Hoffmann Quality Tools USA Inc., in a recent settlement, has coughed up $1.4 million to the federal government after allegations surfaced that the company improperly received a Paycheck Protection Program (PPP) loan. According to a statement by the Department of Justice, Hoffmann was accused of violating the False Claims Act by not counting foreign-affiliated employees in its total workforce numbers, thus making it appear as if it met the PPP size eligibility requirements when it did not.
The backstory here is all about the details. The PPP was part of the lifeline thrown to small businesses in the CARES Act during the height of COVID-19 economic shutdowns. The program was augmented by the subsequent Economic Aid Act enacted on December 27, 2020. Companies applying for a second-draw PPP loan needed to demonstrate that they had no more than 300 employees. A rule published on May 21, 2020, further clarified that foreign employees of affiliate entities must be included in these counts. The government contends that Hoffmann, when it applied for and got its loan forgiven, should've included overseas staff in its headcount, which would have put them over the employee cap for second-draw loans.
The qui tam lawsuit that led to the settlement was initially filed by whistleblower Blockquote, Inc. and is titled United States ex rel. Blockquote, Inc. v. Hoffmann Quality Tools USA Inc., No. 3:24-cv-297 (E.D. Tenn.). U.S. Attorney Francis M. Hamilton III highlighted the importance of the PPP as a "vital resource for small businesses," adding that his office would continue to chase down those who exploited these pandemic programs. "Our office will continue to work with SBA and other federal partners to recover from those who take advantage of vital resources at the expense of the public," Hamilton stated.
The SBA's General Counsel, Therese Meers, had her say, too. She noted that the recovery was a "direct result of the concerted efforts of SBA and the United States Attorney’s Office for the Eastern District of Tennessee to investigate claims of fraud in SBA’s COVID-relief programs and to recover funds lost through false statements from individuals and companies that engage in such activities."
