AI Data Mining and PPP False Claims Act Cases

The relator’s bar is using AI tools and algorithmic approaches to comb over public data released by the Small Business Administration (SBA) to identify potential False Claims Act (FCA) cases to bring against companies that received Paycheck Protection Program (PPP) loans during the pandemic. These data miners are examining public data to try to locate viable cases. A main theory under study is that the companies were ineligible for the PPP loans because, for example, they employed more than 500 employees (or 300 employees for second draw PPP loans) when their affiliates’ employees are added to the headcount or some other publicly available arguably disqualifying condition. There are several ways a company targeted by these data miners can address the issue.

Pipeline of PPP FCA Cases

The Department of Justice’s (DOJ) own FCA reporting underscores the scale of the pandemic-relief pipeline. In its fiscal year 2025 FCA roundup, DOJ reported more than 200 pandemic-related FCA settlements and judgments totaling more than $230 million. These numbers reflect a minor downturn in resolved cases; in the fiscal year 2024 FCA roundup, DOJ reported more than 250 pandemic-related FCA settlements and judgments totaling more than $250 million. We understand anecdotally that a flood of AI-generated cases may be clogging the machinery of government inside DOJ thereby impacting the efficient disposal of meritless cases and active investigation of viable cases.

The PPP program was designed for speed. Urgency was the point: Congress and the executive branch wanted money out the door quickly to prevent mass layoffs and a collapse of the economy in the Spring of 2020 at the start of the pandemic. Speed, however, creates a predictable enforcement pattern not dissimilar from the majority of Medicare fraud FCA cases: FCA cases often arrive years after the underlying conduct occurred because it takes time to assemble and evaluate relevant evidence.

Early 2026 press announcements from DOJ demonstrate a steady drumbeat of PPP-related FCA settlements — covering operating companies, nonprofits, and financial institutions. For example, in January 2026 alone, DOJ publicly announced the following PPP-FCA settlements:

Affiliates issue. DOJ announced on January 22, 2026, that Akris, Inc. agreed to pay over $1.8 million to resolve DOJ’s FCA allegations based on Akris’s failure to properly count employees for its PPP loan application; Akris is affiliated with a Swiss-based fashion business that employs additional personnel. Additionally, DOJ announced on January 13, 2026, that Alupress LLC agreed to pay $2.2 million to resolve DOJ’s FCA allegations based on Alupress’s failure to properly count employees for its PPP loan application. Alupress is a manufacturer of automotive die casting components and part of a larger group based in Italy.
Private club ineligibility. DOJ announced on January 15, 2026, that the Harvard Club of Boston settled for $2.4 million a FCA case arising from the club’s PPP loan. Private clubs with membership requirements were ineligible for PPP loans.
Corporate ineligibility/borrower issues. DOJ announced on January 15, 2026, that Semblex Corporation agreed to pay just over $3 million to resolve allegations it improperly obtained a PPP loan for which it was not eligible.
Nonprofit eligibility issues. DOJ’s D.C. office announced on January 6, 2026, settlements with multiple nonprofits totaling over $3 million resolving PPP FCA allegations.

The PPP application process required borrowers to certify, among other things, eligibility, employee/payroll information, and compliance with program restrictions. Forgiveness applications similarly required representations about how funds were used and whether eligibility conditions were met. If those certifications were knowingly false and they caused the government to pay out or forgive a loan (or guarantee it), DOJ can frame the matter as an FCA “false claim” or “false statement” theory.

In practice, PPP-related FCA matters often focus on one of these categories:

Borrower ineligibility (size, affiliation rules, foreign ownership issues, nonprofit eligibility constraints, U.S. bankruptcy proceedings, criminal convictions, or other program requirements).
Payroll/employee misstatements (inflated headcount, misclassified contractors, doctored or inconsistent payroll support).
Misuse of funds or forgiveness misrepresentations (spending outside permitted categories, inaccurate covered-period calculations).
Lender or intermediary conduct (processing or submission of defective applications, ignoring red flags, or incentives that encouraged bad behavior).

Relators are fueling filings — and DOJ’s own statistics show why

A major accelerant for PPP FCA filings is the FCA’s qui tam mechanism. Relators can file under seal, the government investigates, and then DOJ either intervenes, declines, or seeks a settlement. Importantly, relators/whistleblowers have strong financial incentives: when successful, relators generally receive 15%–30% of the recovery pursuant to 31 U.S.C. § 3730(d), and DOJ reported a record 1,297 qui tam suits filed in FY2025 after a record 980 qui tam suits filed in FY2024 (across all FCA subject areas). The total recovery reported in FY2025 across all subject areas exceeded $6.8 billion, setting a new record. The recovery from a company can climb as high as three times the value of the government’s damages plus additional civil monetary penalties.

The PPP data is nearly all public

The key details of every PPP loan were publicly disclosed by the SBA. Thus, parasitic relators can cross-check such PPP data against public filings by the companies, state websites, news media and other publicly available databases to search for inconsistencies; an AI tool can mine the same data even faster. Then the relator, or its AL tool, can draft a complaint, file it under seal, and ask DOJ to take over the case.

Many PPP loans were issued in April and May 2020. The FCA’s six-year statute of limitations, 31 U.S.C. § 3731(b)(1), is going to start expiring in April and May 2026 for most of the initial PPP loans applied for in 2020. We expect 2026 to be a banner year for under-seal filings of PPP FCA cases. Later-filed forgiveness applications will be able to extend the statute of limitations for another year or so for some of those loans, depending on the representations made in those forgiveness applications. And filing an FCA lawsuit under seal itself tolls the statute of limitations.

How to reduce PPP FCA risk today

For many organizations, the issue now is post-program defensibility. This can include:

Reconstruct the PPP file. Gather the original application, supporting payroll documents, correspondence, key emails, and forgiveness submissions.
Interview key personnel. Try to talk to the team that actually applied for the loan to understand the decisions made at the time. Try to memorialize the company’s evidence of scienter. Talk to the lender as well, if possible.
Stress-test eligibility. Revisit affiliation/size and eligibility rules as they applied at the time. See if the company was nonetheless eligible under a different theory such as the alternative size test.
Verify expenditures. Trace the monies received from the SBA to ensure that the monies were spent appropriately and document such tracing analysis.
Prepare. Companies often learn of a PPP FCA investigation when they receive a civil investigative demand (CID) from DOJ. Others learn when a relator serves them with a complaint after DOJ declined to intervene in the case. Take the issue seriously now and retain experienced FCA counsel; FCA penalties can be high.
Investigate the public record. If DOJ has declined to intervene in the case, a company can potentially convince a court to dismiss the case because the FCA’s public disclosure bar precludes a case that is based on certain public information. Public PPP data available from the SBA and business entity information easily sourced online may bar the case pursuant to 31 U.S.C. § 3730(e)(4)(A). “[T]he public disclosure bar prevents a relator from merely repackaging information enumerated in the public disclosure bar for personal profit by asserting an FCA claim.”
Repay the SBA. If, after all analysis is completed, the company determines that the money was improperly obtained and improperly spent, consider returning the money to the SBA before DOJ sends the company a CID or a relator files a qui tam against the company.