Frankfort Company Pays More Than $3.8 Million to Resolve Improper Paycheck Protection Program Loan

FRANKFORT, Ky. – A Frankfort-based steel wheel manufacturer, Topy America, Inc., agreed to pay the United States $3,840,188.19 to resolve allegations that it improperly obtained a Paycheck Protection Program (PPP) loan from the U.S. Small Business Administration (SBA) for which it was not eligible.

Congress created the PPP in March 2020 to provide emergency financial assistance to small American businesses struggling to pay employees and other expenses during the COVID-19 pandemic. Under the PPP, eligible small businesses could receive forgivable loans guaranteed by the SBA. When applying for PPP loans, borrowers were required to certify that they were eligible for the requested loans and that the information they provided was true and accurate. Regulations provided various eligibility requirements for the PPP, including limitations on the number of employees.

The settlement resolves allegations that Topy America falsely certified it was eligible to apply for and receive forgiveness of a second-draw PPP loan.  In January 2021, Topy America applied for a second-draw PPP loan for $2,000,000, representing that it had fewer than 300 employees. The government contends that, together with its foreign affiliates, Topy America had more than 300 employees and was therefore ineligible for that loan. Based on its false certification, Topy America received the loan and ultimately received forgiveness of the loan. Topy America cooperated with the United States’ investigation and agreed to compensate the United States for its error.

“Our office is committed to holding accountable businesses and individuals who improperly obtained COVID-19 relief funds,” said Acting U.S. Attorney Paul McCaffrey. “Topy America quickly and responsibly addressed the concerns raised by the United States, and we expect that other PPP recipients who did not follow the applicable rules will do the same.”

“This settlement reflects SBA’s commitment to identifying and pursuing those who perpetrated fraud on the Paycheck Protection Program," said SBA's General Counsel Wendell Davis. "This settlement also exhibits the excellent results from effective SBA and DOJ collaboration to combat the unconscionable misuse of critical pandemic relief programs. SBA continues its enhanced efforts to uncover such misconduct and recover those funds on behalf of the American taxpayers.”

The Government’s work in this investigation illustrates its commitment to combatting COVID-19 fraud. The United States encourages anyone with information about potential fraud involving COVID-19 to report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form. PPP recipients also may voluntarily disclose self-discovered evidence of fraud involving the PPP to U.S. Attorney’s Offices.

The settlement resolves lawsuits brought by private citizens under the qui tam provisions of the False Claims Act.  Under those provisions, a private party can file a civil action on behalf of the United States, thereby bringing allegations of fraud to the Government’s attention, and share in any financial recovery.  As part of this resolution, the individuals who filed the qui tam complaints are eligible to receive a portion of the settlement proceeds.  The civil cases are captioned United States ex rel. GNGH2 Inc. v. Topy America, Inc., Case No. 3:24-cv-0003-GFVT and United States ex rel. Blockquote, Inc. v. Topy America, Inc., Case No. 3:24-cv-0028.

This matter was handled by Assistant U.S. Attorney Meghan Stubblebine, with assistance from the SBA’s Office of General Counsel. The claims resolved by the settlement are allegations only; there has been no determination of liability.

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