Hoffmann Quality Tools USA Inc. Agrees To Pay $1.4M Following Improper Receipt Of PPP Loan

KNOXVILLE, Tenn. – Hoffmann Quality Tools USA Inc. (“Hoffmann”) has paid $1,400,027.39 to resolve allegations that it violated the False Claims Act by applying for, receiving, and obtaining forgiveness of a loan under the Paycheck Protection Program (“PPP”) for which it was not eligible.

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act, to provide relief to small businesses experiencing economic hardship during the COVID-19 pandemic. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”) was signed into law.  The Economic Aid Act authorized the Small Business Administration to guarantee second-draw PPP loans.  To be eligible for second-draw PPP loans, borrowers were required to have no more than 300 employees, among other requirements.  On May 21, 2020, an Interim Final Rule was published that clarified that affiliated foreign employees were to be included when a borrower calculated their total number of employees for purposes of determining PPP loan eligibility.

The United States contends that Hoffmann failed to include employees employed by foreign entities affiliated with Hoffmann through common ownership when it applied for a second-draw PPP loan and forgiveness thereof.  Had Hoffmann included the employees of the foreign entities affiliated with Hoffmann, Hoffmann would have exceeded the 300-employee size limitation applicable to second-draw PPP loans and would not have been eligible to receive the second-draw PPP loan.

This Settlement resolves a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and receive a share of any recovery.  The qui tam case is captioned United States ex rel. Blockquote, Inc. v. Hoffmann Quality Tools USA Inc., No. 3:24-cv-297 (E.D. Tenn.).

Assistant U.S. Attorneys Ben Cunningham and Alexa Ortiz Hadley represented the United States, with assistance from the Small Business Administration.

“The Paycheck Protection Program (PPP) stood as vital resource for small businesses during the COVID-19 pandemic,” said U.S. Attorney Francis M. Hamilton III. “Our office will continue to work with SBA and other federal partners to recover from those who take advantage of vital resources at the expense of the public.”

SBA’s General Counsel, Wendell Davis, stated, “This recovery is a direct result of the concerted efforts of SBA and the United States Attorney’s Office for the Eastern District of Tennessee to investigate claims of fraud in SBA’s COVID-relief programs and to recover funds lost through false statements from individuals and companies that engage in such activities.”

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

                                                                                                             ###