Settlement agreement: United States and Cosmax USA and Nu-World Corporation (PPP)

Summary

A settlement agreement among the United States (acting through the Department of Justice on behalf of the Small Business Administration), Cosmax USA, Nu-World Corporation, and Alexander Novik as Relator. It addresses a qui tam action, docket no. 1:22-cv-2171, that the Relator filed on December 2, 2022, in the United States District Court for the Northern District of Ohio. The United States contends that a Nu-World PPP loan application included amounts paid to staffing companies, and that Cosmax USA applied on or about March 22, 2021, for a second-draw PPP loan for which it was not eligible. Cosmax USA agrees to pay $6 million, plus interest at 4% per annum from December 2, 2024, of which $3 million is restitution, and $650,000 to Relator's counsel. The United States is to pay the Relator $1,110,000.00.

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Cite this document

“Settlement agreement: United States and Cosmax USA and Nu-World Corporation (PPP).” Original at www.justice.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/settlement-agreement-united-states-and-cosmax-usa-and-nu-world-corpora-d490fec15b/, SHA-256 1a155c66dbd716684bf05c0ebe8b3cc482ea48634f06ad70a0ec5ec260cab617.

Full text

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is entered into among the United States of

America, acting through the United States Department of Justice and on behalf of the Small

Business Administration (collectively the “United States”), Cosmax USA, Corporation d/b/a Nu-

World and Nu-World Corporation (“Cosmax USA”), Nu-World Corporation (“Nu-World”), and

Alexander Novik (“Relator”) (hereafter collectively referred to as the “Parties”), through their

authorized representatives.

RECITALS

A. Cosmax USA and Nu-World are cosmetic manufacturer and supply companies.

Effective January 1, 2023, Nu-World was merged into Cosmax USA.

B. On December 2, 2022, Relator Alexander Novik filed a qui tam action in the

United States District Court for the Northern District of Ohio captioned United States ex rel.

Novik v. Cosmax USA et al., docket no. 1:22-cv-2171, pursuant to the qui tam provisions of the

False Claims Act, 31 U.S.C. § 3730(b) (the “Civil Action”).

C. The United States contends that it has certain civil claims against Cosmax USA

and Nu-World arising from the following alleged conduct:

a. On or about April 17, 2020, Nu-World submitted an application for a federally

guaranteed loan under the Payment Protection Program (“PPP”), pursuant to 15 U.S.C. §

636(a)(36). That loan application impermissibly included a requested loan amount that was

calculated based, in part, on amounts Nu-World paid to staffing companies for the services of

individuals employed by the staffing companies and not employed by Nu -World.

b. On or about July 29, 2021, Nu-World included an application for forgiveness of the

entire amount of the PPP loan, even though it had previously been warned by another financial

institution that the loan and forgiveness could not include contractors who were not themselves
employees of Nu-World. As a result, Nu-World knowingly submitted, or caused the submission

of, a false claim to SBA for payment in connection with its request for loan forgiveness. Based

on the false loan forgiveness application, SBA approved the loan forgiveness in full.

c. Cosmax USA submitted an application for a federally guaranteed PPP loan on or about

April 5, 2020. Subsequently, on or about March 22, 2021, Cosmax USA submitted an

application for a federally guaranteed “second-draw” PPP loan. A second-draw PPP loan was

only available to companies with 300 or fewer employees, including the employees of the

applicant’s affiliates. 15 U.S.C. § 636(a)(37)(A)(iv)(I)(aa). Cosmax USA was not eligible for the

second-draw loan. Cosmax USA and Nu-World were affiliated by common ownership, and

collectively the number of their employees exceeded 300. Cosmax USA knew it exceeded the

size threshold but nonetheless certified that it met the requirements for the loan.

d. On or about December 24, 2021, Cosmax USA submitted an application for

forgiveness of its second-draw loan. Cosmax USA falsely stated on its forgiveness application

that it had 244 employees, when, in fact, the number of its employees, combined with the

number of Nu-World employees, exceeded the 300-employee limit. As a result of the false

statement, SBA approved the forgiveness application. That conduct is referred to below as the

“Covered Conduct.”

D. This Settlement Agreement is neither an admission of liability by Cosmax USA

and Nu-World nor a concession by the United States that its claims are not well founded.

E. Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the proceeds of

this Settlement Agreement and to Relator’s reasonable expenses, attorneys’ fees and costs.
To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the

above claims, and in consideration of the mutual promises and obligations of this Settlement

Agreement, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

1. Cosmax USA shall pay to the United States six million dollars ($6 million), plus

interest on the Settlement at a rate of 4% per annum from December 2, 2024 (the “Settlement

Amount”), of which $3 million is restitution, by electronic funds transfer pursuant to written

instructions to be provided by the Civil Division of the United States Department of Justice, no

later than 14 days after the Effective Date of this Agreement.

2. Conditioned upon the United States receiving the Settlement Amount and as soon

as feasible after receipt, the United States shall pay $1,110,000.00, plus a proportionate share of

any interest paid, to Relator by electronic funds transfer (“Relator’s Share”).

