DOJ: Lackawanna company to pay $1.5 million to resolve False Claims Act allegations related to improper receipt of PPP funds

• Welded Tube exceeded the 300-employee limit for second draw PPP loans due to its affiliation with Welded Tube of Canada Corp.
• The settlement is part of broader efforts to recover over $10 million in PPP fraud during the 2026 fiscal year.

Welded Tube USA, Inc. agreed to pay $1,500,000 to settle allegations that it improperly obtained a forgiven Paycheck Protection Program (PPP) loan from the SBA, despite exceeding the employee size restrictions for second draw PPP loans. The company was a wholly owned subsidiary of Welded Tube of Canada Corp., and together with its affiliates, had over 300 employees at the time of the loan.

The settlement is part of the DOJ's ongoing efforts to recover funds obtained through PPP fraud, with over $10 million recovered in the 2026 fiscal year. The claims resolved by this settlement are allegations only, with no determination or admission of liability by Welded Tube USA, Inc.

• $1,500,000 settlement amount paid by Welded Tube USA, Inc.
• 300 employee limit for second draw PPP loans
• $10 million PPP fraud recovered in 2026 fiscal year

• Review PPP loan eligibility criteria, especially employee count rules for second draw loans and inclusion of foreign affiliates, as highlighted in the Welded Tube USA, Inc. case.
• Verify all subsidiaries and parent company affiliations when certifying eligibility for SBA programs, referencing the Welded Tube of Canada Corp. structure.
• Monitor DOJ enforcement actions and settlements related to PPP fraud, including the $1,500,000 Welded Tube USA, Inc. settlement, for emerging risk typologies.

This case underscores the importance of strict adherence to eligibility requirements for government relief programs, particularly regarding employee count and corporate affiliations. Compliance officers must ensure that all entities, including foreign affiliates, are accurately reported when applying for programs like the PPP. The DOJ's active enforcement and significant recoveries highlight the risks of non-compliance, making it critical for financial institutions and companies to implement robust due diligence and verification processes to avoid costly settlements and reputational damage.