Small Business Investment Company Agrees to Pay $1.5 MILLION to Resolve False Claims Act Allegations

CAMDEN, N.J. – A Pennsylvania Small Business Investment Company (SBIC), its affiliate, and one of its portfolio companies have entered into a settlement agreement with the United States resolving allegations that the portfolio company violated the False Claims Act by taking a loan from the Paycheck Protection Program (PPP) to which the company was not entitled, U.S. Attorney Alina Habba announced today.

According to the allegations in the complaint and the contentions of the United States contained in the settlement agreement:

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial support to the millions of Americans suffering the economic effects caused by the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other business expenses. Under appropriate circumstances, small businesses were eligible to receive these funds even if they were owned or had investment from SBICs.  For the second draw of PPP loans, businesses in a single corporate group were limited to receiving a maximum of $4 million in PPP loans.

Argosy Investment Partners V, L.P. (“AIP V”) is an SBIC, and Argosy Investment Partners Parallel V, L.P. invests in parallel with AIP V.  Among the portfolio companies in which they invested is AIP-ECS Holdings LLC (“AIP-ECS”).  AIP-ECS applied for, received, and received forgiveness of a PPP loan for $1,205,352.00, even though AIP-ECS was ineligible for a loan of that size, because other companies in the portfolio had already received loans that, together with the loan AIP-ECS received, would take the corporate group over $4 million in total second draw PPP loans.

Argosy fully cooperated in the investigation and resolution of this matter. In accordance with the terms of the settlement, Argosy Investment Partners V, L.P., Argosy Investment Partners Parallel V, L.P., and/or AIP-ECS agree collectively to pay the United States $1.5 million.

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 $150,000 as his share in the recovery. 

U.S. Attorney Habba credits special agents of the Small Business Administration, Office of Inspector General, under the direction of Supervisory Criminal Investigator Angelo Palmeri in New York, with the investigation.

The government is represented by Assistant U.S. Attorney Paul W. Kaufman of the Healthcare Fraud Unit.

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 of America ex rel. Zachary Holtzman v. Argosy Capital Company, LLC, et al., Civil Action No. 24-8318.

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Counsel for Argosy and AIP-ECS Holdings: Suzanne Jaffe Bloom, Benjamin Sokoly, Alan Roth, and Christopher Douglass, Winston & Strawn, New York, New York

Relator’s counsel: Darth Newman Esq., Coraopolis, Pennsylvania