Segepo-FSM, Inc., a manufacturer based in Cold Spring, Kentucky, agreed on Mar. 23 to pay $887,234 to settle allegations that it violated the False Claims Act by improperly obtaining and seeking forgiveness for a Paycheck Protection Program (PPP) loan.
The case is significant because it highlights federal efforts to enforce eligibility rules related to pandemic relief funds distributed under the PPP. The program was designed by Congress as emergency financial assistance for small businesses during the COVID-19 pandemic. Businesses had to certify their eligibility and provide accurate information about their size and other factors when applying for these loans.
According to the settlement announcement, Segepo-FSM allegedly misrepresented its employee count in order to qualify for a second-draw PPP loan of $503,900. The company stated in its application that it had fewer than 300 employees. However, authorities said that as a subsidiary of Dentressangle with foreign affiliates included, Segepo-FSM’s total workforce exceeded this threshold and made them ineligible for the loan and subsequent forgiveness.
The settlement also resolves a lawsuit brought under the qui tam provisions of the False Claims Act by a private citizen acting on behalf of the United States. Under these provisions, individuals can file civil actions regarding fraud against government programs and may receive part of any financial recovery. In this case, the individual who filed will be eligible for part of the settlement proceeds.
The U.S. Attorney’s Office’s Affirmative Civil Enforcement Section handled this matter with support from the Small Business Administration’s Office of General Counsel. Officials emphasized that all claims resolved are only allegations at this stage; there has been no determination of liability.
