Labor Unions Pay $3.85M to Settle PPP Loan Fraud Claims

PPP loan fraud whistleblower cases are still producing significant recoveries years after the pandemic ended. On July 27, 2026, the U.S. Attorney’s Office for the Southern District of New York announced a $3,850,000 False Claims Act settlement against four labor unions and an employee benefit plan that received PPP loans they were ineligible to obtain. Days earlier, on July 23, 2026, a separate settlement resolved allegations against SoftBank Robotics America, Inc., a subsidiary of a Japanese multinational, for obtaining a PPP loan despite exceeding size standards when affiliated entities were counted. Together, these two enforcement actions illustrate the range of conduct that can give rise to a qui tam case — and the role private whistleblowers can play in bringing it to light. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

What Happened: Four Labor Unions and a Benefit Fund Settle PPP Loan Fraud Claims for $3.85 Million

The SDNY settlement resolved False Claims Act allegations against five defendants — IUJAT, USWU, HHWA, LOCAL 726, and UWF — who collectively received $3,316,966 in PPP loans between April 16 and April 20, 2020, and later obtained full forgiveness of each loan. The $3,850,000 settlement amount exceeds the original loan total, illustrating the financial exposure the False Claims Act can create for organizations that improperly received federal funds. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

The Defendants and the Loans They Received

According to the DOJ press release, the five defendants — International Union of Journeymen and Allied Trades (IUJAT), United Service Workers Union IUJAT (USWU), Home Healthcare Workers of America IUJAT (HHWA), Service Professionals Union Local 726 IUJAT (LOCAL 726), and United Welfare Fund – Welfare Division (UWF) — are organized as tax-exempt non-profit organizations pursuant to Section 501(c)(5) of the Internal Revenue Code. Between April 16 and April 20, 2020, each defendant submitted a PPP loan application through its authorized representative. Each defendant later applied for and obtained full forgiveness of its loan.

Why 501(c)(5) Organizations Were Not Eligible

The government’s position was straightforward: in April 2020, Section 501(c)(5) non-profit organizations were not eligible to apply for or receive PPP loans — only 501(c)(3) and 501(c)(19) organizations were. Each defendant certified on its loan application that it was eligible to receive the loan under the rules in effect at the time.

The Government’s Fraud Theory: Knowing Ineligibility, Not Just Paperwork Error

The SDNY complaint alleged that the defendants, at a minimum, acted with reckless disregard or deliberate ignorance of the fact that they were ineligible for the PPP funds at the time they applied — a standard that does not require proof of intentional fraud. As part of the settlement, the defendants admitted and accepted responsibility for certain conduct alleged by the United States. Notably, the Government reached this result by joining a private whistleblower lawsuit that had been filed under seal under the False Claims Act — the same route available to an insider with first-hand knowledge of a PPP certification.

What the Defendants Knew Before They Applied

Before any application was submitted, the defendants were aware that an SBA regional employee had advised their contact at a bank that only 501(c)(3) and 501(c)(19) non-profit organizations were eligible for PPP loans. The government further alleged that the defendants became aware on April 9, 2020 — before the applications were filed between April 16 and April 20 — that the AFL-CIO had advised that labor unions were ineligible for PPP loans. Despite this knowledge, each defendant certified on its application that it was eligible under the rules then in effect.

The Legal Standard: Reckless Disregard and Deliberate Ignorance

Under 31 U.S.C. § 3729, False Claims Act liability can attach when a person acts with actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of information submitted to the government. This standard matters to potential whistleblowers: an insider who witnessed eligibility discussions, emails, or memos reflecting awareness of ineligibility may have actionable information even if no one inside the organization used the word “fraud.” The defendants admitted that, before applying, they were aware an SBA regional employee had advised that only 501(c)(3) and 501(c)(19) non-profit organizations were eligible, and that they are not organized under either provision. The AFL-CIO guidance described above is part of the government’s allegations rather than the admitted conduct. U.S. Attorney Jay Clayton stated: “The defendants here applied for and received millions of dollars in taxpayer funds for which they were not eligible.”

