KNOXVILLE, Tenn. – The United States Attorney’s Office announced today that ARC Automotive, Inc. (“ARC”) agreed to pay $4,200,000 to resolve allegations that it knowingly made false statements in obtaining a loan under the Paycheck Protection Program (“PPP”), and also when seeking forgiveness of the loan, in violation of the False Claims Act (“FCA”).

In March 2020, Congress created the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide emergency financial assistance to American businesses suffering from the economic effects of the COVID-19 pandemic. The CARES Act, through the PPP, authorized loans to small businesses to help pay for certain business-related expenses, including payroll. The U.S. Small Business Administration (“SBA”) administered the PPP and guaranteed the loans, which were eligible for forgiveness if certain program requirements were met. Regulations promulgated by the SBA set forth various loan eligibility requirements. Under SBA regulations, businesses involved in bankruptcy proceedings were ineligible for PPP loans. To assist the SBA in making eligibility determinations, the loan and forgiveness applications required that borrowers certify that they provided truthful information in response to questions about eligibility requirements, and that they were eligible for the PPP.

ARC is a manufacturer of automotive airbag inflators and has a principal office located in Knoxville. It operates manufacturing plants in Tennessee and Kentucky, and entities related to ARC operate manufacturing facilities in other countries, including China. According to the contentions of the United States contained in the settlement agreement, in May 2020 ARC received $2,935,062 after applying for a loan under the PPP. In June 2021, the loan was forgiven after ARC applied for loan forgiveness. The United States contends that ARC falsely certified in its loan and forgiveness applications that it provided truthful information and that it was eligible for the PPP. Specifically, the United States alleges that ARC falsely stated in its application that its owners were not presently involved in bankruptcy proceedings when it knew that one of its parent companies was involved in a bankruptcy proceeding in China, which rendered ARC ineligible for the loan.

This settlement is the result of a collaborative effort between the U.S. Attorney’s Office for the Eastern District of Tennessee and the SBA’s Office of General Counsel. The settlement amount will be paid over time. The investigation that preceded the settlement was prompted by a lawsuit filed in July 2025 under the qui tam or “whistleblower” provisions of the FCA, which permit a private individual (known as a “relator”) to sue on behalf of the government for false claims and to share in any recovery. Pursuant to the settlement, the relator will receive a share of the settlement payments made by ARC.

Assistant U.S. Attorneys Joseph C. Rodriguez and Ben D. Cunningham represented the United States. 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 settled by this agreement are allegations only, and there has been no determination or admission of liability.