Sark Wire Corporation has agreed to pay $1.9 million to resolve allegations that it violated the False Claims Act by applying for a Paycheck Protection Program (PPP) loan for which it was not eligible, according to a March 19 announcement from federal authorities.
The case highlights the importance of accurate reporting and compliance with eligibility rules for federal relief programs, especially those established during the COVID-19 pandemic. The PPP, created under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), was designed to provide forgivable loans to small businesses affected by the economic impact of COVID-19.
First Assistant United States Attorney John A. Sarcone III said, “The False Claims Act allows the United States to recover funds obtained through material misrepresentations. PPP eligibility rules required counting employees of foreign affiliates. Sark Wire didn’t do that; if it had, it would not have been eligible for the PPP loan it received. I commend Sark Wire for promptly acknowledging its ineligibility and proactively initiating settlement discussions with the United States.”
As part of the settlement agreement, Sark Wire admitted that it did not meet employee-count requirements when including its foreign affiliates. The company also acknowledged failing to disclose majority ownership by a Turkish conglomerate and omitting employees of foreign affiliates in its applications for both the loan and forgiveness. When these employees were included as required by program rules, Sark Wire exceeded the size threshold for second-draw PPP eligibility and forgiveness.
SBA General Counsel Wendell Davis said, “The favorable settlement in this case is the product of enhanced efforts by federal agencies such as the Small Business Administration, including SBA’s Office of General Counsel, working with the U.S. Attorney’s Office and other federal law enforcement agencies to recover the proceeds of this fraud as well as penalties.”
This matter began with a qui tam complaint filed in United States District Court for the Northern District of New York under provisions allowing private parties to file suit on behalf of the government and share in any recovery. Under this agreement, the relator will receive $190,000 as their statutory share.
