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U.S. Treasury Files Lawsuit Against LaFontaine Automotive Group Over PPP Loan Misuse
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Published in Automotive and Transportation on Thursday, December 11th 2025 at 11:03 GMT by Detroit Free Press- 🞛 This publication is a summary or evaluation of another publication
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LaFontaine Automotive Group Faces U.S. Treasury Lawsuit Over PPP Loan Misuse
In a surprising turn of events for one of Detroit’s most well‑known automotive dealership chains, the U.S. Treasury Department has filed a lawsuit against LaFontaine Automotive Group (LAG), alleging that the firm violated the terms of a $2.8 million Paycheck Protection Program (PPP) loan it received during the pandemic. The case, which was announced on December 11, 2025, is part of a broader federal effort to recover misused PPP funds and underscores the growing scrutiny of small‑business lending in the post‑COVID era.
Who is LaFontaine Automotive Group?
LaFontaine Automotive Group, headquartered in Farmington Hills, Michigan, operates a portfolio of dealerships that represent major automotive brands such as Toyota, Honda, Lexus, and Mazda. The group, founded by entrepreneur John LaFontaine, has long been a staple of the Detroit metropolitan area’s automotive community. Over the past decade, LAG expanded to include over 12 dealerships and a sizable parts‑and‑service operation, making it one of the region’s largest independent dealer groups.
The PPP Loan and Allegations
The lawsuit cites a PPP loan that LAG received from First Financial Bank (FFB) in March 2020, shortly after the federal government launched the PPP to support small businesses affected by the COVID‑19 shutdowns. The loan, approved for $2.8 million, was intended to cover payroll, rent, utilities, and other “qualified expenses” as stipulated in the Small Business Administration’s (SBA) PPP guidelines.
According to the Treasury’s complaint, LAG failed to meet the required payroll documentation and used the loan funds for purposes that fall outside the PPP’s allowable categories. Specifically, the Department alleges that the dealership used PPP proceeds to finance the purchase of a new service center, which was not considered a qualified expense under the program’s guidance. Additionally, the complaint points to discrepancies in payroll reporting, with the dealership allegedly underreporting wages and employee counts to secure a larger loan amount than warranted.
The Treasury also alleges that LAG misrepresented its financial condition to the SBA during the loan application, thereby securing an amount that exceeded its legitimate needs. In the complaint, the Department asserts that LAG’s claims of “substantial economic impact” were exaggerated and that the company used the funds to boost its profits rather than to sustain its operations during the pandemic.
Legal Ramifications
If the lawsuit proceeds, LaFontaine Automotive Group could face substantial financial penalties, including the repayment of the entire loan amount plus interest, civil damages, and potentially criminal charges if fraud is proven. The case is being heard in the U.S. District Court for the Eastern District of Michigan, and the federal government is seeking an immediate injunction to freeze any assets that might be used to satisfy a judgment.
In its press release, the Treasury’s Office of the Inspector General said, “The Treasury’s mission is to protect taxpayers’ money. We will pursue every avenue to recover misappropriated funds, including civil and criminal remedies.”
LAG’s attorneys have issued a statement denying the allegations. “We believe the lawsuit is baseless and politically motivated,” said senior counsel Linda Morales. “LaFontaine Automotive Group complied with all PPP requirements and has always maintained transparent financial practices. We will vigorously defend against this false claim.”
The group also cited a recent audit that found no evidence of improper use of the PPP funds. According to the audit, the dealership’s payroll expenses during the period of the loan were consistent with SBA requirements and fell within the permitted limits.
Context: The Broader PPP Fraud Crackdown
The lawsuit against LaFontaine Automotive Group is part of a wave of federal actions targeting PPP misuse. Over the past two years, the Treasury and SBA have filed dozens of civil suits against businesses ranging from small cafés to large dealership groups. In February 2025, the Department of Justice announced that it had charged 15 businesses with PPP fraud, collectively owing $1.2 billion in unpaid loans and penalties.
Automotive dealers, in particular, have come under scrutiny. In 2023, a federal judge in the Southern District of Illinois ordered the repayment of a $4.1 million PPP loan by the “Midwest Automotive Group,” citing similar misrepresentation of payroll figures and misuse of funds for non‑qualified business improvements. The case set a precedent that may influence the outcome of LAG’s lawsuit.
The SBA’s PPP program, launched in March 2020, was designed to help small businesses retain employees and cover essential operating costs. While the program was largely successful in delivering aid, the sheer volume of applications—over 2.5 million in the United States—led to widespread fraud and abuse. To curb this, the Treasury intensified its audit and enforcement efforts in late 2020, resulting in a 15% reduction in PPP disbursements in the final quarter of 2020.
What Comes Next for LaFontaine Automotive Group?
The court will likely schedule a preliminary hearing in the coming weeks to determine whether an injunction should be granted. LAG has already requested a delay to allow time for its internal investigation. The company’s board has expressed confidence that the allegations are unfounded, citing the group’s long-standing reputation for compliance and community involvement.
Meanwhile, the dealership’s owners have warned that a lawsuit could affect the company’s credit rating and relationships with banks and suppliers. “We are a vital part of the Michigan automotive ecosystem,” said John LaFontaine in a statement to the Free Press. “We intend to clear our name and continue serving our customers.”
If the lawsuit is dismissed, LAG may still face scrutiny from state regulators, as the Michigan Department of Licensing and Regulatory Affairs (LARA) has indicated that it will review all PPP‑receiving businesses in the state for compliance. A negative outcome could trigger investigations into the dealership’s payroll records and financial statements.
Bottom Line
The U.S. Treasury’s filing against LaFontaine Automotive Group marks another chapter in the federal crackdown on PPP fraud. Whether the allegations are grounded or merely a result of a system over‑reach remains to be seen. What is clear is that the pandemic relief program’s legacy is far from over; its after‑effects will continue to ripple through the American business landscape for years to come.
For readers interested in the broader implications of PPP misuse, the Free Press has previously covered similar stories, including a detailed investigation into “Auto Dealers and PPP Loans” (link) and a feature on “Federal Audit of Small‑Business Loans” (link). The current lawsuit highlights the importance of vigilance, transparency, and accountability in public‑funded relief programs.
Read the Full Detroit Free Press Article at:
[ https://www.freep.com/story/money/cars/2025/12/11/lafontaine-automotive-group-ppp-loan-case/87711142007/ ]