White Plains Businessman Accused of $13M PPP Fraud Across 28 Companies

Federal prosecutors filed a civil fraud lawsuit in White Plains federal court on Monday against businessman Michael Shabsels, his companies Simad Holdings LLC and Damis Holdings LLC, and 26 related corporate entities, accusing the network of fraudulently obtaining more than $13 million in forgiven Paycheck Protection Program loans. The government alleges the companies collectively sought over $17 million in second-draw pandemic relief loans, far exceeding a federal cap designed to keep the emergency funds from flowing to large, interconnected business networks.

According to the U.S. Attorney's Office for the Southern District of New York, Shabsels repeatedly lied on PPP applications by checking “no” when asked whether he or his companies held ownership stakes in other businesses or shared common management with them. That question exists for a reason: accurately disclosing common ownership would have triggered Small Business Administration affiliation checks that could have blocked the loans outright.

The U.S. Attorney SDNY, which announced the filing in a post on X, described the case as targeting a network of companies that fraudulently obtained COVID relief money. Under SBA regulations, second-draw PPP loans were governed by what's known as the Corporate Group Rule, which capped total borrowing across all majority-owned entities in a single corporate group at $4 million — a threshold prosecutors say Shabsels' network blew past by a wide margin.

How the Case Reached Federal Court

The lawsuit didn't start with a government investigation — it began as a private whistleblower complaint filed under seal under the qui tam provisions of the False Claims Act. That complaint was unsealed on August 17 before U.S. District Judge Kenneth M. Karas after the government decided to intervene and take over the case. Whistleblowers who bring valid False Claims Act suits are entitled to a cut of whatever the government eventually recovers.

Recovering that money may prove complicated. All 29 corporate and individual defendants named in the suit have already filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of New Jersey. Prosecutors appear to be pursuing formal liability findings in the civil case specifically so the government can assert priority claims within those ongoing bankruptcy proceedings, rather than relying on a straightforward collection effort.

Part of a Broader Enforcement Pattern

This isn't the Southern District of New York's first swing at corporate affiliation fraud tied to PPP loans. In February, the office secured a $3.2 million False Claims Act settlement with apparel company Alice + Olivia, which admitted to concealing affiliate workforce numbers to get around PPP eligibility caps — a case Hoodline covered in February. In July, the same office reached a separate $3.85 million settlement with four labor unions and an employee benefit plan over allegations they falsely certified their eligibility for PPP funds despite being tax-exempt organizations that were legally barred from the program at its 2020 launch.

The legal foundation underpinning these cases got a boost last month when the U.S. Court of Appeals for the Seventh Circuit upheld the SBA's Corporate Group Rule in a case brought by 203 affiliated nursing homes challenging the agency's authority to deny loan forgiveness based on aggregate group caps, according to Justia. The ruling affirmed that capping aggregate loan guarantees across commonly controlled entities was a lawful exercise of agency discretion, giving federal prosecutors firmer legal ground to pursue similar claims elsewhere.

A National Wave of Pandemic Fraud Enforcement

The Shabsels case fits into a much larger national push. During fiscal year 2025, the Justice Department obtained more than 200 False Claims Act settlements and judgments totaling over $230 million in pandemic-related fraud matters, part of cumulative federal civil recoveries exceeding $820 million since the pandemic began, per department figures. Across the entire federal government, total False Claims Act recoveries hit a record $6.8 billion in fiscal year 2025, fueled by a record 1,297 new whistleblower qui tam filings, according to Jackson Lewis.

The Shabsels network's alleged $17 million in attempted PPP borrowing, and the $13 million in loans the government says were fraudulently forgiven, now sits at the center of a case that will test how far federal prosecutors can reach into bankruptcy proceedings to recover pandemic relief funds. No criminal charges have been announced in connection with the civil suit as of this reporting.