A Silver Spring floral company will pay $1.25 million to the state and federal governments to settle allegations that it told some employees to submit false unemployment insurance claims during the COVID-19 pandemic, according to the U.S. Attorney’s Office for the District of Maryland.
The government brought the civil case against Potomac Floral Wholesale Inc. of 2403 Linden Lane because of a complaint filed in January 2021 by Travis Gabriel, a former sales manager. Gabriel alleged the company’s owner and CEO, Tsur “Jacob” Reiss, violated state and federal laws by instructing employees to apply for unemployment insurance benefits while continuing to work for the floral company without pay, the U.S. Attorney’s Office said in a Wednesday press release.
Reiss and the company instructed employees to do so from March 1 to Dec. 31 in 2020, according to the release.
“Because individuals collecting [unemployment insurance] must be unemployed, not completing work for an employer, Potomac Floral’s and Mr. Reiss’s conduct caused the submission of false [unemployment insurance] claims in violation of the False Claims Act,” the release stated.
Reiss’s attorney, Stephen Stern of the Annapolis-based Kagan Stern Marinello & Beard law firm, said in a statement emailed to MoCo360 Monday that Potomac Floral and Reiss “strongly deny any allegations of wrongdoing.” He noted the settlement agreement states that it is not “an admission of liability” by the company.
“Although neither Potomac Floral nor Mr. Reiss engaged in any wrongdoing or even received any government funds from any of the alleged conduct, rather than expend the substantial time and resources that would be necessary to fight the government in this case, the company and Mr. Reiss thought it was in the best interest of the company and its employees to settle this matter instead,” Stern said.
Maryland Attorney General Anthony Brown said in the release that “exploiting the [unemployment insurance] program to try to avoid paying employees their fair wages is unacceptable.
“All workers deserve to be paid fairly for their time and effort. The unemployment insurance program exists as a critical lifeline to keep individuals and families afloat when someone is laid off or out of work through no fault of their own,” Brown said.
According to Gabriel’s complaint, representatives of the company told him and other employees that they were “furloughed.” The complaint alleges that Reiss told the employees to apply for Maryland’s unemployment compensation and also instructed the furloughed employees to continue working without pay, which was referred to as “volunteering” by management.
An attorney for Gabriel declined to comment Monday.
“This resulted in Mr. Gabriel and at least 35 employees, but possibly over a hundred, working 25-30 or more hours every week without compensation from the company,” the complaint stated. In addition, the alleged conduct resulted in “hundreds, if not thousands, of false claims being submitted to the Maryland Unemployment Insurance Trust Fund.”
At the time, Congress had passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in which the federal government supplemented states’ unemployment compensation systems.
According to the complaint, Gabriel and the other furloughed employees continued working for Potomac Floral without pay due to “uncertainty over how long the COVID-19 pandemic would last and desiring to be rehired once the business returned to full operation.”
The complaint also alleged that Reiss offered to pay Gabriel under the table to “not interfere with unemployment” and when Gabriel informed him that it was illegal to have furloughed employees work and collect unemployment, Reiss retaliated against him. Days later, Gabriel was cut off from access to the Potomac Floral computer system and terminated, the complaint said.
According to the settlement agreement, Gabriel filed a qui tam action in the U.S. District Court for the District of Maryland in Greenbelt. According to the Civil Division of the U.S. Department of Justice, the False Claims Act “allows private citizens to file suits on behalf of the government (called “qui tam” suits) against those who have defrauded the government.”
The settlement agreement states that it is “neither an admission of liability by [Potomac Floral and Reiss] nor a concession by the United States or State of Maryland that their claims are not well founded.”
The terms and conditions include a sum payment of $1.25 million, $250,000 of which is restitution. Potomac Floral and Reiss are ordered to pay $800,852 to the federal government and $449,147 to the state, according to the settlement agreement.
Once the payment is received by the federal government, Gabriel will be paid $243,750. In addition to receiving the payment, Gabriel acknowledged that his claims against Potomac Floral and Reiss, including claims for expenses and attorney’s fees and for wrongful termination are resolved, the agreement states.
In a statement, U.S. Attorney for the District of Maryland Erek Barron said “attempting to unjustly profit from a global pandemic is absolutely wrong” and that unemployment insurance claims are meant for employees who need it when they are laid off.
“During the early stages of COVID-19, the Federal Pandemic Unemployment Compensation program was designed to supplement traditional unemployment insurance for employees laid off during an unprecedented global emergency,” Barron said. “Employers should not use tax dollars to shirk their responsibility to pay employees for their work.”
