Machining Supplier Settles PPP Lawsuit for $1.5 Million

SW North America, Inc., a machining and automation supplier, agreed to pay $1,520,958.14 to resolve allegations that the company violated the False Claims Act by applying for and receiving a loan it was not eligible for in the Small Business Administration's (SBA) Paycheck Protection Program (PPP), announced Acting United States Attorney for the Northern District of Texas Chad E. Meacham.

Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide emergency loans to small businesses suffering economic hardship due to the COVID-19 pandemic. Whether an applicant qualified for a PPP loan depended on various factors, including employee-count size standards for applicants.

SW North America applied for and received a PPP loan in the principal amount of $1,204,400 in 2021, which was later forgiven in full. It was alleged in the lawsuit, however, that SW North America with its affiliates exceeded the applicable size standards for the loan, and was ineligible for that reason.

"PPP loans were intended, first and foremost, to help eligible small businesses during the COVID-19 pandemic," said Acting United States Attorney Chad E. Meacham. "This office will continue to aggressively pursue loan recipients who were not eligible to obtain taxpayer funds, whether due to their size or for any other reason."

The settlement resolved a lawsuit filed under the qui tam or whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States and share in a portion of the government's recovery. The qui tam lawsuit is case number 3:24-CV-1123-N in the U.S. District Court for the Northern District of Texas, and the qui tam relator, GNGH2 Inc., will receive $187,003.05 in connection with the settlement.

The government was represented in the lawsuit by Assistant United States Attorney Andrea Hyatt, with assistance from Amber Perez of the SBA. The civil claims settled by the agreement are allegations only; there has been no determination of civil liability.