ALBANY, NEW YORK – The United States has reached a $1.9 million settlement with Sark Wire Corporation to resolve allegations that it violated the False Claims Act by applying for a Paycheck Protection Program (PPP) loan for which it was ineligible.“The False Claims Act allows the United States to recover funds obtained through material misrepresentations,” said First Assistant United States Attorney John A. Sarcone III. “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.”Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020, to provide emergency financial assistance to Americans affected by the economic consequences of the COVID-19 pandemic. The CARES Act authorized the Paycheck Protection Program, administered by the United States Small Business Administration (SBA), to provide forgivable loans to eligible small businesses during the national emergency. The PPP provided loans in two draws. For second-draw PPP loans, applicants were required to certify that they and their affiliates, including foreign affiliates, employed fewer than 300 employees and otherwise satisfied applicable program eligibility requirements.As part of the settlement agreement, Sark Wire admitted that it did not meet the applicable employee-count threshold when accounting for its foreign affiliates.
The company acknowledged that it failed to disclose in its PPP loan and forgiveness applications that it was majority owned by a Turkish conglomerate and failed to include the employees of its foreign affiliates in its eligibility calculation. Sark Wire further acknowledged that when employees of its foreign affiliates were included as required under program rules, it exceeded the size threshold for second-draw PPP eligibility and forgiveness.“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,” said SBA General Counsel Wendell Davis.This matter arose from a qui tam complaint filed in the United States District Court for the Northern District of New York. The False Claims Act permits private parties to file suit on behalf of the United States and share in any recovery.
Under the settlement agreement, the relator will receive $190,000 as its statutory share. The case is captioned United States ex rel. GNGH2 Inc. v. Sark Wire Corp., Case No. 1:24-cv-1120 (N.D.N.Y.).The investigation and resolution of this matter were the result of a coordinated effort between the United States Attorney’s Office for the Northern District of New York and the SBA Office of General Counsel.
The United States was represented by Assistant United States Attorney Adam J. Katz and Special Assistant United States Attorney Caitlin Kelly.