A St. Louis-area manufacturer is cutting a check for $2,022,250 to the federal government after prosecutors said it should not have received a pandemic-era Paycheck Protection Program loan in the first place.
The payment by VSM Abrasives Corp. settles civil claims that the company was not eligible for a $2 million PPP loan it received in 2021 and later had forgiven.
Settlement Details
The U.S. Attorney’s Office for the Eastern District of Missouri said Thursday that it reached a civil settlement requiring VSM to repay $2,022,250, an amount that reflects the $2 million PPP loan and its forgiveness, according to a press release from the U.S. Attorney’s Office, Eastern District of Missouri.
The deal resolves qui tam allegations brought under the False Claims Act by Blockquote Inc. in a case captioned United States ex rel. Blockquote Inc. v. VSM Abrasives Corp., No. 4:24-cv-00805. Under the agreement, Blockquote will receive $224,694 and the relator’s counsel will receive $20,000. VSM does not admit liability as part of the settlement.
What the U.S. Attorney Said
“We appreciate the efforts of Blockquote and other companies that are ferreting out problematic pandemic loans, as well as VSM’s cooperation,” U.S. Attorney Thomas C. Albus said in the office’s announcement. He added that the resolution “shows our commitment to ensure that government funds are spent appropriately,” language that appears in the same press release.
Company Reaction And Local Context
VSM disputes the allegations, according to First Alert 4. The company’s U.S. website lists a manufacturing facility in O’Fallon, Missouri, and highlights a plant expansion completed in 2022, details VSM uses to showcase its local footprint VSM Abrasives. Prosecutors said VSM’s domestic and affiliated headcount was central to the government’s claims.
Why This Matters
Federal PPP rules require applicants to count employees of domestic and foreign affiliates when applying size limits for eligibility, and certain second-draw loans carried a 300-employee threshold. That 300-employee calculation is at the heart of the relator’s allegations in this case, according to guidance from the U.S. Department of the Treasury. Those affiliation rules have fueled a steady stream of civil recoveries and settlements as agencies and whistleblowers continue to scrutinize pandemic-era loans.
The settlement closes a civil dispute and returns federal funds linked to the loan, while leaving VSM’s denial of wrongdoing on the record. For local manufacturers and advisers, the case serves as a reminder that ownership structures and affiliate headcounts can determine eligibility for emergency federal aid long after the checks have cleared.
