CRHA defaults in lawsuit seeking $1.5 million over ineligible PPP loans, judgment still pending

The government entity that oversees public housing and other rental units in the City of Charlottesville could owe the federal government over $1.5 million in damages and fines after failing to respond to a lawsuit that alleges the agency used false pretenses to receive early COVID relief funds.

“The time for the defendant to appear, answer, or otherwise defend having expired, the undersigned Clerk does hereby enter default,” reads a March 24 legal document in the case against the Charlottesville Redevelopment and Housing Authority.

On March 11, 2024, an Oregon-based realtor filed a lawsuit in the U.S. District Court for the Western District for Virginia against multiple organizations for using false statements in order to get Payment Protection Program (PPP) loans in the early days of the COVID-19 pandemic.

The Charlottesville Redevelopment and Housing Authority is the only one on the list that did not respond to a summons issued this past February ordering a response to the claims. As a result, plaintiff J. Bryan Quesenberry is seeking a default judgment enabling a penalty that is three times the amount CRHA received.

CRHA Executive Director John Sales did not respond to questions sent on Thursday afternoon. The City of Charlottesville directed questions to CRHA.

Qui tam case filed under the False Claims Act

Acting as his own attorney under a provision of False Claims Act, Quesenberry is seeking to recover money he argues was taken incorrectly by government agencies that were not eligible to receive.

“This action seeks to remove more than $6 million wrongfully loaned to the Defendants through the Federal Government’s Payroll Protection Program,” reads paragraph 2 of an amended complaint. “The PPP provided a pathway to borrowers to receive forgiveness of these loans.”

Other entities named are the Breaks Interstate Commission of Dickenson County, the Rockbridge Regional Library in Rockbridge County, the Crossroads Community Services Board in Prince Edward County, and the Rappahannock-Rapidan Community Services Board (also known as Encompass Community Supports).

The complaint alleges that all are government-owned or government-controlled and were not eligible for the PPP loans but were instead able to apply for other relief such through the American Rescue Plan Act and State and Local Fiscal Recovery Programs.

The suit is known as a qui tam case which allows private individuals to sue on behalf of the federal government to recover damages and to share some of what is collected. Quesenberry is licensed to practice law in Utah and Oregon. The plaintiff also attains a title called “Relator.”

PPP was a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act as part of the initial federal relief at a time when the pandemic forced a shutdown of the economy.

“The [Small Business Administration] received funding and authority through the CARES Act to modify existing loan programs and establish the new PPP loan program to assist small businesses nationwide adversely impacted by the coronavirus pandemic,” reads paragraph 28 of the amended complaint.

Anyone seeking a loan had to certify they were eligible under the rules in effect. The complaint points to both a provision in the CARES Act and the Code of Federal Regulations that prevented any level of government from seeking a PPP loan.

“A government-owned entity is an entity owned by a municipality or other political subdivision,” reads paragraph 39.

More from the claim:

• In paragraph 44, Quesenberry alleges that CRHA is a government-entity created after a referendum on April 15, 1954. CRHA is governed by a board appointed by City Council, has the power of eminent domain, is subject to Virginia’s public record laws, and is considered a political subdivision of Virginia.
• Paragraph 46 points to CRHA’s own description of itself as a government entity in its own policies.
• Paragraph 78 states that CRHA was approved for a first loan of $202,293 on April 30, 2020 and the loan was forgiven on December 31 of that year for a slightly higher amount due to interest.
• Paragraph 79 states that CRHA was approved for a second loan of $270,932 on March 15, 2021 and this was forgiven on November 8, 2021 at a slightly higher amount.

Count 1 alleges that all of the defendants knowingly submitted false claims and seeks damages three times the amount received by each entity.

Count 2 alleges that defendants made false records in support of their claim.

Quesenberry wants the cost of his attorney’s fees and expenses covered as well as any other relief the Court would approve. He also sought a jury trial for all defendants.

All other parties respond to the case except CRHA

As part of the qui tam process, cases are sealed for two months while officials in the federal government evaluate the claims to determine if they will join in or otherwise get officially involved.

In this case, the United States government asked for more time and gave notice they would not intervene on June 23, 2025. The case remained sealed until a series of steps were taken including the serving of defendants. That took place after Quesenberry filed the amended complaint on November 17, 2025.

An electronic summons was issued against the defendants on November 20, 2025. None responded until after a 70-day notice was issued on January 22, 2026.

A proof of service on Rockbridge Regional Library was recorded on January 22, 2026. Others followed in the days afterward for other defendants.

