Companies Pay $13 Million to Resolve False Claims Act Liability for Allegedly Receiving Improper Paycheck Protection Program Loans

NEWARK, N.J. – Two Pennsylvania companies and one South Carolina company entered into a settlement agreement with the United States resolving allegations that the companies violated the False Claims Act by taking a total of five Paycheck Protection Program (PPP) loans to which the companies were not entitled, U.S. Attorney Alina Habba announced.

Congress created the PPP in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects of the COVID-19 pandemic. Under the PPP, eligible businesses could receive forgivable loans guaranteed by the Small Business Administration (SBA). Regulations provide various eligibility requirements for the PPP, including limitations on the number of employees and revenue size limits. In their loan applications, borrowers were required to certify that they were eligible for the PPP and that the information they provided was accurate.

According to the contentions of the United States in the settlement agreement:

Rema Tip Top of America, Inc. (“Rema”) is a holding company incorporated in Delaware with number of direct and indirect subsidiaries, including a wholly owned subsidiary based in New Jersey that specializes in automotive and industrial products (Rema Tip Top/North America “RNA”). From April 1, 2020 to October 31, 2021, C&J Welding & Construction (“C&J Welding”), a maintenance and construction company based in Pennsylvania, and an indirect, wholly owned subsidiary of Rema, applied for one PPP loan and received $341,848.78 in loan forgiveness and interest. The United States paid an associated lender processing fee of $11,652.00. Industrial Services Group, Inc. (“ISG”) d/b/a/ Universal Blastco, an industrial corrosion control company based in South Carolina, and an indirect subsidiary of Rema, applied for two PPP loans and received $4,824,288.99 in loan forgiveness and interest. The United States paid associated lender processing fees of $87,828.50. NexGen Industrial Services, Inc. (“NexGen”), an oil, gas, mining, and pipeline construction services company based in Pennsylvania, and an indirect subsidiary of Rema, applied for two PPP loans and received $3,688,618.89 in loan forgiveness and interest. The United States paid associated lender processing fees of $109,529.40.

C&J Welding, ISG, and NexGen were ineligible to receive these PPP loans and loan forgiveness and knowingly failed to fully disclose their affiliates, including Rema, on their PPP loan applications. C&J Welding, ISG, and NexGen falsely certified eligibility for the PPP loans and loan forgiveness they received. Because of their affiliation with each other and with other entities, C&J Welding, ISG, and NexGen exceeded the employee or revenue-based eligibility limits for PPP loans and loan forgiveness and were therefore too large to qualify for the payouts they received.

In accordance with the terms of the settlement agreement, C&J Welding, ISG, and NexGen paid a total of $13 million plus interest. The settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties, called relators, to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. In this matter, the relator is receiving $2.34 million as the share.

U.S. Attorney Habba credited the SBA’s Office of General Counsel for their assistance in this matter.

The government is represented by Assistant U.S. Attorney Susan J. Pappy of the Health Care Fraud Unit in Newark, with assistance from Christopher J. McClintock of the SBA.

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 Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The qui tam case is captioned United States ex rel. Scissors LLC v. Rema Tip Top of America, Inc., et al, Civil Action No. 23-20790.

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

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Counsel for C&J Welding, ISG, and NexGen: Eric W. Sitarchuk, Steven Strauss, Morgan, Lewis & Bockius LLP

Counsel for Scissors LLC: Eric Jaso, Spiro Harrison & Nelson