3. Cosmax USA shall pay to Relator’s counsel six hundred and fifty thousand dollars

($650,000) for expenses, attorneys’ fees, and costs by electronic funds transfer pursuant to written

instructions to be provided by Relator’s counsel, no later than 14 days after the Effective Date of

this Agreement.

4. Subject to the exceptions in Paragraph 6 (concerning reserved claims) below, and

upon the United States’ receipt of the Settlement Amount, the United States releases Cosmax USA

and Nu-World, together with their current and former parent corporations; direct and indirect

subsidiaries; brother or sister corporations; divisions; current or former corporate owners; and the

corporate successors and assigns of any of them, from any civil or administrative monetary claim

the United States has for the Covered Conduct under the False Claims Act, 31 U.S.C. §§

3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or common law

theories of breach of contract, payment by mistake, unjust enrichment, and fraud.
5. Subject to the exceptions in Paragraph 6 below, and upon the United States’ receipt

of the Settlement Amount, Relator, for himself and for his heirs, successors, attorneys, agents, and

assigns, releases Cosmax USA and Nu-World, their affiliate companies, together with their

current and former, direct and indirect parent companies; owners; shareholders; predecessors;

direct and indirect subsidiaries; brother or sister companies; divisions; current or former corporate

owners; current or former directors, officers, employees, and agents; and the corporate successors

and assigns of any of them from any action the Relator has asserted, could have asserted, or could

assert in the future in law or equity of any kind whatsoever; and from any civil monetary claim

the Relator has on behalf of the United States for the Covered Conduct under the False Claims

Act, 31 U.S.C. §§ 3729-3733.

6. Notwithstanding the releases given in Paragraph 4 of this Agreement, or any other

term of this Agreement, the following claims and rights of the United States are specifically

reserved and are not released:

a. Any liability arising under Title 26, U.S. Code (Internal Revenue Code);

b. Any criminal liability;

c. Except as explicitly stated in the Agreement, any administrative liability or

enforcement right, or any administrative remedy, including the suspension

and debarment rights of any federal agency;

d. Any liability to the United States (or its agencies) for any conduct other

than the Covered Conduct;

e. Any liability based upon obligations created by this Agreement;

f. Any liability of individuals;
g. Any liability for express or implied warranty claims or other claims for

defective or deficient products or services, including quality of goods and

services;

h. Any liability for failure to deliver goods or services due; and

i. Any liability for personal injury or property damage or for other

consequential damages arising from the Covered Conduct.

7. Relator and his heirs, successors, attorneys, agents, and assigns shall not object to

this Agreement but agree and confirm that this Agreement is fair, adequate, and reasonable under

all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned upon Relator’s receipt

of the Relator’s Share, Relator and his heirs, successors, attorneys, agents, and assigns fully and

finally release, waive, and forever discharge the United States, its agencies, officers, agents,

employees, and servants, from any claims arising from the filing of the Civil Action or under 31

U.S.C. § 3730, and from any claims to a share of the proceeds of this Agreement and/or the Civil

Action.

8. Relator, for himself, and for his heirs, successors, attorneys, agents, and assigns,

releases Cosmax USA and Nu-World, their affiliate companies, together with their current and

former, direct and indirect parent companies; owners; shareholders; predecessors; direct and

indirect subsidiaries; brother or sister companies; divisions; current or former corporate owners;

current or former directors, officers, employees, and agents; and the corporate successors and

assigns of any of them, from any liability to Relator arising from the filing of the Civil Action, or

under 31 U.S.C. § 3730(d) for expenses or attorneys’ fees and costs.

9. Cosmax USA and Nu-World waive and shall not assert any defenses they may

have to any criminal prosecution or administrative action relating to the Covered Conduct that
may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the

Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth

Amendment of the Constitution, this Agreement bars a remedy sought in such criminal

prosecution or administrative action.

10. Cosmax USA and Nu-World fully and finally release the United States, its

agencies, officers, agents, employees, and servants, from any claims (including attorneys’ fees,

costs, and expenses of every kind and however denominated) that Cosmax USA and Nu-World

have asserted, could have asserted, or may assert in the future against the United States, its

agencies, officers, agents, employees, and servants, related to the Covered Conduct or the United

States’ investigation or prosecution thereof.

11. Cosmax USA and Nu-World fully and finally release the Relator from any claims

(including attorneys’ fees, costs, and expenses of every kind and however denominated) that

Cosmax USA and Nu-World have asserted, could have asserted, or may assert in the future

against the Relator, related to the Civil Action and the Relator’s investigation and prosecution

thereof.

