Michigan-based YAPP USA Automotive Systems, Inc., subsidiary of a Chinese state-owned enterprise, has agreed to a hefty $14.2 million settlement to clear up allegations that it falsely claimed eligibility for a federal Paycheck Protection Program loan, as reported by the Justice Department. The aycheck Protection Program, a life raft thrown by Congress in March 2020, was aimed to keep small American businesses afloat during the rough seas of the COVID-19 economic downturn, with certain eligibility criteria including employee count and company ownership limitations, according to the U.S. Attorney's Office.
Despite YAPP USA's ties to the State Development and Investment Corp., Ltd, owned by the government of the People's Republic of China, the company claimed it was eligible and proceeded to secure and have forgiven a $9.6 million PPP loan; however, the U.S. government contended that both its employee size and government ownership disqualified YAPP USA from receiving such aid, and acting upon these concerns, YAPP USA has now consented to make a $14,208,496 payment to the U.S. "The Department remains committed to pursuing those who violated the requirements of this taxpayer funded program," Deputy Assistant Attorney General Michael D. Granston stated, as reported by the U.S. Attorney's Office.
Moreover, the settlement penalizes the misuse of funds intended for smaller entities struggling to make ends meet—entities that lacked the extensive global affiliations and the backing of a foreign government that YAPP USA did, according to the allegations. Acting United States Attorney Richard G. Frohling of the Eastern District of Wisconsin emphasized the intention behind the program: "Congress and the SBA designed the PPP to help small businesses and their employees during the pandemic, not large companies owned by foreign governments," as stated by the U.S. Attorney's Office.
While YAPP USA cooperated with the investigation, attributing the involved or responsible parties their own internal probe, the resolution of these charges incorporates claims from a qui tam lawsuit filed by whistleblower GNGH2 Inc., who is set to bag a cool $1.42 million from the settlement; such provisions encourage private parties to expose fraudulent acts and give them a slice of the recovery as a reward for their active role in safeguarding the integrity of government aid programs. SBA General Counsel Wendell Davis highlighted the collective effort behind these settlements, marking it as the product of concerted actions by federal agencies, including the Small Business Administration, Department of Justice, and private individuals uncovering fraudulent conduct, all converging their efforts to recover assets and levy penalties against those in breach of trust, as per the U.S. Attorney's Office.
The handling of the matter was a joint endeavor from the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney's Office for the Eastern District of Wisconsin, with assistance from the SBA's counsel and Inspector General's office, as per the official announcement.