John Sales, Executive Director of the Charlottesville Redevelopment and Housing Authority, was served on February 17, 2026. An answer was due on March 10.

Attorneys from other defendants began to respond to the case. On February 27, 2026, counsel for the Rappahannock Rapidan Community Services Board filed a motion to dismiss that was succinct.

“Plaintiffs have failed to state a claim upon which relief can be granted,” reads the motion.

A follow-up from the RRCSB on March 19, 2026 offers eight pages debunking Quesenberry’s claim in many details.

On March 19, Quesenberry filed for a motion of default against CRHA for not responding because an answer had not been given by March 10.

“That deadline has passed and, as the docket sheet reflects, Charlottesville Redevelopment has failed to plead or otherwise defend this action,” reads the motion.

The court clerk filed an entry of default on March 24. Copies were to be mailed to all parties including the CRHA.

On March 26, attorneys for the Breaks Interstate Park Commission filed a motion to dismiss the case for lack of jurisdiction and failure to state a claim.

On March 31, Magistrate Judge Joel C. Hoppe agreed to reverse a default against the Rockbridge Regional Library.

On April 6, the court received notice that mail to CRHA sent to 500 First Street South had been returned with a notice from the postmaster: “Return To Sender – Attempted – Not Known – Unable to Forward.”

Attorneys for other defendants continued to work on behalf of their clients to respond to the lawsuit. By April 30, 2026, none appeared on behalf of the CRHA. On that day, Quesenberry filed for a motion of default judgement that sharpened what he believed the United States government is owed.

“The declaration filed herewith shows damages in the sum certain of $1,528,642.73,” reads what the docket identifies as document #64. That amount includes $1,428,637.98 in PPP loans, lender fees of $70,983.75, civil penalties of $28,616, and costs of $405.

This document also states that Quesenberry as the Relator is entitled to between 25 and 30 percent of the proceeds.

“Those sums cannot be calculated until the civil penalties and damages are paid and therefore do not need to be incorporated into the judgment, which is without prejudice to the subsequent collection of such sums by the United States and Relator,” reads section (f) of the calculations.

The record shows activity in court from other defendants. For instance, on February 27, 2026, the Rappahannock Rapidan Community Services Board filed a motion seeking dismissal for failure to state a claim. This was incorporated into a June 5 hearing along with similar motions from the Rockbridge Regional Library and others.

As a result of that hearing:

• The court agreed to a motion from Quesenberry to sever the Crossroads Community Services Board. An order has not yet been made but the amended complaint contains additional allegations against that organization.
• Arguments were made in the Rappahannock and Bridges cases. An order has not yet been made.
• The court addressed a “possible servicing addressing issue” related to CRHA.

On June 10, an oral order was entered with the the following entry in PACER, the way people can get access to the materials in federal court cases.

“Relator’s Motion for Default Judgment as to Charlottesville Redevelopment & Housing Authority (Dkt. 64) is taken under advisement. Mail to the Authority has been returned as undeliverable. Relator is hereby ORDERED to serve the Motion for Clerk’s Entry of Default (Dkt. 49), the Clerk’s Entry of Default (Dkt. 53), and the Motion for Default Judgment (Dkt. 64) to the Authority in compliance with Rule 4 of the Federal Rules of Civil Procedure, and to mail these pleadings to the post office box listed as the mailing address for the Authority. Entered by District Judge Robert S. Ballou on 06/10/2026.”

Judge Ballou has not yet ruled on the motion for default judgement.

Requests for comment were sent out to both Charlottesville Redevelopment and Housing Authority and the City of Charlottesville Thursday afternoon. They were:

• Is the city aware of this suit, identified in PACER as  3:24-cv-00016-RSB-JCH? 
• Who does the city consider to be the attorney of record for CRHA?ternoon. The questions to the city were:

Charlottesville City Attorney John Maddux responded on Friday.

“The CRHA is an independent political entity separate and apart from the City of Charlottesville, and the City does not provide CRHA with legal advice,” Maddux said. “Any questions about the identity of its counsel should be directed to CRHA.”

City Council has appointed the members of the CRHA’s Board of Commissioners since its formation in the 1950’s. While there is legal separation between the two entities, there has been increased cohesion in recent years. For instance:

• Charlottesville now pays $300,000 of CRHA’s operating expenses each year beginning with the FY2027 budget
• Charlottesville owns half of the “Dogwood portfolio” of low-income rental houses having paid half of the $10 million purchase from from Woodard properties.
• The city has provided millions toward redevelopment projects in recent years and is expected to do so into the future as two phases of Westhaven are pursued.
• Last August, City Council and the CRHA Board had a work session to discuss communications issues.

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