Source: United States Department of Justice (National Center for Disaster Fraud)
Marc H. Silverman, Acting United States Attorney for the District of Connecticut, today announced that MacDermid Incorporated, a Waterbury-based company that provides chemical products and technical services, has paid $2,226,623.62 to settle False Claims Act allegations that Coventya Inc., a company MacDermid Incorporated acquired in 2021, falsely certified its eligibility to receive a Paycheck Protection Program loan.
Congress created the Paycheck Protection Program (“PPP”) in March 2020 under the Coronavirus Aid, Relief and Economic Security (CARES) Act. The PPP was administered by the Small Business Administration (SBA), and was intended to support small businesses struggling to pay employees and other expenses during the COVID-19 pandemic. 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. In December 2020, Congress approved funding for a second round of forgivable PPP loans, which became available to borrowers beginning in January 2021. This “second-draw” loan program included additional eligibility requirements.
One of the eligibility requirements for receiving a second-draw PPP loan was that the entity could employ no more than 300 individuals. The applicant was required to include in its employee count the employees of any foreign and domestic affiliate entities.
The settlement resolves allegations that Coventya Inc., a company involved in the manufacture and international distribution of chemicals, falsely certified it was eligible to apply for and receive forgiveness of a second-draw PPP loan in 2021. In April 2021, Coventya applied for a second-draw PPP loan for $1,075,000, representing that it had fewer than 300 employees. The government contends that, together with its foreign affiliate, Coventya had more than 300 employees and was therefore ineligible for that loan. Based on its false certification, Coventya received the loan. After receiving this PPP loan, Coventya sought and received forgiveness of the total loan amount of $1,081,061.81, including $1,075,000 in principal and $6,061.81 in interest, which the SBA paid to the lender.
Coventya was acquired by MacDermid Incorporated in September 2021, and is now known as MacDermid, Incorporated.
“PPP loans were intended to help small businesses and their employees suffering the economic effects caused by the pandemic,” said Acting U.S. Attorney Silverman. “This office is committed to pursuing those who violated the requirements of pandemic assistance programs and holding them accountable.”
The False Claims Act allegations resolved by the settlement were originally brought in a lawsuit filed in the U.S. District Court in Connecticut by a relator, or whistleblower, under the qui tam provisions of the False Claims Act. These provisions allow private parties to bring suit on behalf of the government and to share in any recovery. The relator, GNGH2 Inc., will receive $222,662.36 as its share of the recovery.
The case resolved by this settlement is U.S. ex rel GNGH2 Inc. v. MacDermid Incorporated, as successor in interest to Coventya, Inc. (Docket No. 3:24-cv-1480).
This case was prosecuted by Assistant U.S. Attorney Sara Kaczmarek, with assistance from SBA’s Office of General Counsel.
Individuals with information about allegations of fraud involving COVID-19 are encouraged to report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721, or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.