YAPP USA Pays $14.2 Million to Settle False Claims Act Allegations

Key Takeaways

• $14.2 Million Settlement: YAPP USA Automotive Systems Inc. has agreed to pay $14.2 million to settle claims of falsely certifying eligibility for a Paycheck Protection Program (PPP) loan.
• False Certification: The company, a subsidiary of a Chinese state-owned entity, received a $9.6 million PPP loan that was later forgiven, despite not meeting the SBA’s eligibility criteria due to employee size limits and government ownership restrictions.
• Government Ownership Violation: YAPP USA’s affiliation with a foreign government entity disqualified it from receiving PPP funds, which were intended for U.S.-based small businesses.
• Whistleblower Involvement: The settlement includes a qui tam provision, and the whistleblower, GNGH2 Inc., will receive over $1.4 million as part of the resolution.

Deep Dive

YAPP USA Automotive Systems Inc. has agreed to pay $14.2 million after being accused of falsely certifying its eligibility for a Paycheck Protection Program (PPP) loan. The company, a subsidiary of State Development and Investment Corp. Ltd., a Chinese state-owned entity, applied for and received a $9.6 million loan under the PPP, which was later forgiven by the Small Business Administration (SBA). However, the U.S. government says the company did not meet the necessary criteria to qualify.

When Congress introduced the PPP in March 2020, it aimed to provide much-needed financial relief to small businesses struggling due to the COVID-19 pandemic. To qualify for these forgivable loans, businesses had to meet specific criteria, including employee size limits and the exclusion of businesses with government ownership. In YAPP USA’s case, the company’s application failed to meet these criteria, both because it exceeded the employee limits set by the SBA and because it is ultimately owned by a foreign government entity.

The settlement comes after an investigation revealed that YAPP USA, along with its affiliated entities, employed more individuals than allowed under SBA rules for its industry. Additionally, the government argued that YAPP USA’s ownership by a Chinese state-run company disqualified it from receiving a loan under the SBA’s regulations. The company’s cooperation with the investigation, including providing crucial documents and identifying key individuals involved in the conduct, helped facilitate the resolution and earned them credit for self-disclosure and remediation.

“We’re committed to making sure that taxpayer-funded programs, like the PPP, go to the businesses they were intended to help,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department’s Civil Division. “Anyone who misuses these funds will be held accountable.”

For Acting U.S. Attorney Richard G. Frohling, this settlement serves as a reminder that the government will not tolerate businesses—large or small—misusing funds meant to support American workers. "The PPP was designed to help small businesses in the U.S., not large corporations owned by foreign governments,” Frohling said. “This settlement proves that we will continue to pursue those who try to take advantage of these vital programs."

The civil settlement also involves a qui tam provision under the False Claims Act, which allows private individuals to file lawsuits on behalf of the government. GNGH2 Inc., the whistleblower in this case, will receive a portion of the recovery, amounting to $1,420,849.

“The favorable settlement in this case is the result of collaborative efforts between federal agencies, like the SBA and the Department of Justice, as well as the private individuals who uncover fraudulent conduct,” said SBA General Counsel Wendell Davis.

Abusing taxpayer-funded programs, especially those designed to help small businesses in times of crisis, will have consequences. It’s a reminder that transparency, accountability, and adherence to the rules are essential when it comes to public funds.

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