Koide Tennessee, Inc. Pays $2M To Resolve False Claims Act Allegations Relating To Second-Draw PPP Loan

KNOXVILLE, Tenn. – Koide Tennessee, Inc. (“Koide TN”) has paid $2,000,000.00 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. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”), enacted on December 27, 2020, subsequently authorized the Small Business Administration (“SBA”) 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, the SBA published an Interim Final Rule clarifying that affiliated foreign employees were to be included when a borrower calculated their total number of employees for purposes of determining PPP loan eligibility.

Koide TN applied for and received a second-draw PPP loan in March 2021 and later obtained forgiveness of that loan.  The United States contends that Koide TN was ineligible for the second-draw PPP loan because it and its affiliates collectively employed more than 300 employees. The United States further contends that Koide TN made certain false statements in its applications for the loan and forgiveness thereof, including falsely certifying that it, together with its affiliates, employed no more than 300 employees.

This Settlement resolves a lawsuit 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. GNGH2, Inc. v. Koide Tennessee Inc., No. 3:24-CV-336 (E.D. Tenn.).

Assistant U.S. Attorneys Alexa Ortiz Hadley and Ben Cunningham represented the United States, with assistance from the SBA’s Office of General Counsel.

“The Paycheck Protection Program (PPP) was designed to support small businesses during the COVID-19 pandemic,” said U.S. Attorney Francis M. Hamilton III. “Our office remains committed to working with SBA and other federal partners to recover from those who disregarded program requirements and obtained funds they were not entitled to.”

“SBA remains firmly committed to pursuing identified perpetrators of fraud on the Paycheck Protection Program,” said SBA's General Counsel Wendell Davis. “This settlement shows the excellent results from coordinated SBA and DOJ efforts to investigate and combat fraud in pandemic relief programs. SBA continues its enhanced efforts to recover funds on behalf of the American taxpayers.”

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.

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