Herb Chambers to pay $11.8 million to settle charges of pandemic loan fraud

This story was updated at 9:20 a.m. Thursday, April 10 to include a statement from Herb Chambers Companies CEO Nicolas Gennetti.

Car sales giant Herb Chambers has agreed to pay $11.8 million to the federal government to settle charges that his companies fraudulently applied for and received pandemic relief funds.

Chambers, James Duchesneau, one of the Chambers’ companies’ officers, and the companies themselves agreed to the settlement with the U.S. Small Business Administration after the federal government said they applied for Paycheck Protection Program loans in 2020, the U.S. Attorney’s Office announced Wednesday.

The PPP program was created early in the COVID-19 pandemic to provide emergency financial assistance to small businesses so they could retain staff. After April 30 of that year, the program was changed so businesses that were part of a single corporate group could not receive more than $20 million.

Eight companies owned by Chambers had applied for — but had not received — loans before April 30, 2020.

Because other companies in the corporation had already met the $20 million cap, the loans were canceled. According to the U.S. Attorney’s Office, the companies applied to a different bank several months later, which approved and funded the loans despite the earlier denial.

“The Paycheck Protection Program was created to provide a financial lifeline to small businesses struggling to stay afloat during the unprecedented COVID crisis – not to serve as a funding mechanism for companies that sought to evade program limits,” U.S. Attorney Leah B. Foley said in a statement.

Herb Chambers Companies CEO Nicolas Gennetti said in a statement that the company received “conflicting professional advice” in 2020, which led to the loan applications that were later deemed fraudulent.

“This settlement is the result of conflicting professional advice regarding vague and unclear language in the PPP loan eligibility requirements, which did not contain definitions of key terms when they issued and came out at a time when the SBA repeatedly revised the governing rules,” Gennetti said. “Once the issue had been identified, Mr. Chambers directed that management work cooperatively and diligently with federal authorities to rectify and to resolve the situation. The settlement acknowledges this cooperation. All PPP loan proceeds were used for proper purposes, and there is no allegation otherwise.”

In February, Chambers sold most of his network of car dealerships to Georgia-based Asbury Automotive for $1.34 billion. He retained ownership of one Mercedes dealership in Somerville.

Herb Chambers Companies employs more than 2,200 people in Massachusetts and Rhode Island. The company’s tongue-in-cheek billboards are a staple along Massachusetts highways.