Did you mean to say adding a chomp function after reading the file,like below:

$user = <$client_socket>;
 chop($user); #remove the \n
 print "$prefix USER = $user\n";
    unless (open (USERNAME, "username")) 
     {
       print "ERROR:Cannot open username file.\n";
       exit(1); # ERROR
      }
    while(<USERNAME>)
    {
        my @newusername = <USERNAME>;
        chomp($newusername);
        foreach $name (@newusername)
        {
            if($name ne $user) 
                {
                print $client_socket "ERR\n";
                print "$prefix ERROR: user $user not permitted to use 
+this mode.  Exiting.\n";
                close(USERNAME);
                exit(1);
                 }
        }
    }
     #else, continue
     print $client_socket "ACK\n";  # approve the user.
    close(USERNAME);
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