Garber Management Group, the family-owned Saginaw auto empire behind more than two dozen dealerships across several states, has agreed to pay about $1.5 million to wrap up federal allegations that it wrongly certified its eligibility for a pandemic-era Paycheck Protection Program loan. The settlement, announced yesterday, resolves a once-sealed whistleblower lawsuit tied to a May 2020 first-draw PPP loan and closes the books on one of the more prominent pandemic aid disputes to hit a Michigan-based private dealer network.
Federal settlement and allegations
The U.S. Attorney’s Office in Detroit said Garber Management Group will pay $1,513,281 to resolve civil claims that it made false statements to the Small Business Administration to secure PPP funds, according to the U.S. Attorney’s Office for the Eastern District of Michigan. Prosecutors allege Garber obtained a first-draw PPP loan for $864,732 in May 2020 and improperly certified that it qualified, even though the company allegedly exceeded the program’s 500-employee cap once affiliated entities were counted and did not qualify for an SBA franchise-identifier exemption.
A sprawling dealer footprint
Garber runs more than two dozen new and used vehicle dealerships in multiple states, with several locations in and around Saginaw listed on Garber Auto. Public company profiles and recruiting materials peg the organization’s workforce in the low thousands and estimate about $1.2 billion in annual sales, according to Indeed. In other words, this is not a mom-and-pop corner lot.
Whistleblower suit and payout
The case began as a sealed whistleblower, or qui tam, complaint and was later unsealed as U.S. ex rel. David Reed v. Garber Management, Case No. 24-cv-13126. Under the False Claims Act’s whistleblower provisions, the relator will receive 10 percent of the settlement proceeds, according to the U.S. Attorney’s Office. The government characterized the matter as a civil resolution rather than a criminal prosecution.
Why affiliation rules mattered
PPP rules generally required borrowers to count the employees of affiliated entities unless a specific statutory exception applied, including an exemption for certain franchises listed in the SBA’s Franchise Directory. Legal guidance on SBA affiliation rules explains that a management company without a franchise-identifier code could be required to aggregate staff across related dealerships when applying the 500-employee cap, which is the affiliation theory the government cited in its settlement description, according to Ropes & Gray.
What comes next
The civil settlement formally resolves the unsealed qui tam suit and does not include criminal charges, The Detroit News reports. Federal enforcement work around pandemic relief is far from over, though. The Department of Justice has continued to pull in large sums under the False Claims Act in recent years, with recovery totals reaching into the billions, according to Cleary Gottlieb.
