PPP Loan Fraud: How to Report It and What You Can Recover
PPP loan fraud can be reported through a qui tam case under the False Claims Act, which pays the whistleblower 15 to 30 percent of what the government recovers. Falsifying an application, inflating payroll, misusing funds, or obtaining forgiveness improperly all create liability, and the limitations period runs well into the future.
The enforcement window is still open
The Paycheck Protection Program ended in 2021, which leads people to assume it is too late. It is not. Congress extended the statute of limitations for PPP fraud to ten years, and the Department of Justice continues to bring cases.
Because loans were made in 2020 and 2021, and forgiveness decisions ran later still, conduct from that period remains actionable for years. The more pressing constraint is the first-to-file rule rather than the statute.
What PPP fraud looks like
The fraud is usually in the application or in what happened to the money afterward.
- Inflating employee headcount or payroll costs to obtain a larger loan
- Applying for loans through multiple entities for the same employees
- Certifying economic necessity where the business had ample liquidity
- Using funds for purposes the program did not permit
- Falsifying documentation to obtain forgiveness
- Applying on behalf of a business that did not exist or had no employees
- Concealing an affiliation that would have disqualified the borrower
- Lenders approving applications they knew were unsupported
The certifications are what make it a false claim
A PPP application required certifications: that the funds were necessary to support ongoing operations, that the payroll figures were accurate, and that the borrower met eligibility requirements. The forgiveness application required further certifications about how funds were used.
Each of those is a statement to obtain federal money. A knowingly false one is a false claim, and the reverse false claim provision also reaches a borrower who obtained forgiveness it knew it was not entitled to.
Who reports PPP fraud
Bookkeepers and accountants who prepared the application, payroll staff who know the real headcount, employees who were listed but not employed, and lenders who processed applications they doubted.
Competitors are also eligible relators, and in this program many of them watched a rival obtain money on figures they knew to be impossible.
Related pandemic programs
The same analysis applies to other relief programs, including Economic Injury Disaster Loans, the Restaurant Revitalization Fund, the Provider Relief Fund, and the Employee Retention Credit.
Employee Retention Credit claims in particular have drawn increasing enforcement attention, because promoters marketed the credit aggressively to businesses that did not qualify.
Frequently asked questions
Is it too late to report PPP fraud?
Generally no. The limitations period for PPP fraud was extended to ten years, so loans made in 2020 and 2021 remain actionable. The practical urgency comes from the first-to-file rule, since only the first relator can recover.
How much can I get for reporting PPP loan fraud?
15 to 25 percent of the government recovery if it intervenes, and 25 to 30 percent if you proceed on your own. Damages are trebled and each false claim carries a penalty.
Can I report PPP fraud anonymously?
A qui tam case is filed under seal, so the borrower is not told during the government investigation. Your name becomes known if the case proceeds. Reporting to the SBA hotline can be anonymous but pays no award.
What if I was listed as an employee but never worked there?
That is direct evidence of an inflated application and makes you a strong relator. Write down what you know about how your name was used and who prepared the filing.
Does this cover Employee Retention Credit claims?
ERC is a tax credit rather than a loan, so it usually proceeds through the IRS whistleblower program rather than the False Claims Act. Some fact patterns support both.
The attorneys who handle these cases
Related reading
Talk to a whistleblower attorney before you report
A conversation costs nothing and is confidential. We will tell you honestly whether what you have describes a case, and what the first-to-file rule means for your timing.