Fremont Company Agrees to Pay Nearly One Million Dollars to Resolve False Claims Act Allegations Involving Paycheck Protection Program Loan

SAN FRANCISCO - Fremont-based Innodisk USA has agreed to pay a total of $950,000 to settle allegations that it knowingly violated the False Claims Act when it received and retained a Paycheck Protection Program (PPP) loan, in violation of PPP rules.

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to provide emergency financial support to the millions of Americans suffering the economic effects caused by the COVID-19 pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other business expenses. Applicants for a "second-draw" PPP loan were required to certify, among other things, that they, together with their affiliates, employed no more than 300 employees and that they had a decrease in gross receipts in excess of 25 percent compared to an earlier time period.

Innodisk USA is a subsidiary of Innodisk Corporation, a multinational Taiwanese company that is a service-driven provider of industrial embedded flash and DRAM memory products and technologies. The United States alleged that Innodisk USA applied for and obtained a second-draw PPP loan on March 17, 2021, even though the company was not eligible because it exceeded the requisite size standards when including affiliated entities, including its parent company, and because it had not experienced the requisite revenue reduction. According to the United States, despite knowing that it was not eligible for the second-draw loan, Innodisk USA sought and obtained forgiveness of the loan.

United States Attorney Craig H. Missakian and SBA General Counsel Wendell Davis made the announcement.

The settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act by Blockquote, Inc. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. Blockquote, Inc. v. Innodisk Corp., USA, 3:24-cv-02949-WHO (N.D. Cal.). Blockquote, Inc. will receive $95,000 in connection with the settlement.

Assistant U.S. Attorney Savith Iyengar handled this matter. The resolution resulted from a coordinated effort between the U.S. Attorney's Office for the Northern District of California and SBA's Office of General Counsel.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.