The United States Department of Justice Civil Division announced on Wednesday (February 19) that YAPP USA Automotive Systems Inc., located in Michigan, has agreed to pay $14,208,496 to settle allegations of violating the False Claims Act. The company was accused of submitting false claims to obtain loans under the Paycheck Protection Program (PPP).
In March 2020, the PPP was established by Congress to provide emergency financial assistance to Americans affected by the COVID-19 pandemic. Under the PPP, eligible businesses could receive loans guaranteed by the Small Business Administration (SBA). The program had various eligibility requirements, including limits on the number of employees and excluding certain types of businesses, such as those owned by government entities. Borrowers had to prove their eligibility and provide accurate information when applying for loans.
YAPP USA’s parent company is State Development and Investment Corp. Ltd., a Chinese state-owned enterprise controlled by the Chinese government. Through joint ownership and management, YAPP USA has connections with dozens of companies globally. When applying for its first PPP loan, YAPP USA claimed to be eligible and was granted an initial loan of $9,598,462, which was later forgiven by the SBA.
According to SBA regulations, YAPP USA was ineligible for the PPP loan because the combined number of employees with its affiliates exceeded the allowable limit for its industry, and because it was owned by a Chinese government entity. Consequently, YAPP USA agreed to pay $14,208,496 to settle the allegations in the United States.
YAPP USA cooperated with the U.S. investigation, identified individuals responsible for the misconduct, and disclosed facts and documents collected through its internal investigation. As a result, YAPP USA received commendation from the Justice Department’s Civil Division.
Michael D. Granston, Deputy Assistant Attorney General for the Justice Department’s Civil Division, stated, “The purpose of PPP loans is to assist American small businesses. This is a taxpayer-funded program, and the department will continue to pursue those who violate its requirements.”
Richard G. Frohling, Acting U.S. Attorney for the Eastern District of Wisconsin, said, “Congress and the SBA designed the PPP to help small businesses and their employees during the pandemic, not to aid large companies owned by foreign governments.” He added, “This settlement shows that our office will hold accountable enterprises and individuals who abuse this vital program.”
Wendell Davis, General Counsel for the SBA, noted, “The favorable resolution of this case is a result of strengthened collaboration between the SBA and federal agencies, including the Justice Department, SBA Office of Inspector General, and other law enforcement agencies, along with individuals who uncover fraudulent activities. Together, they have recovered fraud proceeds and penalties.”
Under the False Claims Act’s qui tam provisions, civil settlements may include payments to whistleblowers who file claims. Private individuals can bring lawsuits on behalf of the U.S. and receive compensation. In this case, the qui tam lawsuit was filed by GNGH2 Inc., entitling the company to receive $1,420,849 from the civil settlement.