United States Attorneys’ Offices recently announced a number of False Claims Act (FCA) settlements arising out of the Paycheck Protection Program (PPP). These settlements reveal several trends that PPP loan recipients should be aware of.

First, the settlements were driven by qui tam suits filed by serial relator, GNGH2. We have previously reported on settlements obtained by GNGH2 as well as other serial relators, such as Relator LLC. These relators have relied on PPP data published by the Small Business Administration (SBA) and other publicly available data to craft allegations that borrowers have violated the FCA by seeking PPP loans for which they were ineligible.

Second, the Department of Justice (DOJ) elected to intervene in these cases. While we previously reported how the U.S. District Court for the Eastern District of California’s dismissal of a Relator LLC qui tam complaint for failure to overcome the FCA’s public disclosure bar was a welcome development for PPP borrowers, such a defense is unavailable when DOJ has intervened.

Third, each case concerned the failure to qualify as a small business against the relevant size standard due to affiliation. The SBA’s concept of affiliation is not only complex in its own right but was a new and foreign concept to many companies that participated in the PPP. Audits, enforcement, and qui tam suits reliant on theories of affiliation were originally few and far between, but there has been an exponential increase in cases with affiliation issues at the heart of the alleged fraud.

Fourth, in each case, SBA previously approved forgiveness of the PPP loan at issue in the settlement. As we have previously discussed, the mere fact of forgiveness does not mean that either the lender or the SBA assessed all aspects of eligibility and expressly deemed the borrower eligible for the loan. In many cases, SBA’s grant of forgiveness merely means that the borrower validated use of the PPP funds on eligible expenses. This is particularly the case where borrowers were not required to submit a Form 3511 to receive forgiveness, or initial PPP applications may have failed to reveal information about affiliates that would have given rise to eligibility questions at the forgiveness stage.

Fifth, the settlement amount in each case is not more than double the loan amount at issue. In other words, while the FCA allows for up to treble damages, DOJ is using a multiplier of 1.5 to 2 in these cases.

Sixth, in all three cases, the relators alleged that the borrowers either had significant operations in China or were subsidiaries of Chinese entities. Chinese state-owned entities were ineligible for PPP loans.

We provide detailed summaries of three cases and their settlements below.

United States ex rel. GNGH2 Inc. v. Rosler Metal Finishing USA LLC a/k/a Roesler Metal Finishing USA LLC, No. 1:24-cv-373 (W.D. Mich.)

On February 28, 2025, the Western District of Michigan United States Attorney’s Office announced a FCA settlement with Rosler Metal Finishing USA.

• PPP Loan at Issue: In 2021, Rosler USA applied for and received a $1,265,035 second-draw PPP loan that was subsequently forgiven. DOJ alleged that Rosler USA falsely certified on its loan application that it had fewer than 300 employees, even though Rosler USA and its affiliates collectively had a total of more than 300 employees, and that Rosler USA failed to disclose its affiliation with other companies. The relator also claimed Rosler falsely certified on its loan application that it did not have substantial operations in China.
• Government Involvement: DOJ elected to intervene. The SBA Office of General Counsel was also involved in this matter.
• Settlement Amount: $2.3M with no admission of liability.
• Link: Unsealed Complaint

United States ex rel. GNGH2 Inc. v. YAPP USA Automotive Systems Inc. (E.D. Wisc.)

On February 19, 2025, the Eastern District of Wisconsin United States Attorney’s Office announced a FCA settlement with YAPP USA Automotive Systems Inc. to resolve allegations that it falsely obtained a first-draw PPP loan for which it was not eligible.

• PPP Loan at Issue: In 2020, YAPP applied for and received a $9,598,462 first-draw PPP loan, which SBA subsequently forgave. Per the release, (1) through common ownership and management, YAPP USA is affiliated with dozens of other companies worldwide, and (2) YAPP USA’s ultimate parent company is State Development and Investment Corp. Ltd, a company owned and controlled by the People’s Republic of China. DOJ alleged that (1) YAPP USA was ineligible because YAPP USA, singly and together with its affiliates, employed more individuals than permitted by SBA’s size standard for its industry, and (2) YAPP USA was ineligible because it is owned by a government entity.
• Cooperation Credit: Per the press release, YAPP USA received cooperation credit by “identifying individuals involved in or responsible for the conduct and disclosing facts and documents gathered during YAPP USA’s own investigation.”
• Government Involvement: DOJ’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the Eastern District of Wisconsin, and the SBA’s Office of General Counsel and Office of the Inspector General, coordinated on this matter.
• Settlement Amount: $14,208,496 with no admission of liability. The relator is to receive $1,420,849 in connection with this settlement.
• Link: DOJ Press Release, Subsidiary of Chinese State-Owned Entity to Pay $14.2M to Resolve False Claims Act Allegations Relating to Paycheck Protection Program Loan

United States ex rel. GNGH2 Inc. v. Horn USA, Inc., No. 1:24-cv-196 (W.D. Mich.)

On January 17, 2025, the Western District of Michigan United States Attorney’s Office announced a FCA settlement with Horn USA, Inc. to resolve allegations that it falsely obtained a second-draw PPP loan for which it was ineligible.

• Underlying Facts: In January of 2021, Horn USA, Inc. applied for and received a $2M second-draw PPP loan, which SBA subsequently forgave. DOJ alleged that Horn USA, Inc. was ineligible for this loan because the company and its affiliates had over 300 employees and thus exceeded the applicable size standard.
• Government Involvement: DOJ elected to intervene.
• Settlement Amount: $4,153,111.12 with no admission of liability.
• Links: DOJ Press Release, Manufacturing Company To Pay Over $4.1 Million To Resolve Allegations It Received Paycheck Protection Program Loan In Violation Of Employee Size Rules; Horn Complaint

Portions of all three dockets remain sealed, but we will monitor and update this alert to the extent additional information about these matters and their resolution is made public.

We will also continue monitoring and reporting on unsealed qui tam suits and FCA settlements related to PPP loans.