Fairfield Manufacturer Pays $2.9M to Settle Alleged Loan Fraud

Federal government alleges Protech Powder Coatings obtained COVID-19 relief funds despite ineligibility under size standards

FAIRFIELD, N.J. — A manufacturing company with operations in Fairfield has agreed to pay $2.9 million to resolve allegations that it improperly obtained a Paycheck Protection Program (PPP) loan during the COVID-19 pandemic, according to an announcement from Senior Counsel Philip Lamparello.

The settlement resolves claims brought under the False Claims Act that Protech Powder Coatings, Inc., a Delaware-registered subsidiary of Canadian-based Protech Group, falsely certified its eligibility to receive and retain over $2 million in federal PPP funds, including both a second-draw loan and full loan forgiveness.

According to the U.S. government’s contentions, Protech Powder Coatings did not qualify for PPP funds because the total number of employees across its corporate affiliates exceeded the program's size limits at the time of application. The PPP, administered by the Small Business Administration (SBA), included eligibility caps based on business size and revenue. Companies applying for loans were required to certify their compliance with these rules.

The $2,016,888 in loan funds included associated lender processing fees of $60,000 paid by the federal government. The Department of Justice alleged that Protech knowingly made false statements about its eligibility and submitted incorrect certifications to secure the loan.

As part of the civil settlement, Protech Powder has paid $2,907,643 to the United States. The resolution also addresses a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. The private party who filed the case — identified as GNGH2, Inc. — will receive $290,764 as a share of the recovery.

The case, U.S. ex rel. GNGH2, Inc. v. Protech Powder Coatings, Inc., No. 24-cv-08805, was filed in the U.S. District Court for the District of New Jersey. Assistant U.S. Attorney Susan J. Pappy of the Health Care Fraud and Opioids Enforcement Unit in Newark handled the case on behalf of the government.

The DOJ emphasized that no determination of liability has been made, and the settlement resolves the allegations without further litigation.

This case is part of a broader federal initiative to address COVID-19-related fraud, particularly in connection with programs like the PPP, which was established in March 2020 to provide forgivable loans to businesses impacted by the pandemic. The public can report suspected fraud to the National Center for Disaster Fraud at 866-720-5721 or online via the Department of Justice’s complaint portal.

The SBA’s Office of General Counsel assisted in the investigation.