Oak Creek-based manufacturer
Zund America, Inc. and the
University Club of Milwaukee have both reached settlements with the U.S. Department of Justice after being accused of wrongfully receiving Paycheck Protection Program (PPP) loans.
Zund America, an industrial equipment manufacturer, has agreed to repay $2,300,825 while the University Club of Milwaukee will pay $1,003,993 to resolve these claims, according to a press release from the DOJ.
The Zund America settlement resulted from a whistleblower complaint. The whistleblower will receive a portion of the $2.3 million settlement.
Congress created the PPP program in March 2020 to provide emergency financial assistance to Americans suffering from the economic effects of the COVID-19 pandemic.
Under the PPP, eligible businesses could receive loans guaranteed by the U.S. Small Business Administration and, if the business spent the loan proceeds on qualified expenses, the SBA would repay the loan.
In December 2020, Congress authorized certain borrowers who received an earlier PPP loan to obtain an additional “second-draw” loan. Under the second-draw loan rules, for a company to be deemed a small business eligible for a second loan, the company, together with any corporate affiliates, had to employ 300 or few individuals.
Zund America is owned by Swiss holding company Zund Holding AG and is affiliated with 19 other Zund entities. In February 2021, Zund America received a second-draw PPP loan, which the SBA later repaid. The United States alleges that Zund America was not eligible for this loan because Zund America and its affiliates had more than 300 employees.
Representatives with Zund America did not immediately respond to a request for comment Friday.
The University Club of Milwaukee operates a private country club and dining facilities. At the time the University Club of Milwaukee applied for its PPP loan and for loan forgiveness, the club limited its membership for reasons other than capacity and was ineligible to participate in the PPP, according to the DOJ.
In a statement issued Friday, University Club of Milwaukee leadership said the organization believes it should have been qualified for the PPP loan based on the program’s criteria and provisions.
"Because it met criteria put forth by Congress and the SBA relative to 501(c)(7) status and limited membership, the Club had every reason to believe it qualified for the PPP loan," said
Peter Duback, board chair, University Club of Milwaukee, in the statement. "Especially given the downtown Club’s dependence on business luncheons, weddings and other event-based revenue, the Club’s operations aligned with the program’s intent to support small businesses during a time of economic hardship. Though our review of the SBA’s membership restriction provision is at odds with their interpretation, the University Club has chosen to repay the loan and settlement rather than engage in a protracted legal battle."
In 2023, the University Club permanently
closed its iconic City Club in downtown Milwaukee’s East Town neighborhood, to focus solely on its country club in Brown Deer.
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