DOJ: Springfield Company Agrees to Pay $1.24 Million to Resolve Allegations of PPP Loan Fraud

• Prefere received a $799,025 second draw PPP loan in 2021 despite having more than 300 employees when including affiliates.
• The company was credited for cooperation under the Department of Justice’s Guidelines for Taking Voluntary Disclosure, Cooperation and Remediation into Account in False Claims Act Matters.

Prefere Melamines LLC, based in Springfield, Massachusetts, agreed to pay $1,247,744 to settle allegations that it violated the False Claims Act by obtaining a PPP loan for which it was not eligible. The company admitted to receiving a $799,025 second draw PPP loan in 2021 and certifying eligibility despite having more than 300 employees when including affiliates.

The PPP required applicants for second draw loans to have fewer than 300 employees, including those of foreign or domestic affiliates. Prefere, a wholly-owned subsidiary of Prime MidCo GmbH, exceeded this threshold but still received and had forgiven the full loan amount. The settlement credits Prefere for its cooperation with authorities.

• $1,247,744 settlement payment
• $799,025 second draw PPP loan received
• 300 employee threshold for PPP eligibility

• Review PPP loan applications for accurate employee counts, including all affiliates, as required by PPP regulations.
• Verify that subsidiaries of foreign parent companies, such as Prime MidCo GmbH, are properly aggregating employee numbers for eligibility.
• Update internal controls to ensure certifications under the False Claims Act and PPP are accurate and supported by documentation.

This case highlights the importance of accurate eligibility certifications for government relief programs such as the PPP. Compliance officers must ensure that all employee counts, including those of affiliates and parent companies, are correctly reported to avoid violations of the False Claims Act. The settlement also demonstrates that cooperation with authorities can influence outcomes, but does not eliminate liability for improper certifications. Vigilance in application processes and documentation is critical to prevent costly enforcement actions.