PPP Loan Fraud Whistleblower: The Carten-Fujikin Settlement

What PPP Loan Fraud Whistleblowers Need to Know About the Carten-Fujikin Settlement

The October 28, 2026 False Claims Act civil settlement announced by the U.S. Attorney’s Office for the District of Delaware shows that a PPP loan fraud whistleblower — not a government audit — drove a six-figure federal recovery. Carten-Fujikin, Inc. agreed to pay $774,812.51 to resolve allegations that it improperly obtained a Second Draw PPP loan for which it was not eligible, with the case originating from a private relator acting under the qui tam provisions of the False Claims Act. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

The Settlement at a Glance

Carten-Fujikin, Inc. (CFI), a Delaware corporation with its principal place of business in Cheshire, Connecticut, agreed to pay $774,812.51 to resolve False Claims Act allegations. On or about January 28, 2021, CFI applied for and obtained a $500,000 Second Draw PPP loan and subsequently applied for and received forgiveness of that loan. The case was initiated by a private relator under the qui tam provisions of the False Claims Act — not by a government audit or regulatory review. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

U.S. Attorney Benjamin L. Wallace announced the settlement, which was handled by Civil Chief Dylan J. Steinberg. The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Background on the Second Draw PPP Program

The PPP was an emergency loan program established by Congress in March 2020 under the Coronavirus Aid, Relief and Economic Security Act and administered by the U.S. Small Business Administration. A second round of loans was authorized in early 2021. To be eligible for these Second Draw PPP loans, a business was required to certify two things: first, that it had no more than 300 employees, including those employed by any domestic and foreign affiliates; and second, that no entity owning, directly or indirectly, at least 20 percent of the business had significant operations in the People’s Republic of China or Hong Kong.

Both of those certification requirements became the basis for the allegations against CFI — making this settlement a useful reference point for anyone with inside knowledge of a similar corporate structure.

Why CFI Was Alleged to Be Ineligible: Two Certification Problems

According to the allegations, CFI was ineligible for its Second Draw PPP loan on two independent grounds: its consolidated affiliate employee count exceeded 300, and a 20-percent-or-greater owner had significant operations in the People’s Republic of China. Each ground, standing alone, would have barred the loan under the program’s certification requirements.

The Affiliate Employee-Count Rule

The allegations state that CFI, together with its affiliates, had more than 300 employees — exceeding the Second Draw threshold. CFI is wholly owned by Fujikin of America Inc., which is in turn wholly owned by Fujikin Incorporated (Fujikin Japan), a Japanese company. The Second Draw rules required applicants to count employees across all domestic and foreign affiliates, not merely the U.S. entity submitting the application. An employee working in accounting, HR, or finance at a U.S. subsidiary of a foreign parent company may have had direct visibility into whether that consolidated count was accurately reported.

The China-Nexus Ownership Bar

Fujikin Japan operated multiple locations in the People’s Republic of China through its subsidiary Fujikin of China Incorporated. Because a 20-percent-or-greater owner had significant operations in China, CFI was allegedly barred from receiving a Second Draw loan. The alleged false-certification exposure extended beyond the initial loan application: CFI subsequently applied for and received forgiveness of the loan, meaning each certification in the forgiveness application could independently give rise to False Claims Act liability.

How the False Claims Act Whistleblower Mechanism Worked in This Case

A private relator filed the qui tam action on behalf of the United States and will receive a share of the $774,812.51 recovery. 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. In a case where the government intervenes, the relator may receive at least 15 percent but not more than 25 percent of the proceeds; where the government declines to intervene, the relator may receive not less than 25 percent and not more than 30 percent. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

The Role of the Private Relator

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act, and the relator will receive a share of the settlement. The government’s recovery here was triggered by an insider, not a regulatory audit — underscoring the practical value of employees who hold documentary knowledge of affiliate structures, employee counts, and forgiveness applications. Individuals considering a similar action can learn more about how the qui tam process generally works for PPP loan fraud whistleblower cases at our dedicated practice page.

What This Signals About Insider Knowledge as an Enforcement Driver

The Carten-Fujikin matter demonstrates that civil False Claims Act enforcement plays a critical role in recovering funds for American taxpayers and holding wrongdoers accountable, as the U.S. Attorney’s Office noted in its announcement. People in accounting, finance, HR, compliance, or legal roles at U.S. subsidiaries of foreign parent companies may have direct access to affiliate employee counts and ownership structures. Employees who participated in, reviewed, or retain records of forgiveness applications that omitted material eligibility facts could potentially serve as relators. Under 31 U.S.C. § 3730(h), the False Claims Act also provides remedies for employees who experience retaliation for protected activity.

PPP Fraud Enforcement Is Still Active — Including Conduct From 2021

The Carten-Fujikin settlement is not an isolated event. On the same date — October 28, 2026 — federal authorities in a separate matter announced a criminal sentence arising from PPP conduct that also occurred in 2021, illustrating that both civil and criminal enforcement of pandemic-era loan fraud remain active years after the underlying conduct.

Parallel Criminal Enforcement on the Same Date

Also on October 28, 2026, an Austin accountant named Arun Mago, 47, was sentenced to 41 months in federal prison for money laundering and bank fraud that undermined the PPP. According to court documents, from about April 4 to November 23, 2021, Mago applied for and received several fraudulent PPP loans and Economic Injury Disaster Loans for several business entities totaling nearly $1 million. U.S. District Judge Robert Pitman ordered Mago to pay over $900,000 in restitution and a $250,000 fine. The two matters are separate cases handled by different U.S. Attorney’s Offices; no source states that they share a common relator or actor. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

Together, these October 28, 2026 announcements reflect the ongoing priorities of the Task Force to Eliminate Fraud and the National Fraud Enforcement Division. Under 31 U.S.C. § 3731, the False Claims Act’s limitations period can extend up to ten years from the date of the violation in certain circumstances, meaning conduct from the 2021 loan round may still be within the window for a civil qui tam action.

If practices like these look familiar from your own workplace, you can discuss what you have seen with a Price Armstrong attorney confidentially and at no cost. Call (888) 670-9542 or use the secure evaluation form below.

Frequently Asked Questions

What made CFI allegedly ineligible for its Second Draw PPP loan?

According to the allegations, CFI was ineligible on two grounds: CFI, together with its affiliates, had more than 300 employees, exceeding the Second Draw threshold; and Fujikin Japan — an indirect owner of CFI — operated multiple locations in the People’s Republic of China through its subsidiary Fujikin of China Incorporated, triggering the China-nexus ownership bar. CFI also applied for and received forgiveness of the $500,000 loan, extending the alleged exposure. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

How much could a PPP loan fraud whistleblower receive under the False Claims Act?

Under 31 U.S.C. § 3730, a relator in a case where the government intervenes may receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement; in a case the government declines to intervene, the relator may receive not less than 25 percent and not more than 30 percent. The statute also contains provisions that may affect the share in cases based primarily on public disclosures. In the Carten-Fujikin matter, the relator will receive a share of the $774,812.51 recovery. Every False Claims Act matter is different; results depend on the specific facts of each case, and no similar outcome is implied.

Is it too late to report PPP loan fraud that occurred in 2021?

Under 31 U.S.C. § 3731, the False Claims Act’s limitations period can extend up to ten years from the date of the violation in certain circumstances. The October 28, 2026 Carten-Fujikin settlement itself resolved allegations arising from a loan obtained on or about January 28, 2021, demonstrating that civil enforcement of 2021 PPP conduct remains active. Anyone with relevant information may also report it to the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721. Whether a particular set of facts supports a viable qui tam action depends on the specific circumstances and is not something any general article can assess.