Five CT companies pay $9.2M to settle PPP fraud claims

Two Connecticut manufacturers owned by Italian companies are among five businesses that have paid or agreed to pay more than $9.2 million combined to settle allegations they improperly obtained federal Paycheck Protection Program loans. The U.S. Attorney’s Office for Connecticut announced the settlements Friday. They resolve allegations that the companies violated the False Claims Act to get pandemic-era PPP loans they weren’t eligible for. The PPP provided forgivable loans to help businesses keep workers on their payrolls during the COVID-19 pandemic. Some businesses that received an initial loan could apply for a second loan. According to the U.S. Attorney’s Office, each case began as a whistleblower lawsuit filed in federal court in Connecticut. The largest payment came from United Abrasives Inc., a Windham-based maker of industrial abrasives owned by the Italian company SAIT Finanziaria. United Abrasives paid about $3.09 million to resolve allegations tied to a nearly $2 million second-draw PPP loan it applied for in February 2021. Second-draw loans, which became available in January 2021, were limited to businesses with fewer than 300 employees, including workers at foreign and domestic affiliates. Prosecutors say United Abrasives and its affiliates had more than 300 employees at the time. Windsor-based Fabbrica LLC, which makes building facade systems and is an indirect subsidiary of a global construction company headquartered in Italy, agreed to pay about $2.58 million over a $2 million second-draw loan. The government alleges Fabbrica knew or should have known that it and its foreign affiliates together employed more than 300 people. Beaver Paper & Graphic Media Inc., a Georgia company whose affiliates include Stamford-based Koehler America Inc., paid about $2.93 million over a $1.2 million second-draw loan. Prosecutors allege Beaver Paper applied for the loan even though its accountants told it the company was too big to qualify. After the loan was forgiven, the company kept the money rather than follow its accountants' advice to return it, and treated the funds as a liability until it believed the risk of a government audit had passed, according to the government. Two other settlements involve alleged misuse of loan proceeds. Connecticut Pharmacy LLC of Norwalk and Connecticut Pharmacy East Rock LTC LLC of Wallingford, along with majority owners Scott Wolak and Bryan Lentini, agreed to pay $400,000, an amount based on their ability to pay. The pharmacies received four PPP loans totaling nearly $1.7 million. Prosecutors say most of that money went to repay loans owed by a separate company owned by Wolak and Lentini, not to payroll or other permitted costs. National Mental Health Corps. in Newtown, formerly known as Health360 Inc., and former CEO Patricia Harrity paid $217,978 over a $137,638 loan. The government alleges Health360 counted AmeriCorps volunteers as employees, inflated its payroll with their stipends, and claimed PPP money covered payroll costs already reimbursed by federal grants. Whistleblowers will share in the recoveries. GNGH2 Inc., which brought the cases against Beaver Paper and Fabbrica, will receive about $551,000 combined. GNGH2 is a corporate whistleblower that has filed PPP-related False Claims Act suits against companies nationwide, often relying on publicly available loan data.