United states of America v. ARC Automotive, Inc.

Knoxville, Tennessee civil litigation lawyers represented the defendant accused of violating the False Claims Act, 31 U.S.C. 3729-3733.

ARC Automovie, Inc allegedly 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”).

It 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.


The False Claims Act (FCA, 31 U.S.C. §§ 3729–3733), also known as "Lincoln's Law," is the United States government's primary civil anti-fraud statute. It makes it illegal to knowingly submit, or cause to be submitted, false or fraudulent claims for payment to the federal government.

Key Provisions & Liability

• Prohibited Acts: Submitting false claims, using false records to get a claim paid, conspiring to defraud the government, or engaging in "reverse false claims" (improperly avoiding or decreasing an obligation to pay money to the government).
• Knowledge Standard: "Knowingly" means actual knowledge, deliberate ignorance, or reckless disregard of the truth. Specific intent to defraud is not required.
• Common Areas: Most frequently applied to healthcare fraud (such as Medicare and Medicaid billing for services not rendered or upcoding), defense contracting, and customs/tariff evasions.

Penalties & Damages

• Treble Damages: Violators are liable for three times the actual damages the government sustains.
• Civil Penalties: Adjusted for inflation, civil penalties range roughly from $13,946 to $28,619 per false claim (varying based on the year of the violation).

The Qui Tam (Whistleblower) Provision

• Private Suits: The FCA includes a unique qui tam provision allowing private citizens, known as relators, to file lawsuits on behalf of the United States against entities committing fraud.

• Under Seal: Complaints are filed under seal so the Department of Justice can investigate privately before deciding whether to intervene and take over the litigation.
• Whistleblower Rewards: If the suit succeeds, the relator typically receives 15% to 30% of the total recovery, depending on whether the government intervenes.
• Anti-Retaliation: The act protects employees from workplace retaliation, offering remedies like reinstatement, double back pay, and legal fees.
Would you like more information on whistleblower protections, healthcare-specific FCA examples, or recent enforcement statistics?

Settled for $4,200,000.

The claims settled by this agreement are allegations only, and there has been no determination or admission of liability.