Settlement Agreement — United States of America, Small Business Administration, Argosy Investment Partners V, L.P.

Summary

A False Claims Act settlement among the United States, on behalf of the SBA, Argosy Investment Partners V, L.P., Argosy Investment Partners Parallel V, L.P., AIP-ECS Holdings, LLC and relator Zachary Holtzman, who filed the qui tam case, Civil Action No. 24-8318 in the District of New Jersey, on or about August 7, 2024. AIP-ECS Holdings applied in May 2021 for a second draw PPP loan of $1,205,352.00, approved on or about May 7, 2021 and later forgiven in the amount of $1,220,378. The United States contends the loan pushed the corporate group, whose other majority-owned companies had already sought more than $3 million, over the $4 million cap on second draw loans. The defendants deny the allegations, cooperated with the investigation and agree to pay $1,500,000.00, of which $1,258,121.65 is restitution, with $150,000.00 going to the relator.

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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 (“SBA”) (collectively the “United States”), Argosy Investment Partners

V, L.P. (“AIP V”), Argosy Investment Partners Parallel V, L.P. (“AIP Parallel V” and, together

with AIP V, “Argosy V”), and AIP-ECS Holdings, LLC (Argosy V and AIP-ECS Holdings,

LLC are referred to collectively hereinafter as the “Defendants”), and relator Zachary Holtzman.

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

representatives.

RECITALS

A. AIP V is a Small Business Investment Company (SBIC) specializing in

investment in small businesses with a principal place of business of 950 West Valley Road, Ste.

2900, Wayne, PA 19087. AIP Parallel V, with a principal place of business of 950 West Valley

Road, Ste. 2900, Wayne, PA 19087, invests in parallel with AIP V. Argosy V has an ownership

interest in a number of companies, including AIP-ECS Holdings, LLC, which has a principal

place of business of 2201 Taylors Valley Road, Belton, TX 76513.

B. On or about August 7, 2024, Relator filed a qui tam action in the United States

District Court for the District of New Jersey captioned United States of America ex rel. Zachary

Holtzman v. Argosy Capital Company, LLC, et al., Civil Action No. 24-8318, pursuant to the qui

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

deny the allegations in Relator’s complaint.

C. In May 2021, AIP-ECS Holdings LLC applied for a Paycheck Protection Program

(“PPP”) loan in the amount of $1,205,352.00 (the “PPP Loan”). That second draw loan, number

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8960288803, was approved on or about May 7, 2021, and was subsequently forgiven by the SBA

in the amount of $1,220,378 upon application by AIP-ECS Holdings LLC.

D. At the time AIP-ECS Holdings LLC applied for the PPP Loan, other companies in

which AIP V held a majority ownership interest had also applied for second draw PPP loans in

excess of $3 million.

E. Second draw PPP loans had a cap of $4 million, collectively, for all loans to

companies within the same corporate group, as SBA defines that term.

F. The United States contends that:

a. AIP-ECS Holdings LLC was in the corporate group with the companies in which

AIP V held a majority ownership interest and that, therefore, AIP-ECS Holdings

LLC was ineligible for any second draw PPP loan that would bring the corporate

group collectively to over $4 million in second draw PPP loans;

b. AIP-ECS Holdings LLC was ineligible for the PPP Loan because the PPP Loan

would bring the corporate group collectively to over $4 million in second draw

PPP loans;

c. By submitting an application for the PPP Loan and/or by submitting an

application for forgiveness of the PPP Loan while being ineligible for such loan

due to the fact that the PPP Loan brought the corporate group collectively to over

$4 million in second draw PPP Loans, AIP-ECS Holdings LLC submitted a false

claim for the PPP Loan within the meaning of the False Claims Act; and/or

d. By causing an application for the PPP Loan and/or causing an application for

forgiveness of the PPP Loan to be submitted while AIP-ECS Holdings LLC was

ineligible for such loan due to the fact that the PPP Loan brought the corporate

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group collectively to over $4 million in second draw PPP Loans, Argosy V caused

AIP-ECS Holdings LLC to submit a false claim for the PPP Loan within the

meaning of the False Claims Act.

That conduct is referred to below as the “Covered Conduct.” The United States will decline to

intervene with respect to the allegations and claims in the Civil Action other than the Covered

Conduct as defined above.

G. This Settlement Agreement is neither an admission of liability by the Defendants

nor a concession by the United States that its claims are not well founded.

H. Defendants have timely and fully cooperated in the government’s investigation by

disclosing relevant facts, including facts gathered during their independent investigation.

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

this Settlement Agreement and to attorneys’ fees and costs.

J. 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. Argosy V and/or AIP-ECS Holdings LLC shall collectively pay to the United

States One Million, Five Hundred Thousand Dollars ($1,500,000.00) (the “Settlement Amount”),

of which One Million, Two Hundred Fifty-Eight Thousands, One Hundred Twenty-One Dollars

and Sixty Five Cents ($1,258,121.65) is restitution, by electronic funds transfer pursuant to

written instructions to be provided by Office of the United States Attorney for the District of

New Jersey no later than 15 business days after the Effective Date of this Agreement.

