Law Firms Using AI to Target PPP Loan Recipients in False Claims Act Cases

Attorneys specializing in whistleblower litigation are leveraging artificial intelligence and algorithmic tools to analyze public data from the Small Business Administration (SBA), hunting for potential False Claims Act (FCA) violations among companies that received Paycheck Protection Program loans during the pandemic.

These sophisticated data-mining operations primarily target businesses that may have been ineligible for PPP funds based on publicly available information. Common allegations include companies exceeding the employee threshold limits (500 employees for initial loans, 300 for second-draw loans) when affiliated entities are properly counted, or failing to meet other program requirements.

The Department of Justice’s recent reporting highlights the significant pipeline of pandemic-related FCA cases. In fiscal year 2025, DOJ reported over 200 pandemic-related FCA settlements and judgments totaling more than $230 million, reflecting a slight decrease from fiscal year 2024’s 250+ cases totaling over $250 million.

Industry sources suggest that AI-generated cases may be overwhelming DOJ resources, potentially slowing the dismissal of meritless claims while delaying investigation of legitimate violations.

The timing of these cases follows a predictable enforcement pattern seen in other federal programs. The PPP initiative was deliberately designed for rapid deployment at the pandemic’s onset in spring 2020, with an emphasis on quickly distributing funds to prevent economic collapse. This speed, however, created conditions ripe for subsequent enforcement actions, which typically emerge years after the initial events.

January 2026 alone has seen multiple high-profile PPP-related FCA settlements announced by DOJ:

Akris, Inc. paid $1.8 million to resolve allegations it failed to properly count employees by not including those at its Swiss-based fashion affiliate. Similarly, Alupress LLC, an automotive parts manufacturer connected to an Italian parent company, settled for $2.2 million over employee counting violations.

The Harvard Club of Boston agreed to a $2.4 million settlement after receiving PPP funds despite private clubs with membership requirements being explicitly ineligible for the program.

Semblex Corporation paid over $3 million to resolve claims it improperly obtained a PPP loan for which it didn’t qualify.

Multiple nonprofits collectively paid over $3 million to settle PPP-related FCA allegations through DOJ’s Washington D.C. office.

The PPP application process required borrowers to certify their eligibility, provide accurate employee and payroll information, and confirm compliance with program restrictions. False certifications that resulted in government disbursement or loan forgiveness can trigger FCA liability under “false claim” or “false statement” theories.

Most PPP-related FCA cases fall into four categories: borrower ineligibility (size, affiliation rules, foreign ownership); payroll/employee misrepresentations; improper use of funds; or problematic lender conduct.

The FCA’s qui tam provisions are accelerating case filings. These provisions allow whistleblowers (relators) to file sealed complaints, with DOJ then deciding whether to intervene, decline, or seek settlement. Successful relators typically receive 15-30% of recoveries, creating powerful financial incentives. DOJ reported a record 1,297 qui tam filings in FY2025, with total FCA recoveries exceeding $6.8 billion across all sectors.

With most initial PPP loans issued in April-May 2020, the FCA’s six-year statute of limitations begins expiring in spring 2026, suggesting a likely surge in under-seal filings throughout the year.

For organizations concerned about potential liability, experts recommend several risk-reduction steps: reconstructing complete PPP application files, interviewing personnel involved in the loan process, re-evaluating eligibility determinations, verifying proper fund expenditures, preparing response strategies for potential investigations, examining public record defenses, and considering voluntary repayment if violations are discovered.