Exploring Settlements Related to the Paycheck Protection Program

PPP Enforcement Paths

PPP loan examination and enforcement often followed one of two enforcement paths: criminal and/or civil enforcement. On the one hand, criminal prosecutions in the PPP context focused on egregious and intentional fraud (i.e., fabricated businesses, fictitious or stolen identities, inflated payroll or expenses, and diverting PPP proceeds for personal gain). On the other hand, civil PPP matters were often more nuanced and increasingly tested how a company and/or its counsel interpreted technical program requirements that were changing on a nearly daily basis with new and novel issues occurring in real time, often resulting in exceptions and exceptions to exceptions. Indeed, any practitioner that was helping PPP clients in 2020–2021 had the period burned into memory.

This distinction is critical. Indictments, guilty pleas, sentences, and civil settlements are different outcomes and should not be grouped together as proven or intentional fraudulent activity. Many civil settlements expressly state that the government’s claims are allegations and that although the company is agreeing to pay back the loan, including some additional amount, the company is not admitting guilt or intent. From the government’s perspective, even if a PPP recipient’s unintentional mistake or misunderstanding resulted in obtaining an improper PPP loan and/or obtaining forgiveness on that loan, an improper payment needed to be paid back.

For those reasons, practitioners that helped clients with PPP loans needed to understand:

• which issues federal law enforcement focused on
• when the rules at issue were implemented and if there are exceptions
• how and whether the rules apply to the specific facts and circumstances
• whether evidence showed that the PPP recipient knew or should have known it may have been in violation of PPP rules
• what a reasonable settlement was based on the answer to those questions

What Borrowers Should Know

Recent settlements identify several recurring issues that companies and their advisors should consider when reviewing PPP applications and forgiveness records:

• Affiliation, ownership, and control. Borrowers generally had to count domestic and foreign affiliates when applying the relevant size standard. In August 2025, BWI North America Inc., BWI Indiana Inc., and BWI Chassis Dynamics (NA) Inc. (together, BWI) agreed to resolve allegations that they had failed to include worldwide affiliates and were ultimately owned by Chinese government entities. DOJ credited the companies’ cooperation, and the settlement did not determine liability. BWI received $14.1 million in total loan proceeds and agreed to pay $21.6 million, a settlement multiple of 1.5.
• Affiliation and employee counts. Foreign employees may count even when the applicant’s US operation falls below the applicable threshold. In August 2026, Continental Aerospace Technologies agreed to resolve allegations that its worldwide affiliates caused it to exceed the size standard and that its ownership created a separate eligibility issue. The settlement did not establish liability. Continental agreed to pay $11.7 million in total loan proceeds after receiving $7.4 million, a settlement multiple of 1.6.
• Second-draw revenue reduction. Second-draw loans imposed a 300-employee limit and required a 25 percent reduction in gross receipts when comparing any 2020 quarter to the identical quarter in 2019. Both tests require the consideration of affiliated entities. In June 2023, Fujisoft America admitted reporting thirteen employees without disclosing a corporate group with approximately 15,000 employees. It also admitted certifying the required revenue decline even though aggregated affiliate receipts had increased. Fujisoft received $400,000 and agreed to pay $1.05 million, a settlement multiple of 2.6.
• Alternative size standard and employee count. During the first round of PPP loans, certain companies with over 500 employees could be eligible for a loan if they met the SBA’s alternative size standard. The second round of PPP loans capped employee count at 300 and no longer permitted the alternative size standard. American Furniture Rental received a first-draw PPP loan of $10 million using the alternative size standard. It also claimed a second-draw loan of $2 million but exceeded employee count eligibility requirements. On March 13, 2025, American Furniture Rentals paid $2.9 million, a settlement multiple of 1.5.
• Ineligible industries. Cannabis-related businesses were ineligible for a PPP loan because marijuana is illegal under US federal law. Two Seattle-based companies, Podworks Corporation and Headset Inc., were either directly or indirectly involved in the sale of cannabis, which made them ineligible for their PPP loans. Podworks agreed to pay $633,000 in December 2025 after receiving $300,000, a multiple of 2.1. Headset agreed to pay $1 million in August 2026 after receiving $874,000, a multiple of 1.2.
• Forgiveness is not a safe harbor. Forgiveness generally addressed the borrower’s use of proceeds and supporting expenditures. It did not always reflect a complete determination concerning every eligibility representation. Authorities may later compare applications with payroll records, tax filings, corporate ownership documents, and analyses supporting claimed revenue declines.

What the Settlements Show

Recent resolutions suggest that settlement amounts often exceed the original loan principal, but there was no standard PPP settlement multiple. In our experience, settlement amounts often consider many factors, including but not limited to the original loan amount, amount forgiven, estimated imputed interest, the borrower’s degree of culpability, the borrower’s ability to pay the loan back, whether the borrower’s other areas of PPP eligibility and calculations are accurate, and the borrower’s level of cooperation with the government.

Given the settlements discussed above and the current administration’s emphasis on reducing fraud, we anticipate continued scrutiny of PPP eligibility, which highlights the importance of an independent review of all areas of a borrower’s eligibility.

How BRG Can Help

PPP enforcement has moved from the program’s hurried launch to a document-intensive review of eligibility decisions. The businesses best positioned to respond are those that can explain both what they certified and the contemporaneous analysis supporting it.

BRG can assist companies and counsel with retroactively evaluating every aspect of PPP eligibility, including when and whether exceptions may apply, responding to government inquiries, preparing for potential FCA disputes and other litigation, and providing expert litigation support and testimony.