Chinese-Owned Company to Pay More Than $11M to Resolve False Claims Act Allegations Relating to Paycheck Protection Program Loan

Continental Aerospace Technologies Inc. has agreed to pay $11,772,680.14 to resolve allegations that it violated the False Claims Act by submitting false claims to obtain a Paycheck Protection Program (PPP) loan for which it was not eligible.

"PPP loans were intended to help small businesses in the United States," said Assistant Attorney General Brett A. Shumate of the Justice Department's Civil Division. "The Department remains committed to pursuing those who violated the requirements of this taxpayer funded program."

"PPP loans were meant to help small American businesses survive the economic turmoil caused by the pandemic. Continental, however, was part of a large Chinese-owned corporation and allegedly provided false information to the SBA to obtain taxpayer funds to which it was not entitled," said First Assistant U.S. Attorney Brad Schimel for the Eastern District of Wisconsin. "This matter is just one of many cases in which our office continues to hold corporations, particularly those owned by a foreign government, accountable when they submit false claims to obtain American taxpayer money."

"This settlement demonstrates our office's steadfast commitment to relentlessly investigating and resolving fraud against American taxpayers," said U.S. Attorney Sean P. Costello for the Southern District of Alabama. "It also reflects the effectiveness of our collaborative False Claims Act investigations in holding companies and individuals accountable for fraudulent conduct and returning unlawfully obtained taxpayer funds to the United States, together with significant financial penalties."

"The SBA is committed to rooting out every dollar of PPP fraud," said SBA General Counsel Wendell Davis. "Alongside the Department of Justice Civil Fraud Section, U.S. Attorney's Offices in the Eastern District of Wisconsin and Southern District of Alabama, and our other law enforcement partners, the agency will aggressively pursue bad actors to hold them accountable and recover pandemic relief funds improperly obtained from the program."

Congress created the PPP in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects of the COVID-19 pandemic. Under the PPP, eligible businesses could receive forgivable loans guaranteed by the Small Business Administration (SBA). Regulations provide various eligibility requirements for the PPP, including limitations on the number of individuals the borrower and its affiliated entities employed. In their loan applications, borrowers were required to certify that they were eligible for the PPP and that the information they provided was accurate.

Continental designs and manufactures aircraft engines and parts. At the time it applied for its PPP loan, it was part of a large multinational corporation partially owned by Aviation Industry Corporation of China (AVIC). AVIC is wholly owned by the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), an arm of the People's Republic of China.

In applying for its PPP loan, Continental certified that it was eligible for the PPP. The United States alleges that Continental was not eligible because it was affiliated with other companies in the United States and China, and together with its affiliates across the globe, Continental employed more individuals than permitted by SBA's size standard for its industry. The United States also contends that Continental was not eligible because it was ultimately owned by a government entity in violation of SBA rules.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to file an action on behalf of the United States and receive a portion of any recovery. The lawsuits were filed by GNGH2 Inc. in the Eastern District of Wisconsin and Andrew McCarley in the Southern District of Alabama. In connection with the settlement, GNGH2 Inc. will receive $1,765,902.02.

This year the Administration launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division to enhance the Administration's war on fraud, waste, and abuse in federal programs. When unscrupulous actors exploit these programs for their own financial gain, they defraud the government, harm the people these programs are designed to aid and protect, and undermine American businesses that play by the rules. The Civil Division's FCA enforcement plays a critical role in combatting such fraudulent schemes, recovering billions of dollars for the American taxpayers, and holding wrongdoers accountable. FCA matters will continue to be on the forefront of the battle against fraud, and the Civil Division's FCA work will support and advance the mission of the Task Force to Eliminate Fraud and the National Fraud Enforcement Division.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section, the United States Attorney's Office for the Eastern District of Wisconsin, and the United States Attorney's Office for the Southern District of Alabama, with assistance from the SBA's Office of General Counsel and Office of the Inspector General.

Trial Attorney Lindsey Roberts of the Civil Division, Assistant U.S. Attorney Michael Carter for the Eastern District of Wisconsin, and Assistant U.S. Attorney Nina Herring for the Southern District of Alabama handled the matter.

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