12. a. Unallowable Costs Defined: All costs (as defined in the Federal

Acquisition Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of Cosmax USA or Nu-

World, and its present or former officers, directors, employees, shareholders, and agents in

connection with:

(1) the matters covered by this Agreement;

(2) the United States’ audit(s) and civil investigation(s) of the matters

covered by this Agreement;
(3) Cosmax USA and Nu-World’s investigation, defense, and

corrective actions undertaken in response to the United States’

audit(s) and civil investigation(s) in connection with the matters

covered by this Agreement (including attorneys’ fees);

(4) the negotiation and performance of this Agreement;

(5) the payment Cosmax USA and Nu-World make to the United

States pursuant to this Agreement and any payments that

Cosmax USA or Nu-World may make to Relator, including costs

and attorneys fees

are unallowable costs for government contracting purposes (hereinafter referred to as

“Unallowable Costs”).

b. Future Treatment of Unallowable Costs: Unallowable Costs will be

separately determined and accounted for by Cosmax USA and Nu-World, and Cosmax USA and

Nu-World shall not charge such Unallowable Costs directly or indirectly to any contract with the

United States.

c. Treatment of Unallowable Costs Previously Submitted for Payment:

Within 90 days of the Effective Date of this Agreement, Cosmax USA and Nu-World shall

identify and repay by adjustment to future claims for payment or otherwise any Unallowable

Costs included in payments previously sought by Cosmax USA and Nu-World or any of their

subsidiaries or affiliates from the United States. Cosmax USA and Nu-World agree that the

United States, at a minimum, shall be entitled to recoup from Cosmax USA and Nu-World any

overpayment plus applicable interest and penalties as a result of the inclusion of such

Unallowable Costs on previously-submitted requests for payment. The United States,
including the Department of Justice and/or the affected agencies, reserves its rights to audit,

examine, or re-examine Cosmax USA and Nu-World’s books and records and to disagree with

any calculations submitted by Cosmax USA and Nu-World or any of their subsidiaries or

affiliates regarding any Unallowable Costs included in payments previously sought by Cosmax

USA and Nu-World, or the effect of any such Unallowable Costs on the amount of such

payments.

13. This Agreement is intended to be for the benefit of the Parties only.

14. Upon receipt of the payment described in Paragraph 1, above, the United States

and Relator shall promptly sign and file in the Civil Action a Joint Stipulation of Dismissal of the

Civil Action pursuant to Rule 41(a)(1). The Stipulation shall state that the action is being

dismissed: (a) with prejudice to the United States and Relator as to Cosmax USA and Nu-World

with respect to the Covered Conduct; and (b) with prejudice to the Relator and without prejudice

to the United States as to all other parties and conduct; and (c) that the dismissal is subject to the

terms of the Settlement Agreement.

15. Each Party shall bear its own legal and other costs incurred in connection with this

matter, including the preparation and performance of this Agreement.

16. Each Party and signatory to this Agreement represents that it freely and voluntarily

enters in this Agreement without any degree of duress or compulsion.

17. This Agreement is governed by the laws of the United States. The exclusive

jurisdiction and venue for any dispute relating to this Agreement is the United States District

Court for the Northern District of Ohio. For purposes of construing this Agreement, this

Agreement shall be deemed to have been drafted by all Parties to this Agreement and shall not,

therefore, be construed against any Party for that reason in any subsequent dispute.
18. This Agreement constitutes the complete agreement among the Parties. This

Agreement may not be amended except by written consent of the Parties.

19. The undersigned counsel represent and warrant that they are fully authorized to

execute this Agreement on behalf of the persons and entities indicated below.

20. This Agreement may be executed in counterparts, each of which constitutes an

original and all of which constitute one and the same Agreement.

21. This Agreement is binding on Cosmax USA and Nu-World’s successors,

transferees, heirs, and assigns.

22. This Agreement is binding on Relator’s successors, transferees, heirs, and assigns.

23. All parties consent to the United States’ disclosure of this Agreement, and

information about this Agreement, to the public.

24. This Agreement is effective on the date of signature of the last signatory to the

Agreement (Effective Date of this Agreement). Facsimiles of signatures shall constitute

acceptable, binding signatures for purposes of this Agreement.

[SIGNATURE PAGES FOLLOW]
THE UNITED STATES OF AMERICA

DATED:
BY:
--------------
Graham D. Welch
Trial Attorney
Commercial Litigation Branch
Civil Division
United States Department of Justice

DATED:
~ zazS:
ckson Froliklong
Assistant United States Attorney
U.S. Attorney 's Office, Northern District of
Ohio
COSMAX_ USA AND NU-WORLD -— DEFENDANTS

DATED: BY:
Of /o2/202.5 A
Martin
Chief Executive Officer of Cosmax
USA

DATED: :
9-2-2929 (Qe dye Oeury
Anne COrtina Perry
Charles D. Riely
Jenner & Block LLP
Counsel for Cosmax USA and Nu-World
ALEXANDER NOVIK RELATOR

DATED:
5/1/2025 BY:
Alexander Novik

DATED: 5/1/2025
BY:
Colin Callahan
Chris Georgalis
Gavin Bell
Flannery | Georgalis LLC
Counsel for Alexander Novik

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SHA-256: 1a155c66dbd716684bf05c0ebe8b3cc482ea48634f06ad70a0ec5ec260cab617
Our copy: cosmax-usa-nu-world-settlement-agreement.pdf
Original: www.justice.gov