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United States ex rel. Brickman v. Business Loan Express, LLC

United States District Court for the Northern District of Georgia, Atlanta Division

December 18, 2007, Decided; December 18, 2007, Filed

CIVIL ACTION NO. 1:05-CV-3147-JEC

Opinion

ORDER & OPINION

This case is presently before the Court on defendants' Motions to Dismiss [53] and [54]. The Court has reviewed the record and the arguments of the parties and, for the reasons set out below, concludes that defendants' Motions to Dismiss [53] and [54] should be GRANTED.

BACKGROUND

Relators James Brickman and Greenlight Capital assert claims against defendants Business Loan Express, LLC ("BLX") and Business Loan Center, LLC ("BLC") under the False Claims Act (the "FCA"), 31 U.S.C. § 3729 et seq. (Third Amended Compl. ("Compl,") [22].) That Act creates a cause of action against any individual who submits a false or fraudulent claim for payment to the United States government. See 31 U.S.C. § 3729(a). The action can be brought by the Attorney General or by private individuals on behalf of the government under the FCA's qui tam provision. 1 31 U.S.C. § 3730(a) and(b).

Relators' claims involve allegedly fraudulent small business loans that were guaranteed by the Small Business Administration ("SBA"), pursuant to § 7(a) of the Small Business Act. (Compl. [22] at PP 14, 32.) Section 7(a) authorizes the SBA to guarantee private loans to qualified small businesses. (Id. at P 12.) By shifting the risk of default from the lender to the government, § 7(a) encourages private lenders to loan money to small businesses that otherwise would not be able  [*4] to obtain loans. (Id.) To minimize the risk of default, a § 7(a) lender must certify that it has complied with the SBA's Standard Operating Procedures ("SOPs"). (Id. at PP 13-14.) These SOPs are designed to ensure, among other things, that the borrower is creditworthy and that the loan proceeds will be disbursed to the correct person and for the authorized purpose. (Id. at P 14.) The lender also must verify that the borrower has injected a specified amount of equity into the business that the SBA guaranteed loan is to fund. (Compl. [22] at P 14.)

Defendant BLC is a small business lender and a wholly owned subsidiary of defendant BLX. 2 (Id. at P 5.)From January 1999 through December 2005, BLC made numerous loans to individuals for the purpose of purchasing and operating shrimp boats in the Gulf of Mexico. (Id. at P 32.) BLC applied for and obtained SBA guarantees for these loans under § 7(a). (Id.) In securing guarantees, BLC certified that it had complied with the SBA's SOPs concerning loan disbursement and borrower creditworthiness, and verified that each borrower had made the required equity injection. (Id.)

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2007 U.S. Dist. LEXIS 93046 *; 2007 WL 4553474

UNITED STATES OF AMERICA, ex rel. JAMES BRICKMAN and GREENLIGHT CAPITAL, INC., Relators, v. BUSINESS LOAN EXPRESS, LLC, f/k/a BUSINESS LOAN EXPRESS, INC., BUSINESS LOAN CENTER, LLC, f/k/a BUSINESS LOAN CENTER, INC., ROBERT TANNENHAUSER, MATTHEW McGEE, GEORGE HARRIGAN, DOES 1-100, Defendants.

Subsequent History: Affirmed by Brickman v. Business Loan Express LLC, 2009 U.S. App. LEXIS 2298 (11th Cir. Ga., Feb. 5, 2009)

CORE TERMS

publicly, shrimp, loans, borrower, boat, public disclosure, original source, allegations, defendants', qui tam, lawsuit, records, arbitrator's, transactions, fraudulent, injection, lender, stock, disclose information, motion to dismiss, deposition, discovery, proceeds, small business, creditworthiness, misrepresented, mortgage