Small Business Investment Firm to Pay $1.5 Million in PPP Fraud Settlement

Settlement resolves allegations that Argosy portfolio company exceeded federal loan limits under the CARES Act’s Paycheck Protection Program.

A Pennsylvania-based Small Business Investment Company (SBIC), its affiliate, and a portfolio company have agreed to pay $1.5 million to resolve allegations that a Paycheck Protection Program (PPP) loan was improperly obtained during the COVID-19 pandemic, the U.S. Attorney’s Office announced on Thursday, June 6.

The settlement addresses claims under the False Claims Act against Argosy Investment Partners V, L.P., Argosy Investment Partners Parallel V, L.P., and AIP-ECS Holdings LLC (AIP-ECS). The federal government alleged that AIP-ECS unlawfully received and was granted forgiveness of a $1.2 million PPP loan in excess of federal limits.

According to the settlement agreement, the companies violated eligibility restrictions for “second draw” PPP loans authorized by Congress through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The program, aimed at assisting small businesses in retaining employees during the pandemic, imposed a $4 million cap on total second-draw loans obtained by affiliated entities within a single corporate group. Authorities contend that AIP-ECS’s loan caused the group to exceed that statutory limit.

Although AIP-ECS was ineligible for the loan amount it received, the companies cooperated fully during the federal investigation. The matter was investigated by special agents from the Small Business Administration Office of Inspector General, and the case was prosecuted by Assistant U.S. Attorney Paul W. Kaufman of the Healthcare Fraud Unit.

The case originated from a whistleblower lawsuit, or qui tam action, brought under the False Claims Act. The relator, Zachary Holtzman, will receive $150,000 as part of the government’s recovery.

The case is captioned United States of America ex rel. Zachary Holtzman v. Argosy Capital Company, LLC, et al., Civil Action No. 24-8318.

The Department of Justice encourages individuals with information about fraud involving COVID-19 relief programs to contact the National Center for Disaster Fraud Hotline at 866-720-5721 or submit a report online via the NCDF Complaint Form.