Mutoh America Inc., a manufacturer in the large format printing industry and a technology distributor of drafting machines operating in Arizona, has admitted to making material misrepresentations in its applications to receive and have forgiven a Paycheck Protection Program (PPP) loan.
Mutoh also agreed to pay $900,000 to settle allegations that it violated the False Claims Act by making those material misrepresentations. The civil settlement includes the resolution of claims brought under the whistleblower provisions of the False Claims Act. Under those provisions, a private party – in this case Verity Investigations – can file an action on behalf of the United States and receive a portion of any recovery. Verity Investigations, will receive $90,000 as its share of the settlement.
Mutoh is a wholly owned subsidiary of Mutoh Holdings, Inc., a publicly traded company in Japan.
The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted in March 2020 to provide emergency financial assistance to the millions of Americans who were suffering the economic effects caused by the COVID-19 pandemic. One source of relief under the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the PPP. The PPP was expanded and modified by the Economic Aid Act (EAA) in December 2020 and the American Recovery Plan Act (ARPA) in March 2021.
ARPA provided new restrictions on PPP loans, including limiting loans to applicants who, together with their domestic and foreign affiliates, collectively employed 300 or fewer persons. ARPA clarified that second draw PPP loans required applicants to include employees working overseas at foreign affiliates in calculating the total number of employees.
In the settlement agreement, Mutoh admitted the following facts:
Together with its foreign affiliates, Mutoh had more than 300 employees at the time of its second PPP loan.
Mutoh Holdings, Inc., collectively had approximately 684 employees in March 2019, approximately 693 employees in March 2020, and approximately 674 employees in March 2021.
Mutoh applied for a second draw PPP loan, which Mutoh received on or about March 18, 2021.
Mutoh did not disclose its affiliated entities’ employees in its computation of the total number of employees on the application as otherwise required.
Before Mutoh’s application was submitted, a high-ranking Mutoh official seriously doubted Mutoh’s eligibility for the loan but decided to proceed with the application anyway and run the risk of a repayment obligation.
On or about September 29, 2021, Mutoh applied for forgiveness of the loan, which the SBA later approved.
The United States was unaware of the misrepresentations regarding the number of employees in Mutoh’s applications to receive the loan and have it forgiven, and these misrepresentations were material to the United States’ decision to pay and forgive Mutoh’s PPP loan in the amount of $584,012.
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