Fairfield Company Pays $2.9 Million to Settle PPP Loan Fraud Allegations

A Delaware-based company operating in New Jersey has agreed to a multimillion-dollar settlement with federal authorities after allegedly misusing pandemic relief funds intended for struggling small businesses.

Protech Powder Coatings, Inc. will pay nearly $2.9 million to resolve claims that it violated the False Claims Act by fraudulently obtaining and receiving forgiveness for a Paycheck Protection Program (PPP) loan, according to an announcement from Senior Counsel Philip Lamparello of the U.S. Attorney’s Office.

Federal officials contend that Protech Powder, a subsidiary of the Canadian-based Protech Group, applied for and received a second-draw PPP loan in March 2021, later securing loan forgiveness in January 2022. The total amount, including interest, came to approximately $2.02 million.

The government’s investigation revealed that the company allegedly made false certifications regarding its eligibility for the funds. Specifically, authorities claim Protech exceeded the employee size limits established under the program when counting its affiliated companies—a critical requirement for PPP qualification.

“The company knowingly made false statements in its PPP application,” said a government representative familiar with the case. These misrepresentations not only resulted in Protech receiving funds it wasn’t entitled to but also caused the government to pay roughly $60,000 in processing fees to the lender who handled the application.

Under the settlement terms announced this week, Protech will repay $2,907,643 to the federal government—representing both the original loan amount and additional penalties for the alleged fraud.

The case originated from a whistleblower complaint filed under the qui tam provisions of the False Claims Act, which allows private citizens to sue on behalf of the government and share in any recovery. The unnamed whistleblower who brought the allegations to light will receive approximately $290,764 as their share of the settlement.

The PPP program was created by Congress in the early days of the COVID-19 pandemic as part of the CARES Act in March 2020. It represented one of the federal government’s primary economic responses to the crisis, offering potentially forgivable loans to help businesses maintain their workforce during the unprecedented economic shutdown.

To qualify for these loans, businesses were required to certify their eligibility according to specific criteria, including size limitations and demonstration of economic necessity. Second-draw PPP loans, which became available in 2021, had even stricter requirements designed to target businesses that continued to struggle as the pandemic persisted.

The Protech case highlights the federal government’s ongoing efforts to reclaim improperly obtained pandemic relief funds. Since the creation of COVID-19 relief programs, the Justice Department has prioritized identifying and prosecuting fraud cases involving pandemic assistance.

“When companies misrepresent their eligibility for relief programs like the PPP, they divert critical resources away from legitimate small businesses that were struggling to survive during an unprecedented crisis,” noted a federal prosecutor involved in COVID-19 fraud enforcement.

The settlement with Protech Powder Coatings comes amid a broader crackdown on pandemic relief fraud. The Small Business Administration’s Office of Inspector General has identified billions of dollars in potentially fraudulent loans across various COVID-19 relief programs, spurring increased investigation and enforcement actions.

For Fairfield, New Jersey, where Protech maintains operations, the case serves as a reminder of the scrutiny being applied to pandemic-era business assistance programs as federal authorities work to ensure that limited relief funds reached their intended recipients.

Neither Protech Powder Coatings nor its parent company provided immediate comment on the settlement agreement.