AI-Driven False Claims Act Investigations Target PPP Loan Recipients

Law firms across the country have observed a concerning trend: artificial intelligence and data mining tools are being leveraged to identify potential False Claims Act (FCA) violations related to Paycheck Protection Program loans distributed during the pandemic.

Relator attorneys are systematically combing through public data released by the Small Business Administration (SBA) to flag companies that may have improperly received or retained PPP funds. These investigations frequently focus on eligibility issues, particularly cases where companies may have exceeded employee thresholds when counting affiliated entities.

The Department of Justice (DOJ) has already reported significant enforcement activity. In fiscal year 2025, DOJ disclosed more than 200 pandemic-related FCA settlements totaling over $230 million, following a similar pattern from fiscal year 2024 when over 250 cases resulted in approximately $250 million in settlements.

Industry experts note that the initial PPP program’s emphasis on rapid fund distribution is now creating predictable enforcement challenges. “The program was designed for speed,” explains one legal analyst. “Congress and the executive branch prioritized getting money out quickly to prevent mass layoffs and economic collapse in early 2020. But speed inevitably creates vulnerabilities that are now being scrutinized.”

January 2026 alone saw multiple high-profile settlements. Akris, Inc. agreed to pay $1.8 million to resolve allegations about improper employee counting due to its affiliation with a Swiss fashion business. Similarly, Alupress LLC, an automotive components manufacturer connected to an Italian parent company, paid $2.2 million over employee count discrepancies.

Other settlements involved different eligibility issues. The Harvard Club of Boston paid $2.4 million after investigators determined private clubs with membership requirements were ineligible for PPP funds. Semblex Corporation agreed to a $3 million settlement for general eligibility violations, while multiple nonprofits collectively paid over $3 million to resolve various PPP-related FCA allegations.

Legal experts identify four common categories of PPP-related FCA matters: borrower ineligibility issues (size requirements, affiliation rules, foreign ownership); payroll or employee misstatements; misuse of funds or forgiveness misrepresentations; and lender or intermediary misconduct.

What’s particularly alarming for businesses is the financial incentive driving these investigations. Under the qui tam provisions of the False Claims Act, whistleblowers (relators) can receive between 15% and 30% of recovered funds. DOJ reported a record 1,297 qui tam suits filed in FY2025, following 980 in FY2024. Total FCA recoveries across all areas exceeded $6.8 billion in FY2025, creating substantial motivation for relators to pursue these cases.

The timing is also significant. The FCA’s six-year statute of limitations means claims related to April and May 2020 PPP loans will begin expiring in the corresponding months of 2026. Experts anticipate a surge of under-seal filings throughout 2026 as relators rush to meet these deadlines.

For organizations concerned about potential exposure, legal advisors recommend several proactive steps. Companies should reconstruct their complete PPP file, including the original application, supporting documentation, and forgiveness submissions. Interviewing personnel involved in the application process can help establish the decision-making context. Companies should also reassess their eligibility under the rules that existed at the time and verify that funds were properly spent.

Perhaps most crucially, businesses receiving civil investigative demands from DOJ should engage experienced FCA counsel immediately, as penalties can be substantial. In some cases, companies that identify issues with their PPP funding may benefit from voluntarily repaying the SBA before formal investigations begin.

“The public disclosure bar may provide some defense against purely parasitic relator claims,” notes one FCA specialist. “But companies need to take these issues seriously and prepare their defense strategy now rather than waiting for a subpoena to arrive.”