Trucking company owner fights back over PPP loan fraud charges
In June, federal authorities came after Xavier Bailey, owner of Bailey’s Trucking LLC, based in Tutwiler, Miss., for a Paycheck Protection Program loan for which he wasn’t eligible.
Now Bailey is suing the bank that facilitated the loan, saying the bank officers should have known he wasn’t eligible.
Bailey’s Trucking (U.S. DOT 3540929) has one truck and one driver, according to the Federal Motor Safety Administration’s SAFER website.
The PPP loans were made available through the Coronavirus Aid, Relief, and Economic Security Act enacted in March 2020. The loans were intended to help small businesses retain employees and stay in business. The loans were administered by the Small Business Administration. A participating lender processed the loan applications and supplied the money if it was approved by the SBA. The interest and principal of the loan were entirely forgiven if used within a designated time period and a certain amount was used to meet payroll expenses.
Loan application and lawsuit
In June, the federal prosecutors filed a lawsuit against Bailey saying he had knowingly presented a fraudulent claim for a PPP loan in April 2021 through Blue Ridge Bank. The lawsuit says Bailey Trucking received a loan for $143,738. It also says Bailey misrepresented his company’s payroll costs to get a larger loan.
Among the misrepresentations, according to the U.S. Attorney’s Office for the Northern District of Mississippi:
Bailey said he had nine employees prior to the pandemic.
The company was not registered with the Mississippi secretary of state until Dec. 23, 2020.
Bailey claimed to use “1099 workers” that he claimed as employees, which violated the loan eligibility criteria.
The U.S. Attorney’s Office seeks in its June lawsuit the full loan amount plus loan processing fees and interest.
Bailey’s counterclaim
The gist of Bailey’s counterclaim lawsuit filed Dec. 19, is that Blue Ridge Bank failed to request pertinent documents or to verify compliance with loan requirements before processing the PPP loan.
In addition, the bank “used automated systems to change applications to obtain easier approvals and higher payouts, which benefited the bank financially,” Bailey claimed in the lawsuit.
In so doing, Bailey argues the bank breached its fiduciary responsibility to him, meaning the bank acted in its own interests rather than those of the loan applicant.
“Blue Ridge Bank breached a fiduciary duty to Mr. Bailey when approving Bailey’s Trucking LLC for funds it knew or should have known the company was ineligible to receive by failing to request proper documents and paperwork – since it knew the standards required by the Small Business Administration,” Bailey’s attorneys wrote.
Other PPP loan problems
Others have been accused of fraud claims related to the PPP loan program. Here are some of the cases:
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