The largest fraud
in American history.

Why this matters to workers

If you were laid off, you may be a witness.

PPP loans came with one central promise: the borrower would use the money to keep workers on payroll. Loans were fully forgivable only if at least 60% of the proceeds went to payroll costs and the borrower maintained employee headcount and wage levels. Everything else in the program — the EIDL advances, the Restaurant Revitalization Fund, the Provider Relief Fund, the Employee Retention Credit — operated on a similar premise. Federal money, delivered fast, on the representation that it would be spent on specific things.

When a company took PPP money and then laid you off, that is not automatically fraud. Companies were allowed to reduce headcount in certain circumstances and still qualify for partial forgiveness. But when a company took PPP money, certified that it would use the funds for payroll, and then quietly let workers go while the owners paid themselves, took distributions, bought real estate, or moved the money into unrelated operations — that is the pattern federal prosecutors and whistleblower lawyers are looking at right now.

The patterns

What PPP fraud actually looks like.

Prosecutors and civil enforcement attorneys have converged on a recurring set of schemes. Most cases fit one of these patterns or a combination of them.

Phantom payroll

The borrower inflated its payroll numbers on the loan application to qualify for a larger loan. This can mean listing employees who didn't exist, listing contractors as employees (contractors were not eligible for PPP payroll calculations), or using 2019 payroll numbers that had already been reduced by the time of the application. If you remember the company having, say, 40 people and the application reported 80, that gap is the case.

Diverted funds

The borrower received PPP money and spent it on something other than eligible expenses. Mortgage principal, owner distributions, personal vehicles, real estate acquisitions, expansion of unrelated businesses. The Department of Justice has prosecuted borrowers who used PPP money to buy Lamborghinis, Rolexes, and Miami Beach condos. Civil FCA cases cover the quieter version: the owner who routed the money through a management company he also controlled.

Forgiveness fraud

The borrower spent the money on something other than payroll but submitted a forgiveness application certifying that at least 60% went to payroll. Forgiveness applications are signed under penalty of perjury and submitted to the SBA — they are textbook false claims. Every forgiven loan is a claim to the government that the money was used as promised.

Double-dipping

The borrower claimed the same wages under PPP and under the Employee Retention Credit. The two programs were designed to be mutually exclusive for the same wages, but the rules changed repeatedly through 2020 and 2021, and many employers took both. When the ERC claims were knowingly duplicative, they can be pursued under the False Claims Act.

Affiliated-entity fraud

The borrower broke a single business into multiple LLCs and applied for PPP loans under each one, exceeding the program's affiliation caps. Franchise operators, restaurant groups, and hospitality companies are the most common fact pattern.

Ineligible borrowers

The borrower was a publicly traded company, a hedge fund, a company already in bankruptcy, or otherwise ineligible — but certified eligibility on the application. Several of the earliest and largest PPP settlements have involved this category.

The law

Why PPP fraud is a False Claims Act case.

Every PPP application, every forgiveness application, every EIDL application, every Provider Relief Fund attestation was a claim or statement to the federal government. When those claims were knowingly false — or made in reckless disregard of the truth — they fall squarely within 31 U.S.C. § 3729(a)(1). That means:

• Treble damages. The government (or the whistleblower on its behalf) can recover three times the amount of the fraudulent loan or the fraudulently forgiven portion.
• Per-claim civil penalties. Currently $14,308 to $28,619 per false claim, adjusted annually for inflation. On a PPP case, the application and the forgiveness application are typically counted as separate claims.
• A whistleblower share. Under § 3730(d), the relator who brings the case receives 15% to 30% of whatever the government recovers. On a $2 million PPP loan falsely obtained and forgiven, trebled to $6 million, a relator's share can land between $900,000 and $1.8 million.

The statutory relator share ranges are set by 31 U.S.C. § 3730(d). The penalty amounts are current figures adjusted under the Federal Civil Penalties Inflation Adjustment Act. Actual recovery in any given case depends on the strength of the evidence, whether the government intervenes, and other factors. Past results do not guarantee future outcomes.