KNOXVILLE, Tenn. – Spradling International, Inc. – South (“Spradling”) has agreed to pay $1,836,222.00 to resolve allegations that it violated the False Claims Act by applying for, receiving, and obtaining forgiveness of a loan under the Paycheck Protection Program (“PPP”) for which it was not eligible.
Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act, to provide relief to small businesses experiencing economic hardship during the COVID-19 pandemic. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”), enacted on December 27, 2020, subsequently authorized the Small Business Administration (“SBA”) to guarantee second-draw PPP loans. To be eligible for second-draw PPP loans, borrowers were required to have no more than 300 employees, among other requirements. On May 21, 2020, the SBA published an Interim Final Rule clarifying that affiliated foreign employees were to be included when a borrower calculated their total number of employees for purposes of determining PPP loan eligibility.
The United States contends that Spradling failed to include employees of its foreign parent and foreign affiliates when it applied for a second-draw PPP loan and forgiveness thereof. Had Spradling included the employees of its foreign parent and foreign affiliates, as required, it would have exceeded the 300-employee size limitation applicable to second-draw PPP loans and would not have been eligible to receive the loan.
This Settlement resolves a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and receive a share of any recovery. The qui tam case is captioned United States ex rel. Blockquote, Inc. v. Spradling International, Inc. – South (Case No. 3:25-CV-505) (E.D. Tenn.).
Assistant U.S. Attorneys Ben D. Cunningham and Alexa Ortiz Hadley represented the United States, with assistance from the SBA’s Office of General Counsel.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within federal benefit programs.
The claims resolved by this settlement are allegations only, and there has been no determination of liability.
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