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

as feasible after receipt, the United States shall pay One Hundred Fifty Thousand Dollars

($150,000.00) to Relator by electronic funds transfer (“Relator’s Share”).

3. No later than 15 business days after the Effective Date of this Agreement, Argosy

V and/or AIP-ECS Holdings LLC shall collectively pay to counsel for Relator, the Law Offices

of Darth Newman LLC, Eleven Thousand Dollars ($11,000.00) for attorney fees and/or costs.

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 the

Defendants, together with Defendants’ current and former parent entities; direct and indirect

subsidiaries; brother or sister entities; divisions; current or former entity owners; the entity

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 the common law theories of

breach of contract, payment by mistake, unjust enrichment, and fraud. 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 the Defendants, together with Defendants’ current

and former parent entities; direct and indirect subsidiaries; brother or sister entities; divisions;

current or former entity owners; the entity successors and assigns of any of them, from any SBA

claim, administrative liability or enforcement right, or any SBA administrative remedy, arising

from the Covered Conduct, including any action to suspend, debar, or limit Defendants -

including Defendants’ affiliated SBIC licensed entities or those with pending SBIC licensing

applications - from participation in any SBA or SBIC licensing programs.

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5. Subject to the exceptions in Paragraph 6 below, and upon the United States’

receipt of the Settlement Amount and Relator’s counsel’s receipt of the payment for fees and/or

costs set out in Paragraph 3, Relator, for himself and for his heirs, successors, attorneys, agents,

and assigns, releases the Defendants and any of their current or former officers, agents,

employees, or owners, from any claim the Relator has individually or on behalf of the United

States pertaining to or arising from the Covered Conduct and/or the allegations in the Civil

Action, in law or in equity, in contract or tort, or under any statute or regulation, including under

the False Claims Act, 31 U.S.C. §§ 3729-3733; or the common law theories of breach of

contract, payment by mistake, unjust enrichment, and fraud and any and all causes of action,

claims, or other theories of liability for the Covered Conduct which were or which could have

been asserted or alleged in the Civil Action.

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; and

f. Any liability of individuals.

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7. Relator and its 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 its 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. Upon the receipt of payment for fees and/or costs set out in Paragraph 3, Relator,

for himself, and for his heirs, successors, attorneys, agents, and assigns, releases Defendants, and

their officers, agents, employees, and owners 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. Defendants 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. Defendants 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 they 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.

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11. Defendants fully and finally release the Relator from any claims (including

attorneys’ fees, costs, and expenses of every kind and however denominated) that they have

asserted, could have asserted, or may assert in the future against the Relator for acts taken up to

the date of this Settlement Agreement, related to the Covered Conduct 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 Defendants, and their 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) Defendants’ 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 Defendants make to the United States pursuant to this

Agreement and any payments that Defendants may make to

Relator, including costs and attorneys fees,

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

“Unallowable Costs”).

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

separately determined and accounted for by Defendants, and Defendants 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, Defendants shall identify and repay by

adjustment to future claims for payment or otherwise any Unallowable Costs included in

payments previously sought by Defendants or any of their subsidiaries or affiliates from the

United States. Defendants agree that the United States, at a minimum, shall be entitled to recoup

from Defendants 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 Defendants’ books and records and to disagree with any

calculations submitted by Defendants or any of their subsidiaries or affiliates regarding any

Unallowable Costs included in payments previously sought by Defendants, 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 payments described in Paragraphs 1 and 3, above, the Relator

and the United States shall promptly sign and file in the Civil Action a Joint Stipulation of

Dismissal of the Civil Action pursuant to Rule 41(a)(1).

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, except as provided

above.

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

voluntarily enters into 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 District of New Jersey. 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 between 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 Defendants’ 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.

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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.

THE UNITED STATES OF AMERICA

DATED: 5/8/2025
5/8/2025
BY: hao Z
Paul W. Kaufman
Assistant United States Attorney
U.S. Attorney’s Office
District of New Jersey

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Eric S. Benderson
Associate General Counsel for Litigation and Claims
Office of General Counsel
U.S. Small Business Administration

RELATOR ZACHARY HOLTZMAN

DATED: BY:
Zachary Holtzman

DATED: BY:
Darth M. Newman
Law Offices of Darth Newman LLC
Counsel for Relator Zachary Holtzman

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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.

THE UNITED STATES OF AMERICA

DATED:
Paul W. Kaufman
Assistant United States Attorney
U.S. Attorney's Office
District of New Jersey

DATED:
Eric S. Benderson
Associate General Counsel for Litigation and Claims
Office of General Counsel
U.S. Small Business Administration

RELATOR ZACHARY HOLTZMAN

5-g-æs
DATED: Hoi

DATED: 5/8/25
Darth M. Newman
Law Offices of Darth Newman LLC
Counsel for Relator Zachary Holtzman

10
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Counsel for AIP-ECS Holdings, LLC

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