Continental Aerospace Technologies, the Chinese state-owned engine manufacturer with a decades-long footprint in Mobile, will pay $11.7 million to resolve federal allegations that it improperly received pandemic-era relief loans designed for small American businesses.
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The Justice Department announced the civil settlement on Tuesday, Aug. 12, saying Continental was ineligible for a forgivable Paycheck Protection Program loan because its affiliations with other companies in the United States and China pushed it over federal size limits. Prosecutors also alleged the company was ultimately owned by a Chinese government entity in violation of Small Business Administration rules.
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\”This settlement demonstrates our office’s steadfast commitment to relentlessly investigating and resolving fraud against American taxpayers,\” U.S. Attorney Sean P. Costello for the Southern District of Alabama said in a statement. The settlement resolves allegations only and does not determine liability.
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A $7.4 million loan meant for Main Street
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PPP records maintained by ProPublica show Continental was approved for a $7.4 million forgivable loan in April 2020, listing 476 jobs it intended to protect. Congress created the PPP in March 2020 to funnel emergency, forgivable lending to small businesses staggering under COVID-19 lockdowns, and borrowers were required to certify their eligibility — including that they and their affiliated entities fell under the program’s employee limits.
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According to the Justice Department, Continental was, at the time it applied, part of a multinational corporation partially owned by Aviation Industry Corporation of China, or AVIC — a conglomerate wholly owned by SASAC, the State Council arm that manages China’s state-owned enterprises. That ownership chain, prosecutors said, put the Mobile engine maker far outside the program’s small-business guardrails.
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How the case surfaced
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The settlement stems from whistleblower lawsuits filed under the False Claims Act’s qui tam provisions, which let private parties sue on behalf of the United States and share in any recovery. Two whistleblowers came forward: GNGH2 Inc., a for-profit corporate whistleblower entity that has targeted PPP borrowers with China ties, filed in the Eastern District of Wisconsin and will receive $1,765,902 of the settlement; Andrew McCarley filed in the Southern District of Alabama on May 10, 2024, naming AVIC, Continental Aerospace Technologies and CEO Karen Hong.
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That Mobile case remained under a protective order until Aug. 5, when Chief U.S. District Judge Jeffrey U. Beaverstock unsealed portions of it. The SBA joined the condemnation: \”The SBA is committed to rooting out every dollar of PPP fraud,\” General Counsel Wendell Davis said.
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The settlement lands mid-sale
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The $11.7 million figure had been previewed before the government confirmed it. Hong Kong Stock Exchange disclosures in June revealed that Continental’s parent had agreed to sell the company’s U.S. and German operations in a proposed $535 million deal to Mobile Acquisition Co. LLC, a Delaware company tied to Arcline Investment Management — and that the filings estimated a DOJ settlement between $10 million and $20 million over the PPP allegations. The sale has not been finalized and remains subject to approval and foreign investment review. German firm Gleiss Lutz announced July 28 that it had advised Arcline on the purchase.
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Phillip Mahoney, global strategy partner for Continental, has said the sale was unrelated to the Justice Department settlement and denied that prosecutors proposed or discussed the sale in settlement negotiations.
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For Mobile, the case closes a pandemic-era chapter with a familiar tension: a major local employer whose corporate ownership chain runs through Beijing paid millions back to U.S. taxpayers for money it was never supposed to receive — while a $535 million change of ownership, which could once again reshape the company’s future in Mobile, waits on regulators.
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