Two German-owned companies pay $2.1 million to resolve allegations of fraudulent PPP loans

BUFFALO, N.Y. - U.S. Attorney Michael DiGiacomo announced today that Kemper Systems America, Inc. and Thermacut, Inc. agreed to pay $2.1 million to resolve False Claims Act allegations of improperly obtained Paycheck Protection Program loans from the U.S. Small Business Administration for which they were not eligible to receive.

In March 2020, Congress created the Paycheck Protection Program to provide emergency financial assistance to American small businesses suffering from the economic effects of the COVID-19 pandemic. Under the program, eligible small businesses could receive forgivable loans guaranteed by the SBA provided they met various eligibility requirements. One such requirement limited the total number of employees an applicant company could employ, which included employees associated with the applicant company's foreign affiliates.

The United States contends that in 2021, Kemper and Thermacut obtained forgiven PPP loans that they were not eligible for because they exceeded the PPP size requirement. When Kemper and Thermacut obtained the loans, they were wholly owned subsidiaries of Industrie-Beteilugungs-Gesellschaft mbH & Co. (IBG), a German-based conglomerate that owned numerous subsidiaries worldwide. IBG and its affiliates, including Kemper and Thermacut, had over 300 employees at the time the applications were submitted, thereby exceeding the total number of employees the companies could have.

"The Paycheck Protection Program was designed to support small business during the COVID-19 Pandemic, but too often large businesses took advantage of the program by having their subsidiaries obtain loans," said U.S. Attorney DiGiacomo. "This settlement, and others like it, demonstrate that this office is committed to holding those who improperly took government aid accountable."

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act. Under those provisions, a private party-known as a relator-can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. Verity Investigations, LLC v. Kemper System America, Inc.; Thermacut, Inc., 25-cv-405 (W.D.N.Y.). The relator will receive a share of the settlement.

This matter was handled by Assistant U.S. Attorney David M. Coriell and USAO Investigator Margaret McFarland, with assistance from the SBA's Office of General Counsel.

Individuals with information about allegations involving fraud, waste and abuse associated with COVID-19 are encouraged to report it by calling the Department of Justice's National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

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