Utilization of AI tools in PPP false claims litigation

The bar is using AI tools and algorithmic approaches to scrutinize public data released by the Small Business Administration (SBA) to identify potential False Claims Act (FCA) lawsuits brought against businesses that received Paycheck Protection Program (PPP) loans during the pandemic. These data miners scour public data to try to find viable cases. The main theories under investigation are that a company is ineligible for a PPP loan because it employs more than 500 employees (or 300 in the case of a second PPP loan), for example, if you add the employees of an affiliated company to the employee count, or because there are some publicly available disqualifying conditions. There are several ways that companies targeted by these data miners can address this issue.

PPP FCA Litigation Pipeline

The Department of Justice’s (DOJ) own FCA report highlights the scale of the pandemic relief pipeline. In its fiscal year 2025 FCA summary, the Department of Justice reported more than 200 pandemic-related FCA settlements and judgments totaling more than $230 million. These numbers reflect a slight decrease in solved cases. In its Fiscal Year 2024 FCA Roundup, the Department of Justice reported more than 250 pandemic-related FCA settlements and judgments totaling more than $250 million. We know anecdotally that a flood of AI-generated cases can clog government machinery within the Department of Justice, thereby impacting the efficient processing of meritless cases and aggressive investigation of viable cases.

The PPP program was designed for speed. What mattered was urgency. Congress and the executive branch had hoped to provide funding quickly to prevent mass layoffs and economic collapse in spring 2020, when the pandemic began. But a quick response creates a predictable enforcement pattern similar to the majority of Medicare fraud FCA cases. FCA lawsuits often arrive years after the underlying conduct occurs because it takes time to gather and evaluate relevant evidence.

Early 2026 press releases from the Department of Justice indicate steady progress in PPP-related FCA settlements targeting industrial corporations, nonprofit organizations, and financial institutions. For example, in January 2026 alone, the Department of Justice published the following PPP-FCA settlements:

Affiliate problems. The Department of Justice announced on January 22, 2026, that Akris has agreed to pay more than $1.8 million to resolve the Department of Justice’s FCA complaint that Akris failed to properly count the number of employees on its PPP loan application. Akris has partnered with a Swiss-based fashion company and is hiring additional staff. Additionally, the Department of Justice announced on January 13, 2026, that Alupress LLC has agreed to pay $2.2 million to resolve the Department’s FCA complaint based on the company’s failure to properly count the number of employees in its PPP loan applications. Alupress is a manufacturer of automotive die-cast parts and is part of a large group based in Italy.
Not eligible for private club. The Department of Justice announced on January 15, 2026, that the Harvard Club of Boston has settled an FCA lawsuit arising from the club’s PPP loan for $2.4 million. Private clubs with membership requirements were not eligible for PPP loans.
Corporate unsuitability/borrower issues. The Department of Justice announced on January 15, 2026: Semblex Corporation has agreed to pay just over $3 million to resolve allegations that it fraudulently obtained ineligible PPP loans.

Nonprofit organization qualification issues. On January 6, 2026, the Department of Justice’s DC office announced settlements totaling more than $3 million with multiple nonprofit organizations to resolve PPP FCA claims.

The PPP application process required borrowers to demonstrate eligibility, employee/payroll information, compliance with program restrictions, and more. Exemption applications similarly required representations about how the funds were used and whether eligibility conditions were met. If these certifications are intentionally false and they cause the government to pay or forgive (or guarantee) the loan, the Department can frame the issue as an FCA “false claim” or “false statement” theory.

In practice, PPP-related FCA issues often focus on one of the following categories:

Borrower ineligibility (size, affiliation rules, foreign ownership issues, nonprofit status limitations, U.S. bankruptcy proceedings, criminal convictions, or other program requirements).
Payroll/employee misrepresentation (exaggeration of headcount, misclassification of contractors, fabrication or lack of consistency in payroll support).
Misuse of funds or misrepresentations regarding exemptions (spending outside of permitted categories, inaccurate time period calculations).
conduct of lenders or intermediaries (processing or submitting defective applications, ignoring red flags, or providing incentives to encourage fraudulent activity);

Related parties are facilitating applications – the Department of Justice’s own statistics show why

The main factors driving PPP FCA filings are: Quitam mechanism. Interested parties can file under seal, the government will investigate, and then the Justice Department will intervene, deny, or seek a settlement. Importantly, there are strong financial incentives for stakeholders/whistleblowers. If successful, parties generally receive between 15% and 30% of the recovery amount under 31 USC § 3730(d), with the Department of Justice reporting a record 1,297 cases. Quitam Number of lawsuits filed in 2025 after record 980 cases Quitam Litigation filed in FY2024 (across all FCA subject areas). Total recoveries across all subject areas reported in 2025 exceeded $6.8 billion, setting a new record. Recoveries from companies could be as much as three times the amount of government damages plus additional civil penalties.

Almost all PPP data is publicly available

Important details of all PPP loans have been released by the SBA. Therefore, parasitic parties can search for discrepancies by checking such PPP data against public files from companies, state websites, news media, and other publicly available databases. AI tools can mine the same data even faster. Interested parties, or their AL tools, can then prepare a complaint, file it under seal, and ask the Department of Justice to take over the case.

Many PPP loans were issued in April and May 2020. FCA six-year statute of limitations, 31 USC § 3731(b)(1). Most of the original PPP loans applied for in 2020 are scheduled to begin expiring in April and May 2026. We expect 2026 to be a banner year for PPP FCA litigation tort filings. A forgiveness application filed later may extend the statute of limitations for some loans by an additional year or so, depending on the representations made in the forgiveness application. And filing an FCA lawsuit under seal itself becomes a statute of limitations.

How to reduce your PPP FCA risks now

For many organizations, the current issue is post-program defensibility. This includes:

Rebuild the PPP file. Gather original applications, supporting payroll documents, correspondence, important emails, and exemption submissions.
Interviews with key people. Be sure to speak with the team that actually applied for the loan to understand the decisions made at the time. Try commemorating the evidence of corporate scientists. If possible, talk to your lender as well.
Stress test qualification. Reconfirm the affiliation/size and qualification rules that were in place at the time. Check whether the company still qualifies under another theory, such as an alternative size test.
Check your expenses. Track monies received from the SBA to ensure they are used appropriately and document such tracking analysis.
prepare. Companies often find out about a PPP FCA investigation when they receive a Civil Investigation Request (CID) from the Department of Justice. Others have learned that the parties filed complaints after the Justice Department refused to intervene in the case. Take this matter seriously and hire an experienced FCA attorney now. FCA fines can be significant.
Research public records. If the Justice Department declines to intervene in the case, the companies may be able to persuade the court to dismiss the case because the FCA’s disclosure regulations prohibit lawsuits based on certain public information. Public PPP data available from the SBA and entity information readily available online may bar litigation pursuant to 31 USC § 3730(e)(4)(A). “[T]The Disclosure Regulations prevent parties from simply repackaging the information listed in the Disclosure Regulations for personal gain by asserting FCA claims. ”
repay the SBA. If, after all analysis is complete, the company determines that the funds were improperly obtained and improperly used, consider returning the funds to the SBA before the Department of Justice sends the company a CID or the parties file a report. Quitam To the company.