PPP Loans Granted To Dozens Of NY Companies With History Of Fraud And Other Violations

At least 56 New York-based companies that have faced penalties or settled cases related to fraud, environmental violations, or workplace offenses over the last twenty years were approved for small business loans under the federal CARES Act program, research by a watchdog group shows. The loans are part of the Paycheck Protection Program administered by the Small Business Administration to help companies stay afloat during the pandemic.

Among the most high-profile cases is that of Zwanger & Pesiri Radiology Group, LLP, a Long Island radiology company that was approved for a loan between $2 million and $5 million.

But four years ago, following a whistleblower's complaint, the company's CEO, Steven Mendelsohn, paid $8.1 million to settle allegations of Medicare and Medicaid fraud with the New York Attorney General’s office.

Mendelsohn was accused of performing unnecessary medical procedures on patients and billing the federal government as part of a fraud scheme that netted him more than a million dollars. Specifically, the government claimed that if a woman came in with a prescription for a transvaginal ultrasound, he would also perform a pelvic exam and bill for it.

Conversely, if a woman came in for a pelvic exam, he would have employees add on a transvaginal ultrasound.

Phil Mattera, research director at Good Jobs First, the Washington, D.C.-based government spending watchdog nonprofit, has been compiling the list of companies that have had problems with the government in the past, noting those companies deserve extra scrutiny.

“Past behavior might be a predictor of future behavior. So it’s possible companies that are getting taxpayer assistance will repeat behaviors of the past, whether it’s mistreating employees or cheating the government on on contracts or cheating consumers,” he told Gothamist.

Mattera wouldn’t go so far as to say that companies with blemished records should not get loans, because the loans are designed to help save jobs and keep small businesses afloat by providing money for things like overhead costs.

At the very least, these companies might merit additional scrutiny to make sure they are not misusing the assistance they’re receiving from the government during the pandemic.

The nonpartisan U. S. Government Accountability Office has said: “We found that the Small Business Administration processed over $512 billion in guaranteed small business loans, but isn’t ready to address fraud risks and hasn’t said how it plans to oversee the loans.”

The big attraction to small businesses is that the loans are forgivable if less than 60 percent is used towards “eligible payroll expenses” like salaries, healthcare, insurance, or retirement, according to Matt Coleman, the SBA’s spokesman for the New York and New Jersey region.

He declined to discuss any of the companies with past penalties or that faced charges.

Coleman said there are several questions required of every borrower to answer in the PPP application. A “yes” answer to any renders a small business or non-profit ineligible for a PPP loan, he said.

Among them: Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) commenced any form of parole or probation (including probation before judgment)?

The case of Zwanger & Pesiri Radiology Group, LLP was settled in 2016, within five years of the PPP loan, which the company got approval for in April 2020. There was a guilty plea in a related case brought by the U. S. Attorney’s Office in the Eastern District of New York. But the guilty plea did not come from Mendelsohn or Zwanger & Pesiri Radiology Group, LLP. Instead, it came from Zwanger-Pesiri, Inc., an entirely new company that Mendelsohn’s attorney filed for just months before the 2016 settlement.

However,Zwanger-Pesiri Inc., pleaded guilty to the Medicaid and Medicare fraud charges, and is listed in court documents as “part of a family of radiology companies headquartered in Long Island.”

Mendelsohn told Gothamist he never pleaded guilty to anything, that it was Zwanger-Pesiri, Inc. that pleaded guilty. He claimed to have no connection to Zwanger-Pesiri, Inc.

His company, Zwanger & Pesiri Radiology Group, LLP, was the company that got the loan.

A call to the bank listed as providing the loan to Mendelsohn’s company, Manufacturers and Traders Trust Company, was not returned.

There were several other companies that qualified for the larger PPP loans which are included on the Good Jobs First list. Among them are Bouchard Transportation Company Inc., based in Melville, which was approved for a federal loan between $5 million and $10 million. In 2013, it paid $13.3 million in a settlement with the National Oceanic and Atmospheric Administration related to an oil spill near Buzzards Bay in Massachusetts that damaged 100 miles of shore and killed wildlife. That was just one of several penalties levied against the company.

Crane-Hogan Structural Systems, Inc., a construction company based in Spencerport, was also approved for loan between $2 million and $5 million dollars under the federal program. Five years ago, the firm pleaded guilty to dumping concrete slurry in the Susquehanna River and was fined $500,000.