Wisconsin-based Zund America, Inc. has agreed to pay a hefty sum of $2.3 million to settle claims of violating the False Claims Act by allegedly providing false information to secure a federal Paycheck Protection Program (PPP) loan; this announcement, made by United States Attorney for the Eastern District of Wisconsin, Gregory J. Haanstad, underscores the ongoing crackdown on fraud related to pandemic relief efforts, according to a statement on the U.S. Attorney’s Office website.
The PPP was established in March 2020 as a lifeline for businesses reeling under the economic impacts of COVID-19, it provided loans that the Small Business Administration (SBA) would forgive provided they were used for certain business expenses, and Zund America, an affiliate of the international Zund Holding AG, received a second-draw PPP loan in February 2021, which the SBA later paid off—however, they allegedly did not meet the small business eligibility criteria of having 300 or fewer employees because including its affiliated entities, the company exceeded this number.
"Congress created the PPP to help small businesses and their employees survive the COVID-19 pandemic," Haanstad said. "To make funds available as quickly as possible and save jobs, Congress and the SBA trusted companies to certify that they complied with the eligibility rules. Unfortunately, Zund America did not fulfill its obligations, and instead submitted false information to obtain its second-draw loan. This settlement requires Zund America to repay the SBA plus a substantial penalty,” the U.S Attorney’s Office statement detailed.
The successful outcome of this case is largely attributed to the collaborative efforts of federal agencies and whistleblowers, Therese Meers, SBA General Counsel, highlighted the teamwork involved by stating on U.S. Attorney's Office, “The favorable settlement in this case is the product of enhanced efforts by federal agencies such as the Small Business Administration working with the U.S. Attorney’s Office, SBA’s Office of Inspector General and other Federal law enforcement agencies, as well as private individuals who uncover fraudulent conduct to recover the product of this fraud as well as penalties.”
Originating from a whistleblower complaint, the case against Zund America under the qui tam provisions of the False Claims Act continues and the whistleblower is poised to receive a portion of the settlement proceeds, while the case, United States ex rel. GNGH 2, Inc. v. Zund America, Inc., No. 24-cv-0661, still is pending, Zund America, while paying the settlement, has not admitted to any of the allegations.
