In a recent move to address alleged misuse of federal relief funds, Cosmax USA has reached a settlement to pay $6 million for false claims related to its acquisition and forgiveness of loans under the Paycheck Protection Program (PPP). As reported by the U.S. Department of Justice, the settlement includes a $3 million restitution and arises from a lawsuit filed by whistleblower Alexander Novik, a former employee.
The allegations against the former Solon, Ohio-based manufacturer, which include providing false information to secure pandemic relief loans, were serious. Specifically, the authorities contended that Cosmax USA and Nu-World, which merged with Cosmax in 2023, exaggerated employee counts and misrepresented the status of their workers to meet qualification criteria for the PPP funds. This program, established by the CARES Act in 2020, was designed to support small businesses reeling from the blows of COVID-19.
Details of the resolution outlined two main violations by the companies. The first claim mentioned by the Justice Department involved Nu-World Corporation’s application for a First-Draw PPP loan in April 2020, and a subsequent forgiveness application in 2021, which reportedly included payments to individuals not actually employed by the company. The second claim focused on Cosmax USA’s Second-Draw PPP loan application, which falsely certified the company as a small business under the 300-employee threshold – a figure that was inaccurately reported when considering affiliated employees.
Under the False Claims Act's whistleblower provisions, individuals such as Novik have the opportunity to file suit on behalf of the U.S. government and may receive a share of the funds recovered through legal proceedings. This case was resolved through collaborative efforts between the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Ohio, and the Small Business Administration’s legal teams.
