave the affiliates out of it. [EDITOR: Has a Treasury dispute actually produced anything for a client, and what did the successful one say?]

June 4 and August 24

On June 4, 2026, every Shabsels company and both brothers filed Chapter 11 in New Jersey, thirty petitions on one day. On August 24, eighty-one days later, the Southern District filed, stay or no stay, and paragraph 55 says why it could: a False Claims Act action is a police or regulatory proceeding exempt from the automatic stay under 11 U.S.C. 362(b)(4). Bloomberg Law reported in August that the same bankruptcy is where more than $230 million in merchant cash advance funding to the camps gets sorted out, so the funders who fronted the money are stayed while the government's fraud claim goes forward. A bankruptcy that stopped every cash-advance lender did not slow the PPP case by a day. How a bankruptcy court treats a False Claims Act judgment, if one comes, is a question for a bankruptcy lawyer, and we would bring one in rather than guess on a page.

What we do first

Before we speak to anyone on the other side, we build the ownership map as of the loan date, every entity in both directions, every percentage, every management agreement, because the government builds the same map and we want ours on the table before the first call. Then we put the first-draw and second-draw applications next to each other field by field, as the complaint does at paragraph 70, and look for the field that changed. If the answers hold and the count was right, the response to a letter is a cover letter and the two forms. If they do not match, we want to know while there is still a choice about what to do with it, because the Justice Manual gives cooperation credit for bringing a discrepancy in, and the difference between bringing it in and being caught with it is real money. [EDITOR: When the SBA-OIG Eastern Region first contacts a client, what is the document? A letter, a civil investigative demand, an agent call? What is the heading on it?]

Do not amend the forgiveness application after a letter arrives, because a correction dated after you were flagged is either a second false statement or an admission about the first. Do not discuss ownership with whoever calls about the balance, and do not have your accountant write to the SBA, because the accountant's letter is your admission, typed by someone else. Find the 2020 application, and then call us.

If the ownership map is clean and the letter is a debt, we will give you a short answer and a small bill. If the map has a hole in it, we will say that too, and what half of treble looks like on your loan, and then we will start. Attorney on call, 24/7. The number is at the top of the page.