A Second Enforcement Action: SoftBank Robotics and Affiliation-Based Ineligibility

SoftBank Robotics America, Inc., a San Francisco-headquartered robotics business within SoftBank Group Corp., agreed to pay a total of $3,637,499.09 to settle allegations that it knowingly violated the False Claims Act when it received and retained a PPP loan despite being ineligible because it exceeded size standards when affiliated entities were included. The case was brought by a private qui tam relator and resolved in the Northern District of California. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

How Corporate Affiliation Can Create PPP Ineligibility

According to the government, applicants for a first-draw PPP loan were required to certify that they met certain size standards based on, for example, the number of employees they employed, including in most cases employees of any U.S. and foreign affiliates. The United States alleged that SoftBank Robotics America, claiming to have only 16 employees, applied for and obtained a first-draw PPP loan in March 2021, even though the company was not eligible because it exceeded the size standards when including affiliated entities, including its multinational parent company. The government further alleged that, despite knowing it was not eligible for the first-draw loan, SoftBank Robotics America also sought and obtained forgiveness of the loan. Employees at subsidiaries or portfolio companies who witnessed their employer claim a small headcount while knowing affiliated-entity rules applied may have information relevant to similar cases.

The Relator’s Role and Share in the SoftBank Case

The settlement resolves claims brought under the qui tam provisions of the False Claims Act by Verity Investigations, LLC, which will receive $363,749.91 in connection with the settlement. This case illustrates how PPP loan fraud whistleblower cases brought by private relators work in practice. Under 31 U.S.C. § 3730, a person may bring a civil action for a violation of section 3729 for the person and for the United States Government; the statute further provides that if the Government proceeds with the action, the person shall receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement. That same paragraph limits the share to no more than 10 percent where a court finds the action was based primarily on information that had already been publicly disclosed, and a relator who planned or initiated the violation may receive less. A relator’s actual share depends on the facts of the case and, in a negotiated settlement, on the terms the parties reach with the Government. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

What This Means for Potential Whistleblowers

These two settlements — announced within days of each other in July 2026 — signal that DOJ continues to actively pursue PPP fraud cases. Insiders at labor unions, trade associations, non-profit organizations, employee benefit funds, or subsidiaries of large corporate groups who have direct knowledge of PPP eligibility misrepresentations may have information that could support a qui tam complaint. The False Claims Act also provides retaliation remedies: 31 U.S.C. § 3730(h) provides that any employee, contractor, or agent who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done in furtherance of an action under this section shall be entitled to all relief necessary to make that employee, contractor, or agent whole.

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Frequently Asked Questions

Can a labor union or non-profit organization be liable under the False Claims Act for a PPP loan?

Yes, as the SDNY settlement demonstrates. Five defendants organized as 501(c)(5) non-profit organizations agreed to pay $3,850,000 to resolve False Claims Act allegations after receiving $3,316,966 in PPP loans they were ineligible to obtain. The defendants admitted and accepted responsibility for certifying eligibility despite being aware, before they applied, of an SBA regional employee’s advice that only 501(c)(3) and 501(c)(19) non-profit organizations were eligible. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

What does a PPP loan fraud whistleblower need to show to bring a qui tam case?

Under 31 U.S.C. § 3729, a false claim may be established through actual knowledge, deliberate ignorance, or reckless disregard — not only outright intentional fraud. A whistleblower with direct knowledge of internal communications, eligibility discussions, or certifications made despite known ineligibility may have information sufficient to support a complaint. The SDNY case shows that awareness of guidance from the SBA or a trade federation, combined with a decision to apply anyway, could satisfy this standard.

How much could a PPP loan fraud whistleblower receive?

Under 31 U.S.C. § 3730, the range depends on how the case proceeds. If the Government proceeds with the action, the relator shall receive at least 15 percent but not more than 25 percent of the proceeds; if the Government declines to intervene and the relator proceeds, the relator shall receive an amount the court decides is reasonable, at least 25 percent but not more than 30 percent. Those bands are not floors in every case: the same statute limits the share to no more than 10 percent where a court finds the action was based primarily on information already publicly disclosed. In the SoftBank Robotics settlement, the relator received $363,749.91 of the $3,637,499.09 settlement, which is 10 percent. Individual results depend on the facts of each case, and there is no assurance of any particular outcome.