Chroma Systems Solutions Agrees to Pay Over $1.9 Million to Resolve Allegations of PPP Loan Fraud

BOSTON – Chroma Systems Solutions, Inc. (Chroma Systems) has agreed to pay over $1.9 million to resolve False Claims Act allegations that the company falsely certified its eligibility for a Paycheck Protection Program (PPP) loan.

As detailed in the settlement agreement, Chroma Systems admitted that in January 2021 it applied for a second draw PPP loan and certified that it was eligible to receive the loan under the PPP rules. When it applied, Chroma Systems, together with its foreign affiliate, had over 1,800 employees.  

Congress enacted the Coronavirus Aid, Relief, and the Economic Security Act (CARES Act) on March 29, 2020, to provide emergency financial assistance to the millions of Americans who were suffering the economic effects of the COVID-19 pandemic. The CARES Act authorized forgivable loans to small businesses for job retention and certain approved expenses through the PPP. On May 5, 2020, the SBA issued guidance that explained that, for purposes of meeting size eligibility requirements (i.e. whether the applicant is a “small business concern” or otherwise falls below the cap on employee headcount) an applicant must count all of its employees and the employees of its U.S. and foreign affiliates, absent a waiver of or an exception to the affiliation rules. SBA’s guidance also made clear that it would only enforce this rule prospectively, i.e. for applications made on or after May 5, 2020. On Jan. 8, 2021, SBA announced the availability of a second round of PPP loans, known as the “second draw” PPP loans. Businesses with more than 300 employees were not eligible for second draw loans.

The settlement credits Chroma Systems for cooperation under the Department of Justice’s Guidelines for Taking Voluntary Disclosure, Cooperation and Remediation into Account in False Claims Act Matters.  

United States Attorney Leah B. Foley and the U.S. Small Business Administration made the announcement today. Assistant United States Attorney Steven Sharobem of the Affirmative Civil Enforcement Unit handled the case.