SOUTHWICK — It took a whistleblower initiating a lawsuit of his own, but the government has its money back.
A Southwick company that designs and markets broadcast and surveillance cameras has agreed to pay the government more than $2 million to settle an allegation it was not eligible for its pandemic-era loan that was later forgiven.
The U.S. Attorney’s Office announced details of the settlement Friday afternoon.
Kokusai Denki Electric America, which announced a name change in March from Hitachi Kokusai Electric, obtained a $1.3 million loan in January 2021 under the federal Paycheck Protection Program, which was intended to help small businesses keep employees during the economic turmoil of the pandemic.
It later asked the U.S. Small Business Administration to forgive the loan, which the agency did in full. The loan forgiveness included $1.3 million of principal, $40,000 in lender fees and about $12,000 in interest, according to the settlement agreement shared by the U.S. Attorney’s Office.
However, it was not eligible for the assistance in the first place, according to the U.S. Attorney’s Office.
Under the rules of the second round of the PPP loans, only companies with fewer than 300 employees were eligible. As a subsidiary of Tokyo-based Hitachi Kokusai Electric, the Southwick company needed to take into account the number of employees at its affiliates, according to the program’s rules. But in its application for that round of PPP loan, Kokusai Denki said it only had 67 employees.
Daniel Foster filed a lawsuit against Kokusai Denki on behalf of the federal government in April, alleging the company violated the False Claims Act, according to the settlement agreement.
Foster’s attorney, Boston-based Gregg Shapiro, described his client as an outsider who has analyzed PPP loan data and identified companies who appear not to have qualified for the loans they received.
“A lot of money went out the door very quickly,” said Shapiro of the PPP loan program. “A lot of people who received the money didn’t qualify for the money.”
Foster filed what is known as a “qui tam” action, which allows people to bring a lawsuit against an entity they believe defrauded the government.
The legal process was created in the middle of the Civil War to address fraud among companies working with the government at the time, according to the Federal Law Enforcement Training Centers.
A qui tam action is initially filed under seal, Shapiro said, and only the government is notified at first, giving it a period of time to investigate and determine if it wants to intervene.
If their efforts are successful, people who initiate the litigation receive a portion of the recovered funds.
In this case, Foster is set to receive 10% of the settlement, according to the agreement.
A spokesperson for Kokusai Denki did not immediately respond to a request for comment.
However, the settlement says the company “cooperated with the government’s investigation, immediately acknowledged wrongdoing, and sought to resolve this matter expeditiously.”
