Tennessee Company Settles $2 Million False Claims Lawsuit

In a significant enforcement action against pandemic aid fraud, Koide Tennessee, Inc. has agreed to a $2 million settlement with the U.S. government over allegations it falsely obtained and received forgiveness for a Paycheck Protection Program (PPP) loan it wasn’t eligible to receive.

The metalworking company reportedly misrepresented its workforce size on loan applications, claiming to meet the program’s 300-employee maximum threshold. However, investigators determined that when accounting for Koide’s affiliated companies, the business exceeded this limit, making it ineligible for the second-draw PPP loan it received.

“The Paycheck Protection Program was designed to support small businesses during the COVID-19 pandemic,” said U.S. Attorney Francis M. Hamilton III in announcing the settlement. “This case demonstrates our commitment to ensuring that critical financial relief reaches the businesses Congress intended to help.”

The case emerged through a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allows private citizens to file suits on behalf of the government against entities they believe have submitted false claims for government funds. These provisions typically entitle whistleblowers to receive a portion of any recovered funds.

U.S. Attorneys Alexa Ortiz Hadley and Ben Cunningham represented the government in the case, with support from the Small Business Administration’s Office of General Counsel. Their investigation revealed that Koide Tennessee had made false statements in both its initial loan application and subsequent forgiveness request.

The PPP, established in 2020 under the Trump administration as part of the CARES Act, provided nearly $800 billion in forgivable loans to businesses affected by the COVID-19 pandemic. The program was specifically designed to help smaller enterprises maintain their workforce during widespread economic shutdowns.

This settlement highlights ongoing efforts by federal authorities to reclaim fraudulently obtained pandemic relief funds. Government estimates suggest that billions of dollars in pandemic aid may have been improperly distributed through various relief programs.

“SBA remains firmly committed to pursuing identified perpetrators of fraud on the Paycheck Protection Program,” said SBA General Counsel Wendell Davis. “This settlement shows the excellent results from coordinated SBA and DOJ efforts to investigate and combat fraud in pandemic relief programs.”

Davis emphasized that the agency continues “enhanced efforts to recover funds on behalf of American taxpayers,” signaling that more enforcement actions may be forthcoming against other companies that may have improperly received pandemic relief.

Koide Tennessee is part of a larger global operation with facilities in multiple countries. The company specializes in precision metalworking and manufacturing components for various industries. The settlement represents a significant financial penalty and underscores the risk companies face when misrepresenting their eligibility for government programs.

Federal agencies have established dedicated channels for reporting suspected fraud related to COVID-19 relief programs. The public can contact the Department of Justice’s National Center for Disaster Fraud Hotline or submit complaints through the NCDF Web Complaint Form.

The Koide settlement demonstrates that even years after the PPP program’s implementation, federal authorities continue to investigate potential abuses of pandemic relief funds. Similar enforcement actions have targeted businesses across various sectors, from healthcare to construction, that allegedly exploited emergency programs designed to stabilize the economy during an unprecedented crisis.

As pandemic relief programs wind down, compliance experts anticipate continued scrutiny from federal regulators and enforcement agencies seeking to recover improperly obtained funds and hold responsible parties accountable.